Duff & Phelps’ Preferred Bidder Statement Analysed – Guest Post by Den

I’m delighted to present another guest post. This time Den has taken time to “fisk” Duff & Phelps’ “preferred bidder” statement.

One day they will produce a statement which cannot be questioned….

But that might still be some time away!

I now leave you in the capable hands of Den.

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While nursing frustration that the inevitable is not being allowed to happen and at the amount of disinformation that is being bandied about I thought I would concentrate on the latest statements.

The Administrators statement of preferred bidder . My comments in bold

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Duff and Phelps, joint administrators of Rangers Football Club, issued the following statement today.

Paul Clark, joint administrator, said: “We would like to thank all parties for their efforts in seeking to submit bids which preserve the long history and success of the Club.

“We are delighted to announce that today we have received an unconditional bid for the business and assets of Rangers Football Club plc from Mr Bill Miller which has been accepted and he is now the preferred bidder. Mr Miller now proposes to complete his transaction by the end of the season.

They received the unconditional bid “today” that is 3 May. His bid had been reported as £11.2m (is that still the bid now that it is unconditional). End of season is 10 days away. It will need to be fast process.

 

“After many weeks of negotiation and deliberation we believe that the structure of the bid from Mr Miller provides not only the most deliverable outcome but preserves the history of the Club. Rangers Football Club will continue as the football club it has been for 140 years.

Does it keep the Company as a going concern, is it in the best interests of the Creditors. The Insolvency Act says nothing about most deliverable outcomes or History.

“Furthermore, Mr Miller and his team have sought clarity in relation to potential footballing sanctions and the place of Rangers Football Club plc within the Scottish Premier League. Significant progress has been made and discussions will continue throughout the period which Mr Miller now enjoys as preferred bidder.

“Significant progress has been made and discussions will continue throughout the period which Mr Miller now enjoys as preferred bidder.”

Sorry to repeat the quote it suggests a backroom deal has been done which pre-empts the meeting or they are just talking quite loosely to boost the credibility of the offer.

 

“Very importantly, the bid also avoids the need for liquidation. All too often the term liquidation has been bandied about during the process without a clear understanding of what it actually means.

“Liquidation means selling off the assets of a business individually to raise cash and therefore bringing about the closure or winding up of that business. This has never been on the table from any party in any form. There is no liquidation involved in this strategy and we cannot stress that strongly enough.

Note the first and last sentences. Pretty reassuring. If the CVA failed how would they explain the subsequent liquidation?  The definition they gave is incomplete; you can sell off individual assets of a company without it being liquidation. The Stadium and training facilities could be sold and leased back for instance.

“As we stated at the outset, one of the prime objectives of the administration was to achieve a CVA which would deliver a return to creditors. Mr Miller’s bid meets this criteria.

They must act in the best interests of the Creditors not merely deliver a return. They haven’t delivered a CVA yet.

 

“In recent weeks there has been much debate about Rangers exiting from administration through a stand-alone CVA. However, the barriers to a proposed stand-alone CVA are now too high.

“These barriers include, in particular, the absence of any bidder proposing unconditionally sufficient funds to enable a stand-alone CVA to take place.

“Crucially a stand-alone CVA would take so long now to effect, the Club could not survive in administration.

A stand-alone CVA cannot happen. It was never attempted; the Creditors never had the chance to vote on it. The Company was in a terminal state.

The only alternative is Bill Miller’s bid; take it or take it chaps. This process involves taking anything worth anything into another company and chucking £11.2m (maybe) into the pot for the £70 to £100M worth of Creditors, Duff & Phelps, secured Creditors and abandoned employees to fight over. Are the players, the stadium, the training ground, Furnishings and fittings, company cars etc. worth more than £11.2m? Are the Debts owed to Rangers being transferred to the new Company? If the case against Collyer Bristow is won would the proceeds go to the Creditors or the asset owning nurturing Company, where will the costs be borne ?

 

As a consequence, no party has been able to submit an unconditional bid in a stand-alone CVA scenario.

“We confirm that discussions with the two final bidding parties for the Club included the possibility, as part of the proposals, the formation of a new company in addition to the preservation of the Rangers Football Club plc.

“Mr Miller’s proposal involves the use of a specially created newco in addition to the retention of the Rangers Football Club plc. The business and assets he proposes to purchase will be sheltered in a newco and returned to the plc once the plc has been ‘cleaned up’.

Nice reassuring words “Sheltered” “cleaned up” what does it mean in Legal and Financial terms ? Think “incubator”.  On the other hand think “asset stripping” “phoenix” “Newco”. 

 

“He sees this route as a necessity rather than a choice and in our view this is an entirely workable strategy. Indeed to ensure the continuing operation of the Club beyond the end of May it is in our view a very compelling strategy.

“For the avoidance of any doubt as administrators we can only accept ultimately an unconditional bid – and Mr Miller’s proposal is the only unconditional bid we have received.

Nothing else on the table. What else can we do? 

 

“The bid submitted by Mr Miller is substantially greater than any other proposal and provides the best return to creditors, a fundamental part of our duties as administrators. Importantly, the structure provides a stable platform through which new investment can be deployed to ensure that the Club thrives again in the future.

The only bid is by definition the best bid. Would a sale of individual assets achieve more for the creditors ? Have the administrators left it too late by dithering with final bids and final final bids.

 

“The bid from Mr Miller creates the most suitable framework to deal with the issue of the majority shareholding in Rangers Football Club plc.

Don’t mention Craig Whyte ! If we cover our eyes he isn’t there. For better or for worse he is still major shareholder in Rangers and a secured Creditor. They may be confident that he will be stripped of his status as both but end of season is less than two weeks away, will the courts work that fast. Could there be a protracted legal battle – longer than two weeks.

The assets can be sold without Craig Whyte’s agreement but pending a court judgement any proceeds would go to him. The creditors are not just contemplating 8 to 15p in the pound but the possibility of zero after long expensive litigation. On the other hand if Rangers are liquidated they can claim tax relief on the bad debts now with no questions.

Rangers old and Newco merger  (mother and child reunion – Ahhh) cannot be achieved until Whyte sells or is stripped of his majority of shares.

It may be easier to strip out the assets and leave the rest fighting over a mythical bone, and then rely on sophistry/ spin.

 

“Mr Miller will be making his own statement in due course and we can confirm that it is envisaged that the sale of the Club will be completed by the end of the current season.

“We hope fans will now support and appreciate the commitment made by Mr Miller. His approach has been consistent throughout the process and on two occasions he has stepped back from the fray to enable other parties to submit an unconditional bid.

If I bid make a bid for a house, piece of furniture, work of art, beloved football club it is because I want it. If the rest are not ready I will go for it because I want it. Why hold back ?

 

“Mr Miller’s proposal can provide the opportunity for the Club to return to success on and off the field. We have no doubt that the fans will continue to provide the tremendous support to the club necessary to continue the Club’s long history of success and tradition.

“Despite the competitive nature of the bidding scenario, we are hopeful that now a bidder has been chosen for the Club, all parties involved in the process will act in the best interests of the Club by lending their full support to the prospective new owner. We expect to enter into a binding agreement very soon.”

Blah

I can’t help thinking that D&P in a previous incarnation advised Craig Whyte on taking over Rangers.

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Posted by Paul McConville, on behalf of Den