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How can the owner be a creditor?

How can the owner be a creditor? I am utterly confused about what is happening to our club. Can anyone help and explain it to me?

As I see it the story is as follows. AAF consortium, having bought PFC Ltd, find they don't have enough money to run it and borrow from Balram Chainrai. He secures his loan by a mortgage on Fratton Park and a charge on the company shares. (NB - PFC Ltd still own FP, although it is mortgaged to Chainrai). AAF defaults on repayments, so Chainrai exercises option to seize shares and foreclose on the mortgage. This means he now owns PFC, who own FP, which is mortgaged to him. Having foreclosed on the mortgage, he is now "mortgagee in possession" and has a legal duty to the owner (PFC Ltd, which he owns) to obtain best value for the property, redeem the mortgage, and pay any surplus to PFC Ltd.

This is where it gets confusing.

PFC Ltd will go into administration on Friday. Chainrai therefore loses control of the company, which is now run by the Administrator with a duty to get best value for the creditors. BUT AT THIS POINT CHAINRAI IS NO LONGER A CREDITOR - HE IS THE FORMER OWNER. So how is it possible for Chainrai to claim to be a secured creditor and walk away with £17 million (as reported in the Telegraph - if that is true) and keep Fratton Park, while other creditors, including HMRC and local suppliers lose out?

The situation appears to be similar to a speculator who sees he is about to go bankrupt and transfers his property into the name of his wife, hoping that this will protect him from the creditors whom he has cheated. If the law allows that, the law is an ass. Some commentators have seen Chainrai as a benefactor coming to our rescue. I am not so sure.

Have I got something wrong in this story? I wish someone would explain.

Written by erithacus rubecula.

The views within this article are the views of the individual who wrote and submitted this piece, sometimes solely theirs. They are not necessarily shared by the Vital Pompey Site Journalists.

Writer: pompeyrug

Date:Thursday February 25 2010

Time: 10:35AM

Your Comments

erithacus rubecula, you know what i wish i knew what was what - who is what, what people are trying to do and what they will in actual fact get...but i have on idea!
i have had some quite serious reservations about chairnai yet had an indepth chat about this with someone last night who puts up a very good argument that he is the only good guy in all of this and that he will not walk away 'quids in' as it may well come across he will - his 'main' fault being that he is not interested in football.
as said i have no idea anymore but do know i am done, i am completely drained and think i have to basically adopt a 'i cannot influence or change anything anymore so have to hope that the administrator will be able to do a job to save us and find a new 'milan' that will do this'.

pompeyrug

erithacus - Your understanding of the Telegraph article is correct and the scenario you describe with 'putting it into your wifes name' is a fair one .. The part I think the Telegraph are missing is that they (nor we) know the exact amount of charge he has on PFC .. Is it £17m .. Is it £10m .. is it £7m (I've seen all reported) For me I think all he is doing is protecting what he has put in ... If he doesn't get it he can loan back Fratton Park at the stated £1m a year (or whatever) .. if he does get it I believe he will relinquish control of Fratton Park to a new owner for a nominal sum.. I do trust the bloke not to screw us.. but I also firmly believe that he is protecting his money at the same time.. Where it will all end .. who knows !.. but yeah it is confusing to say the least..

Chix

As usual the whole world is speculating. If it is admin tomorrow let's wait and see what the administrator comes up with. Why depress ourselves further without knowing the facts?

PFCblue

" (NB - PFC Ltd still own FP, although it is mortgaged to Chainrai)." How can there be 2 owners? That sounds to me like I have a mortgage on my house but the previous owner still has a claim on it. If Chainrai keeps up his payments to Barclay's isn't he the owner?

PFCblue

blue, in many ways you are right - i hope that i am not naive in thinking so but the administrator IS brought in to check out what is what, they do not hide things or cover them up do they? if there is any salvation to be had they will find it and find THE BEST buyer around, and not a shyster or anything...
admin is not a good thing by anymeans but it is the best chance we have of a 'fresh beginning' so if there is a new beginning to be had they will find it, we just sit back and see what they do now, right?

pompeyrug

Rug you're right. Sorry for the double posting - don't know how that happened :-(

PFCblue

what double posting ;-) sorted blue - its still an issue with the 'members corner article' when the page is refreshed at time, not sure why...

pompeyrug

PFCBlue - The previous owner doesn't come into it. When you buy a house with a mortgage, you actually own the house even though it is mortgaged to the Bank or Building Society (who are the "mortgagees" and hold the deeds). According to a Land Registry search which I did a few days ago, the registered owner of Fratton Park is "Portsmouth City Football Club Limited" and the Charges Register records a charge (i.e. a mortgage) dated 5 November 2009 to Portpin Ltd, c/o Fuglers. Portpin is believed to be Chanrai's company. So Chainrai is (or was) the mortgagee and has now taken possession. But that doesn't mean that he owns it personally. Until Friday he owns the company that owns Fratton Park - unless somehow he has managed to transfer the ownership from PFC Ltd to him personally before it goes into administration. That is what I meant by the analogy of a speculator putting property in his wife's name. But I agree we only have sketchy information which is hopelessly confused (as I am). Perhaps we shall learn more when the Administrator takes over, although he may not want to give out information which could affect the saleability of the club. BTW I have nothing particularly against Chainrai. I just think he has acted in his own interest - not because he has any particular regard for Pompey.

erithacus rubecula

The stadIum is held as security on a loan, secured creditors get preference, simples.

russellm

As a Watford fan, i hope you don't mind my thoughts, I fully understand how you fans are feeling as im sure you will recall, we were close to administration before xmas. one of our shareholders and then chairman had loaned our club money without security.. he then changed the way the loan was from unsecured to secured against the ground, he then states that he can not reach an agreement with the major shareholder and so wants his money back. The club not being cash rich has only the ground and so he could have placed the club in to administration happily in the knowledge in that he had first security on the ground. so his loan was safe.. hope that makes sense and i wish you all the luck in the world, i just thik we need a reality check and get rid of all the crap and get back to football, with footballers who want to play football, not just how much you pay first. Oh and where you can stand and watch a game.

ANDY710

Just seen an interview on Sky with a very angry Avram Grant. Apparently Avram and the players have been told they are going into Administration tomorrow (Official) No White Knights this time then?

Mike1954

But didn't, in the last few weeks, Chanrai reduce his loan by £10 million, by taking ownership of FP and agreeing to rent it to PFC for £1million a year over 15 years? Not too sure how that works, but would point out that in the mortgage scenario Chanrai (or Portpin) represent Barclays, not you & me. So how does that fit in with everything, anybody know?

tracyc

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