March 20 (Bloomberg) -- Vladimir Romanov bought Heart of Midlothian eight years ago and promised to wipe out debt, replace its aging stadium and boost dwindling crowds.
After the collapse of the Lithuanian bank at the core of his business empire, Romanov is set to leave the Edinburgh soccer club as he found it: battling for survival. Regulators last month closed Ukio Bankas AB, which financed Romanov’s international sport, aluminum and real-estate projects.
“He had a lot of dreams, but his dreams never came true,” former Hearts team manager Csaba Laszlo said in an interview last week. “It’s not a nice story.”
Romanov, 65, first invested in Hearts in 2004, a year after Russian billionaire Roman Abramovich took control of Chelsea in London and spent millions on new players. While acknowledging he had a fraction of the wealth, Romanov, also Russian-born, similarly promised a rise through the ranks of soccer. Last year, Chelsea won the Champion’s League, the top trophy in European club football, as Hearts struggled to pay a tax bill.
Rather than become a new home fit for elite European competition, Hearts’s Tynecastle stadium in the west of the Scottish capital is pledged to Ukio as security for debts, as are the shares that give him control of the club.
Romanov, who first publicly mooted the sale of Hearts in November 2011, said his downfall was engineered by rival banks in conspiracy with Lithuanian authorities.
“The goal of those who took my bank was not just to take the bank but to destroy all my business,” Romanov, who last year founded the Lithuanian People’s Party and won 0.25 percent of votes in a parliamentary election, said by phone on March 1.
The Bank of Lithuania suspended Ukio’s activities on Feb. 12 and permanently revoked its license a week later, saying risky loans to parties related to Romanov had driven the bank to insolvency. Romanov owns 64.9 percent of Ukio, filings show. Some of the loans went to Ukio Banko Investicine Grupe, or UBIG, through which he controls 79 percent of Hearts.
“There’s no conspiracy,” Raimondas Kuodis, deputy chairman of the Lithuanian central bank, said by telephone yesterday. “Such accusations are mere defense tactics. The bank simply had big negative capital and according to the law could no longer operate.”
It will be several months before Ukio’s eventual bankruptcy administrator might come calling on Hearts to pay back borrowing or forfeit its stadium, according to the lender’s temporary administrator, Adomas Audickas.
Romanov said the club’s debt is about 20 million pounds, roughly what it was when he took over. Hearts sold shares last year to supporters to raise money for a tax bill and the prospectus put the debt at 24 million pounds, including 1.75 million pounds owed to the taxman. It said the club would face liquidation should UBIG demand repayment.
Hearts fans “certainly have time” to sort out club finances and seek a new savior, assuming cash flows suffice for player salaries and other obligations, Audickas said in a March 15 phone interview from Kaunas, where Ukio is based. A supporters group is in talks to acquire the club.
“If anyone wants to try to rescue the club, they should be talking with UBIG,” he said.
Hearts was founded in 1874, a year before Edinburgh rival Hibernian, and named after a dancing club in the city during the Victorian era. The team, which plays in maroon and white, last won the Scottish championship in 1960, a league that has been dominated by Glasgow clubs Rangers and Celtic.
There was some success under Romanov. After building his stake in Hearts, he assumed its debt, 19.2 million pounds at the time, and looked into expanding the stadium or replacing it.
On the field, things started looking up during the first season of Romanov’s tenure. As Hearts won games, its 18,000-seat Tynecastle stadium sold out, up from an average attendance of 12,000 the previous season. Hearts finished second in the league and qualified for the Champion’s League preliminary rounds.
Hearts went on to win the Scottish Cup in 2006 and again last year, beating Hibernian in the final. It lost to St. Mirren in the final of the second-tier League Cup last weekend.
“For all the criticism, there have been two cup wins and I grew up thinking Hearts were never going to win anything,” Graeme Downie, 32, a communications consultant and a Hearts season-ticket holder, said on March 14. “He took us over in a bad state, and if he hands us over to someone else in the same way, after two trophies, I don’t think I can complain.”
In the club, Romanov appointed Lithuanians, including his son, to the board and gained a reputation for firing managers. Laszlo, 49, a Romanian-born Hungarian, is among 10 managers to have come and gone at Hearts under Romanov.
Laszlo said he was fired in early 2010 after 18 months in the job and seven straight victories. No explanation was ever given, he said by telephone on March 12. Laszlo is currently coach of the Lithuanian national team.
The problem for Romanov is that while he has “many good business ideas,” his associates don’t challenge the ones that aren’t so good, according to Laszlo. Manager John McGlynn, who started in June, left at the end of last month by mutual agreement, according to the club’s website. Gary Locke, a former Hearts player, was named to replace him on March 16.
Romanov, who served on a Soviet nuclear submarine and worked as a taxi driver and electrician, said last week he’s structured his diverse businesses to “insure” them against “thieves” and “perverts.” He intends to fight for his property in court against Lithuanian authorities.
FC Kaunas, a soccer club in Lithuania’s second-biggest city, closed in 2012 after Romanov withdrew the previous year. Zalgiris basketball club, also in Kaunas and 75 percent owned by UBIG, this month asked for financial help from fans to survive.
Zalgiris players will stop training within a week if new management, which was announced today and excludes Romanov, doesn’t pay the four months of wages they are owed, team captain Paulius Jankunas said in a statement on the club’s website.
As for Hearts, Romanov said realizing the club’s potential demands more resources than he now has. He’s seeking outside investors to help rescue and revive the Edinburgh squad. “We could sell part of the club, or all of it,” he said.
Hearts Director Sergejus Fedotovas said on March 4 by e-mail that a “number of investors” expressed interest “without any detailed proposal as to acquisition or otherwise.”
Alex Mackie of Foundation of Hearts, a group that wants to buy it on behalf of fans, said it won’t be easy to save the club because it’s losing about 2 million pounds a year as well as players. Banks won’t lend, investors aren’t likely to pay Romanov what he thinks his shares are worth, and other shareholders now have empty pockets after the recent stock sale.
“He’s not lived up to what he promised,” said Downie, the season-ticket holder. “But any Hearts fan who believed everything he said at the time was very naïve.”
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