Craig Whyte Mans Barricades and Circles Wagons – Part 1 – Enough to see off his Critics?

 

In light of the Daily Record revelations on Tuesday, Rangers Chairman issued a rallying cry to his team’s supporters, published on his Club website. I feel that this is a momentous letter, justifying a full “fisking”. Therefore, Mr Whyte’s comments are in normal type and my thoughts in bold.

Will Craig Whyte emerge victorious as the British did at Rorke’s Drift, or is he playing the role of General George Custer at Little Bighorn?

Take it away, Mr Whyte!

 

To all Rangers supporters,

I write to you today to address a number of key issues facing the Club.

First, I would like to address specifically the latest attempt to undermine Rangers in today’s (31^st January’s) Daily Record which devotes five pages to trashing our efforts to get this Club back on a sensible financial footing.

The Record piece was mainly about the mortgaging of much of the season ticket money for the next three seasons in return for cash now. How, I ask respectfully, is that “getting the Club back on a sensible financial footing”? A cynic might also say that, as matters stand, Rangers do not need to be “trashed”. Instead Mr Whyte’s ire has been roused, as indeed it was by the BBC, by personal attacks, as he would perceive them.

In the most lurid terms, the Record accuses the Club’s management and, specifically me, of using supporters’ money to help fund the buy-out of Rangers. Not true.

Mr Whyte must be commended. His use of the English language is generally very precise. He seems, generally, to measure every word he says, and as a result close analysis of exactly what he says can be very interesting.

Here is a perfect example. Mr Whyte did not use the “supporters’ money to help fund the buy-out”. After all, the buy-out only cost £1! If he means that the £18 million paid to clear the Lloyds Bank debt (and transfer the right to recover it to Mr Whyte’s own company, Rangers FC Group Ltd) was “supporters’ money, then again this would not be true. Those sums were either obtained in a short term loan from some source, paid off by the raising of funds from Ticketus, or the Ticketus funds themselves were what paid off Lloyds.

However, in any football club, the “supporters’ money” will be used to assist in the running of the Club, including paying loan interest, repaying loan capital etc. It is not the case that the cash from the spectators is put in a separate account where the Club can only access it to buy players, for example.

Mr Whyte is very good at denying that with which he has not been charged.

The Club is accused of not paying £5 million in VAT. Not true.

As has already been pointed out elsewhere, this could mean that Rangers owe £4.9 million, £5.1 million, or £10 million! Mr Whyte could have said – “The Club’s VAT payments are up to date and have been made in full”. He did not.

Instead he gave no answer to the two VAT issues there seem to be. First of all, if the Ticketus payment was an advance on sales, then potentially the VAT is payable then too, coming to around £5 million. Alternatively there are rumours that Rangers have not been maintaining their payments of VAT in a timeous manner. Mr Whyte’s efforts to “clarify” the issue do not do so.

I can categorically assure supporters that when I launched a takeover bid for the Club it was funded entirely from one of my companies and that was demonstrated clearly to the satisfaction of the previous owner, Lloyds Banking Group and professional advisers.

The need to pore over every word becomes addictive. As Mr Whyte says, “When I launched the bid” it was “funded entirely from one of my companies”. That sentence could imply that the bid might have started funded by one of his companies, but does not confirm that it remained that way.

Money was put into the client account of Collyer Bristow, Solicitors. The source of these funds should have been declared so as to allow Collyer Bristow to fulfil its anti-money laundering obligations.

Did this money come from Ticketus, similar to a mortgage cheque being sent out, which has to be returned if the deal falls through?

Or was it from Liberty Capital Ltd, Mr Whyte’s British Virgin Islands based company?

I have a piece on the money laundering issues that large payments can cause for solicitors nearly ready, but of course, I would not intend to suggest that that issue exists in this case. Mr Whyte could clarify matters very simply with a clear statement.

What is true is that Rangers, like many other clubs, has a financing arrangement in place with a company called Ticketus which enables the Club to receive revenue from a portion of season ticket sales in advance.

There is nothing unusual or untoward in this arrangement which was put in place at the Club long before my takeover last year and was used by the previous management. For members of that regime to criticise the use of a scheme they put in place is, frankly, outrageous.

This is a perfectly straightforward way of raising working capital for the Club. Money from season ticket sales goes directly to the Club and is used for the Club’s operations and that remains the case. In effect, all this financing arrangement does is release the revenue to the Club earlier.

Mr Whyte, or perhaps his PR adviser at Media House, is a wizard with words. Nothing of what is said in the previous three paragraphs can be seriously questioned or shown to be false. However, the fine print looks less clear.

