Thursday, 17 November 2011

CSI Move to re-assure fans after Snoras Bank placed into administration Part I



Today CSI released a statement to the media in a bid to re-assure Pompey fans that the problems in relation to the Snoras Bank had no bearing on the businesses operations of CSI and that the purchase of the club had been solely financed through the private wealth of its owners and that the football club is operationally unaffected by the bank entering into what they call temporary administration. Well that’s OK then we can all go bury our heads into the sand and not panic at all.

Sadly though the statement seems to have missed a couple of area’s that might be cause for concern to the long term safety of the club. Being placed into administration as fans will well remember isn’t like forgetting your pin number at the cash point and having your card swallowed up by a machine. It means your business is in financial meltdown. Its one step away from liquidation, a last throw of the dice as you will to find someone to step in and save your ailing business. If Snoras Bank is part of what supposedly makes up the wealth of owner Vladamir Antonov’s so called personal fortune, then it’s safe to assume and to allegedly suggest that a huge chunk of that wealth is in serious danger of no longer existing. Just how bad is the situation with the bank? Well the government has taken it over citing concerns that they believe it to be insolvent. The synonym of being insolvent; That the company is bankrupt. And we all know that when you go bankrupt it means you have no money and are unable to pay the bills anymore.

So in short the government believes the bank to be insolvent which should set some alarm bells ringing as the aforementioned Mr Antonov is the largest shareholder in the Bank with 68.10% of the shares issued.

The problems don’t stop there; Lithuania’s banking regulator also believes that more than one billion litai (which is the equivalent to $392 million) worth of assets may be missing. The regulators have halted the banks operations until Novemeber 21st and have appointed a state administrator after the Bank ignored recommendations to reduce its credit risk. So in other words the warning signs have been there for quite a while but were ignored by the bank and those who run the business or in other words they knew they were sailing close to the wind and in trouble but carried on regardless. This isn’t putting much faith in me that they have the business acumen to run businesses in any way shape or form. I don’t know about anyone else but things like that tend to make me slightly nervous especially giving the past few seasons at Pompey under previous owners.

A statement was released from the Central Bank which read; “The decision was taken to effectively protect the interests of the bank’s clients and the public interest to ensure confidence in the domestic banking system and its stability,” or in other words in had no confidence in the ability of its current shareholders to responsibly continue to run a business which it already suspects is insolvent.

In a further statement issued about the situation, accusations are levelled that the lender  “avoided providing information needed for the supervisory purposes,” and that “there are indications that information submitted to the supervisory institution was false.” So in other words a direct contradiction to the words in the CSI statement which point towards a temporary administration. The banks is now in the hands of the government who have suspended its operations and will now take over as guarantors of anyone who has money with the bank in the same way that the UK government did when it bailed out Northern Rock, Lloyds and Barclays.

Its worth noting at this juncture that this isn’t the first time the business activities of Mr Antonov have been called into question. Remember this is the man that now owns a 75% controlling stake in Pompey. In July Antonov was barred from investing in Saab by the European Investment Bank which didn’t provide a reason for its decision. In February 2009 the UKs Financial Services Authority denied Snoras permission to operate in Britain because the bank’s executives withheld information. They described the tactic as “an ongoing pattern of behaviour by institutions controlled by Mr. Antonov.”

So how big is Snoras Bank in relative terms? Well its Lithuania’s third biggest bank by way of assets, yet its net income for the first nine months of the year only totalled 5.6 million litai which is $2.23 million dollars. Compare that to a British banking operation like Barclays Wealth for example and that sort of income would be achieved in about an hour on an average day and not nine months. The news of the administration saw the shares in the bank fall 4.1% to 0.234 Euros or $0.31.

For those of you reading this and are thinking can we do this in pounds and pence instead let’s break it down for you. The current exchange rate between the dollar and the pound is 0.6346 or in simple terms for every dollar you have per se, you would get 63 pence in exchange based on rounding down. This places the values of shares in the company in Sterling terms at £0.196726 per share. On paper the bank based on share price is worth 93,290,813 million pounds and 54 pence. This means on paper that Mr Antonov’s share of the bank would be worth 63,531,044 pounds and two pennies. That’s a figure not to be sneezed at and this figure as the CSI statement suggests would make up part of the owners personal wealth which is funding the club. Only the government thinks the business is insolvent and has no money, hence why it has been placed into administration. So in reality if the bank has no money then 68.1% of nothing is still nothing. Also remember the assets that are said to be missing; which in Sterling equates to £248,763,200. That’s not like misplacing your car keys down the back of the sofa let’s be honest. A lot of questions are going to be asked about where those assets have gone let’s be fair. You can forgive the odd fiver or even tenner going missing but that’s a serious amount of lose change to have gone missing right there!

Now if Mr Antonov was a footballer and the business he worked for went bust then like Sol Campbell and others owed money by Pompey I’m sure he would be walking around not sweating over anything right now. The fact that his 68.1% controlling stake in a bank that is argued to be insolvent by the Lithuanian government is now allegedly largely worthless it seems would to me suggest that he might be panicking somewhat especially as the government are preparing to do a full investigation into the bank and its missing assets. Remember though according to the CSI statement the club is being funded by the personal wealth of its owners so there's no need to panic. Of course unless the pockets of someone on paper allegedly just got a whole lot lighter.

To be continued…

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