The ninth month of the year began yesterday and Birmingham City FC seems no closer to a sale than it did in the first month of the year. Despite a statement talking of due diligence nothing has been further forthcoming and with the crowds dwindling and the team looking ever more lacking in Championship quality the question has to be – how long can this go on for and more importantly, what is holding it up?

What is holding up the deal then?

The chief problem with the sale of Birmingham City is it’s not as easy as a buyer coming to an agreement over a price for the club and walloping a load of cash down on the table. The reason for this is twofold; firstly, due to the fact that BIH are a publicly listed company on the HKSE we have to follow HKSE rules. These rules are pretty strict bearing in mind how big a part of the total turnover of BIH Blues represents – it has to have shareholder approval and BIH have to satisfy HKSE that they will continue trading post-sale.

However, that pales into comparison with the second problem which is far thornier. It was already known that Carson’s stake in the club was in the restraint order which has frozen his assets but what wasn’t clear (and I have now had confirmed) is that his loan to the club of £14million is also included. Now, if a buyer was to come in and pay that off in full, that wouldn’t be an issue – it would just go into an escrow account pending the result of Carson’s trial and confiscation of his assets/release of the restraint order. The problem is realistically the club isn’t worth £14million which means that any buyer is going to only want to pay a portion of that loan off and get the rest written off. Again, that wouldn’t be so much of a problem if it was just Carson they were dealing with but that deal has to be okayed by the HK authorities – which just adds another party to the negotiating table. Hence you can see my personal incredulity when people like Paladini in the past have claimed that a deal could be “done in ten days” – it’s just not possible.

There is also a third problem, which I’m surprised more people haven’t picked up on. In Neil Moxley’s report last year regarding the Paladini deal he mentioned that an agreement had been reached to pay off Peter Pannu – as much as £2million plus. Bearing in mind that the club is now probably worth no more than about £5-£10mil realistically, would a buyer want to pay that, a portion of the loan off and Pannu as well? If I was in the position to buy the club I wouldn’t – I can see the money will run out sooner than later and I’d tell them I’d wait for administration when the loan of £14mil gets wiped and Pannu will more than likely get booted by an administrator.

Before anyone asks – that payment would be in addition to his current salary from BCFC (£687,000 in the last published accounts), consultancy fee for Asia Rays (a rumoured £25,000 per month), and the directors fee from BIH (which I have heard rumours is around HK$3million per annum). What makes it even worse is that there is also evidence that Pannu has negotiated a cut from BIH for selling the club of as much as 7% of the sale price  in addition to all the above – that’s having your cake, eating it and your next door neighbour’s too for good measure in my eyes.

That’s depressing – how long can this go on for?

That’s the other $64,000 question. We know that BCFC and BIH are hurting for money – in the last announcement they talked about how they were arranging loans to ensure “liquidity” for the club and for the holding company. Blues are certainly on the edge; staffing is stripped to the bone, costs have been trimmed as far as possible off the pitch and players have been brought in on a strict wage cap.

How long it can go on for is down to how much money BIH can borrow for itself and for the club – which is going to be decided by two factors. Firstly, neither have any collateral realistically to secure a loan on; the ground already has a charge on it from HSBC and whilst it is possible to factor a parachute payment there are very strict controls on who can do that and how it can be done. Otherwise, Blues don’t own anything else of value – and from what I know BIH has absolutely nothing left to loan against. Secondly, what kind of company would lend money to either BIH or BCFC knowing the financial trouble they are in and the lack of assets to secure the loan against? I honestly believe that it’s harder than ever for Carson to attract people to loan money to BIH and that might mean that one or two of the companies will run out of money fairly soon.

However, I’m not even sure administration would be as clear cut as one would think. If BIH went into administration I think BCFC would be sold as an asset and the choice of who to sell it to would be taken out of Carson/Pannu’s hands. However, the thorny issue of the £14mil loan would still stand and I’m not sure how that would play out at all. If BCFC went into administration then that loan would be “wiped out”, Pannu would be booted and maybe even compromise agreements reached with some of the higher paid players – but who would be in control? Administrators can be appointed by either the largest creditor – which would be Carson if he was in control of that loan so it could potentially be one appointed by the HK authorities – or they can be appointed by the bank as they have a floating charge. Would HSBC want to get involved or would the future of the club be at the behest of the lawmakers of Hong Kong?

So what can we do?

I’m not sure. My friend Sasquatch posted this thread on the smallheathalliance board and whilst I’ve never been in favour of protest I can see his point. All we can do is maybe shame Pannu into taking a smaller cut (or God forbid no cut at all) and jolt Carson into action to get up from the table and say that he’s had enough. Whatever we do as fans we must continue to support the team – they need us more than ever in truth – and we must not do anything against the hardworking people at the club who are trying to get on with their roles despite the sword of Damocles above their head.

Should you want to get involved with Sasquatch is doing (and I will stress that like me he’s just a fan, not a spokesperson or anything like that) please register on SHA and post on that thread.

For legal reasons, I have closed comments on this piece.

Tags: BIH, Carson Yeung, Peter Pannu, The Takeover