Alastair Johnston, the erstwhile chairman of Rangers, explained to the BBC last night that the previous Board of Rangers used the Ticketus arrangement to “smooth out” cash flow over the year. Football clubs generally receive their income in a couple of large chucks each year. Season ticket renewals, European income and TV money do not come in on a steady weekly basis. If a Club has an overdraft facility, then this can be used to “smooth out” the bumps, but Rangers do not have one now.

The Ticketus model is a normal way of raising working capital. However, and this is not denied by Mr Whyte, generally Clubs do not mortgage four years of season ticket income for a one off payment. What Mr Whyte appears to have done here is to take out a huge payday loan, and rather than using the money raised to tide him over till he can keep all of his income after three years have passed, he has splurged it all now. What therefore will he use to keep the Club running, even before we get to the edge of the “Black hole” mentioned below?

His statement here allows him to introduce his them that it was all the fault of the old Board, and that Mr Whyte is blameless.

The Daily Record’s approach to this story sought to distort and dramatise the matter. I for one will not be reading or buying the Daily Record again and I’m sure many other Rangers fans will share my disgust at yet another smear on this football club.

Mr Whyte does not accuse the Record of invention or falsehood, but distortion and dramatisation. Bearing in mind how his star seems to be waning with Rangers’ fans, how many will follow his call for a boycott, who are not already doing so?

It was, predictably, fuelled by accusations of former board members of the Club. I simply ask Rangers fans what these men did for Rangers in the Club’s hour of need? They were all talk and no action and presided over the Club as it careered to the brink of financial collapse.

Why did Mr Whyte buy a Club on “the brink of financial collapse”? Was it to rescue it, as a proud Rangers fan with untold wealth, or was it, as a distressed company, a ripe target for a venture capitalist with a history of involvement in distressed companies?

What was the cause of this careering? Was it overspending and mismanagement, or the tax issues? He may tell us.

The overarching issue that affects Rangers financially is the HMRC tax tribunal, which has been hanging over the Club for many years and long before I became chairman. As I have said many times before, the sooner that is resolved the better.

True. Especially if Mr Whyte’s plan was to have the Tribunal find against Rangers allowing him to appoint a receiver, and blame the Murray regime. This, too, would have allowed him, if so minded, to try to get round the “fit and proper” rule if he wanted to be part of a newco, as he could argue the failure of the Club was despite his best efforts, not because of them.

In terms of the playing squad, you may know the Club has agreed a fee with Everton for the transfer of Nikica Jelavic. We wish the player well and thank him for his contribution to Rangers.

The reality of Jelavic’s departure is two-fold. One, the player wanted to leave and there is no point in trying to keep a player who no longer wants to be at Ibrox. Two, the Club is simply not in a financial position to turn down offers for players which give the Club a good return on its original investment.

Interesting… Mr Jelavic does not seem to agree. He seems not to have wanted to go, although he might have been saying that to justify his payment for not wanting a sale. In addition, what has changed since this news on 31^st August – “Rangers say they have rejected a £9m offer from an unnamed club for striker Nikica Jelavic after warding off an earlier approach from Leicester City.” By that date Rangers had been eliminated from both European competitions. Perhaps it was the League Cup defeat to Falkirk that made the difference?

How is it possibly good business for a team in Rangers’ position to turn down a £9 million bid and accept £5.5 million 5 months later?

Bearing in mind the initial investment of £4 million, the return was a lot less than it could have been, especially as Mr Jelavic will be entitled to a significant part of the fee as he did not, apparently, ask for a transfer.

As Gordon Waddell of the Record put it on 4^th September 2011:-

“A gullible three-year-old wouldn’t buy their schtick if Santa Claus and the tooth fairy themselves read it to them as a bedtime story. The announcement of the fact they knocked back a bid from Leicester for Nikica Jelavic on their own website just about did the trick. They almost convinced people that doing nothing was actually doing something. Haven’t brought in a single one of our manager’s first-choice targets all summer long, but LOOK! We did keep a player we had under contract anyway!”

Investment in the playing squad has been a thorny issue since I took over the Club in May and is the source of endless debate, much of it ill-informed. I want to set the record straight.

Excellent! Thank you, Mr Whyte. Inform us!

In the summer transfer window last year we conducted 14 different pieces of transfer business, more than any other club in Scotland. This included new signings and improvement to existing contracts with key players, increasing the players’ wage bill significantly. We now have a first team squad of 30 which includes 18 full internationalists.

This might be a little nit-picky, but I am not aware of anyone, other than Mr Whyte who describes giving improved contracts to existing players as “transfers”. In the takeover circular, he stated that Rangers FC Group had undertaken to provide £5 million “for investment in the playing squad”. Most fans would have seen that as being for transfer fees and wages for newly signed players and free agents, rather than for increasing the salaries of the existing staff.

