By Pete Wilson
15 April 2010 (with 16 April update at the bottom)
Birmingham City’s owners have been set a deadline of 27 May to pay a debt of £2.2m to the investment bank, Seymour Pierce, or else risk having their shares sold off to meet their obligations.
But the club have this afternoon dismissed the amount as “immaterial” and Yeung has vowed to remain in control.
A statement from the club’s parent company says: “Birmingham International Holdings Limited (BIHL) acknowledges that it has been in litigation with Seymour Pierce disputing the payment of fees and that summary judgment had been obtained by Seymour Pierce in relation thereto.
“BIHL is currently seeking leave to appeal the decision. BIHL stresses that the amount in dispute is immaterial to it and if payment is required to be made, will not have any material adverse effect on its financial condition or business.
“It is stressed that BIHL has not and will not lose control of Birmingham City Football Club as a result of this litigation.”
There have been dire warnings that Seymour Pierce’s legal action could herald the beginning of the end of the ownership tenure of the Hong Kong-based businessman, Carson Yeung, whose company, Grandtop (now BIHL), completed a buyout of the club last year for £81m.
Neil Bennett, a spokesman for Seymour Pierce, said today: “Seymour Pierce can take a charge over the shares of Birmingham City and do what they need to do with them to recover the money it is owed, so that means they could potentially sell them to another owner.”
In reality, the situation should not progress that far, and either an appeal by Yeung will succeed or Birmingham will pay the debt.
Yeung hired Seymour Pierce, headed by Keith Harris, in 2007, to help him buy a stake in the Midlands club. A “success fee” was negotiated for £2.2m and written into the contract between Grandtop and Seymour Pierce.
As it transpired, Yeung only bought a minority stake in Birmingham in 2007, and did not complete the buyout until last year, with different advisors working on his behalf, not Seymour Pierce.
An initial legal battle centered on whether Yeung owed the success fee or not. He argued not. Seymour Pierce said he did. A High Court summary judgement shortly before Easter went in Seymour Pierce’s favour. The judge also said Yeung had no right to appeal, meaning he (or rather BIHL) would need to go to the Court of Appeal even to win a right to appeal.
The payment of the £2.2m was due on Monday under the terms of the High Court ruling, but has not been forthcoming. Hence the further legal action by Seymour Pierce this week, namely an application for control of Birmingham’s shares.
This so-called “charging order” is in place, and effectively “freezes” the club’s shares – which means none can be bought or sold, but the day-to-day running of the club remains unchanged – but Seymour Pierce won’t actually be granted power to sell shares to recoup cash until 27 May.
Yeung therefore has until that date to win his appeal, or pay. With tens of millions of pounds of Premier League cash due imminently, there is no logical reason why Yeung won’t be able to pay the money if necessary.
16 April update
Peter Pannu, one of Birmingham’s vice-chairmen, has told sportingintelligence today that he views the dispute with Seymour Pierce as “a storm in a tea cup” that will be “dismissed” by BIHL “either by an appeal in time or by payment into court the summary judgement debt [of £2.2m] pending appeal .”
Of Seymour Pierce, he adds: ” They do not hold any shares and they do not control the club . . . I won’t lose sleep over this and neither should the fans.”