At least Mr Whyte saw that, for all the financial troubles, he was able to increase “the players’ wage bill significantly”.

The 14 pieces of transfer business seem to consist of (a) signings of new players (b) transfers out of old players and (c) improvement of existing contracts. Most football fans hearing about their club doing 14 pieces of business would expect 14 new players!

Admittedly, there were transfer targets we did not secure but that is not uncommon. As chairman, I have supported Ally McCoist in his choice of targets and will continue to do so. The timing of Jelavic’s departure so late in this window is far from ideal and efforts to improve the squad will continue until the transfer window closes.

The problem is that Rangers’ targets went from first class players to second class after their demise in the Champions League, and then to the bargain bin after going out of the Europa League. I do not have enough space to list all the players Rangers have been linked to since Mr Whyte took over, and who have ultimately not signed for Rangers.

From the start of the transfer window people were expecting that sales would take place at the end, sadly too late for any purchases. Lo and behold, that very scenario came to pass!

Did Mr McCoist go into the transfer window hoping only to sign one player, Mr Celik?

Is he happy to have a line-up of strikers consisting of Lafferty, Healy, Kerkar, Little and Hemmings? It is not a group of forwards who will go into Rangers’ history books for any positive reasons, I suspect.

That said, we must be realistic. Media coverage of the transfer window has bordered on the hysterical. As it stands at the moment Rangers has operating costs of approximately £45 million a year and revenues of around £35million – not including revenue from possible Champions’ League and Europa League participation.

Here is the key part of the statement, and one which, to be frank, has been rather swamped in other coverage. Mr Whyte, the man in charge of the Club, has publicly stated that “Rangers has operating costs of approximately £45 million a year and revenues of around £35million”. This statement follows him saying that the players’ wage bill increased significantly.

The two statements do not tally.

As Mr Whyte himself said in the statement accompanying the unaudited accounts:-

“I am the first to recognise the contribution Sir David Murray made to Rangers over 20 years. There will be a change of approach and I firmly believe the changes I have implemented will be in the longer term interests of the Club, which must always come first.”

So, Mr Whyte has already made changes (increased wages?) and these will be in the long term interest of the Club. There are two ways of dealing with debt. Increase income and decrease outgoings. As Mr Whyte mentions in his next paragraph, European money cannot be relied upon, although it is clear that the Rangers practice under Mr Whyte and before him was to rely on it! Other than that, and other than becoming a selling club, there is not much more that can be done to increase income in the Scottish football arena.

However, there are clearly areas where costs could be cut, wages being the first. Therefore, to face up to a £10 million black hole by (a) increasing wages (b) turning down a £9 million bid for their top player and (c) not selling off any of the other valuable and highly paid stars, seems bizarre in the extreme.

All of this would apply even without the looming tax case!

As we know, European money cannot be taken for granted and it doesn’t take much to work out that without it there is a big financial hole to fill every year – regardless of who owns the Club.

I’ve said many times that in Scottish football we have to move on from this mindset that you have to keep spending more and more money – that’s what got this Club into financial trouble before. We have to live within our means, continue to develop talent and spend wisely.

As I said above, Mr Whyte, who has asked to be judged on his actions, increased wages. The only signs of spending less are in fact through Rangers not paying debts: confirmed in the case of the various matters which have gone to court, and rumoured in connection with various tax issues.

These are challenging financial times for Rangers – as they are for many other businesses. What I can say to you as a Rangers fan is that everything I will do as chairman will be in the interests of the Club and I thank you for your continued support.

Craig Whyte, Chairman

“Everything I will do as chairman will be in the interests of the Club”. As matters stand today, and as I will address further over the next couple of days, it would instead appear that everything Mr Whyte has done as chairman has been in his own interests!” Who can fault him for that however? He has taken a significant financial risk, and after all, he must have been a very confident businessman to buy a club with £18 million of bank debt to be cleared, with an accepted liability of almost £3 million for one tax bill and with a disputed tax bill which, when all is said and done, end up around £50 million!

As is often the case however, what is not said is what is most important.

Mr Whyte details nothing of his long or even medium term plans. He fails to say how he will bridge the gap in the finances of the Club. He does not clarify how his takeover was funded.

His greatest focus seems to be on the directors with the temerity to criticise. As he says:-

“I simply ask Rangers fans what these men did for Rangers in the Club’s hour of need? They were all talk and no action.” A far cry from his comments about Sir David Murray quoted above.

Since his statement on the Club website, he has been quoted in the press striking back too, but that is for another blog post.

All I can say about this statement is that, amongst Rangers fans I know who were staunchly in favour of Mr Whyte, it provoked nothing but hilarity!