In which I look at what Duff and Phelps have cost the creditors of Rangers, and what they have been spending time on since they sold off all the assets in June.
I also take a very “broad axe” approach to the value of the administration process, which seems to suggest that the creditors would have been several million pounds better off if the liquidators had come in on 14th February!
The figures are mind-boggling.
That applies to each of the total costs, the weekly bills, the hourly rates charged, and the amount of time spent on this job.
——————————————————-
Duff & Phelps were appointed as administrators of Rangers Football Club PLC on 14th February 2012. They remain in place, but expect shortly to be replaced when BDO step up as liquidators.
D&P consider that they have succeeded in achieving the second goal of administration, namely a better outcome for creditors via administration that if the company had gone straight to liquidation.
As Duff & Phelps’ global website says:-
2012 Administrator for Rangers in the largest football club insolvency in UK history
What about the costs charged by them for this arduous and onerous work?
As I mentioned in my last post, the total sum, excluding VAT, paid to and owing to lawyers, valuers and PR firms by D&P in connection with the administration, and all money coming from the creditors’ pot amounts to £2,319,894.
The fees of D&P are separate and distinct from that figure.
In full, for the period from 14th February 2012 to 10th August 2012, the total fees charged by D&P to the creditors (which is what in effect the position is) total £3,335,053.25.
There is also a trading shortfall, in other words a loss, during the period to 13th August of £3,983,594. That figure takes account of a payment made by Mr Green’s newco to assist with trading costs of £280,924.
Therefore, on a very simplistic view, the administration process, up to almost three weeks ago, has cost the creditors as follows:-
Expenses and outlays to third parties – £2,319,984
D&P Fees – £3,335,053
Trading Shortfall – £3,983,594
TOTAL COST TO CREDITORS – £9,638,631
Of course this does not include costs of the last three weeks, and of the period until D&P finish as administrators.
It does not include the ongoing costs of the English High Court case against Collyer Bristow, either for Counsel or solicitors.
It does not include the costs incurred by the liquidators when they are appointed.
It does not include the cost of the liquidators litigating against either the purchaser of the assets or the allegedly negligent directors.
Bearing in mind that what the administrators realised was £5.5 million as the sale price of all the assets, then it is clear, with hindsight, that the process of Duff & Phelps trying to run Rangers in administration has been one which has not turned out to be in the interests of the creditors.
The question that the administrators may have to face is whether their plan was ever realistic, or in fact it was the case that this outcome could have been foreseen from the earliest stage. If that is the case, then Duff and Phelps could potentially be looking out their Indemnity Insurance policy in the face of a claim by the creditors.
In this post, I want to look at the costs incurred by D&P since the sale of the business and assets of Rangers, on 14th June.
As the August Report stated:-
6.2 The sale of the business and certain assets included the sale of the Company’s right, title and interest in its SPL share and SFA membership. Following the sale of these assets, the sale of Ibrox and Murray Park and the transfer of the Playing Staff to Newco the Company was no longer in a position to meet the criteria for membership of any of the Football Authorities and therefore no longer operates a Football club.
That means that, as far as I can see, there was comparatively less for D&P to do following the sale on 14th June.
Up to 29th June the total D&P fees charged amounted to £2,973,403.50. Spreading this evenly over the 19 ½ weeks to that point brings out an average weekly fee charge, ultimately to the creditors, of £152,482.
That of course includes the costs of running a football team, dealing with the regulatory issues arising and attempting to put together a CVA and then a sale.
After the sale, it is fair to say that the costs would have decreased significantly. They did.
In the six weeks from 30th June to 10th August D&P charged fees of £361,649.25 – a weekly average of £60,275.
What could D&P have found to do to incur costs at that level, having sold off all the assets and business?
The five largest elements of the post 30 June fees are as follows:-
Strategy Planning and Control
In the six-week period Partners carried out 170 hours of work under this heading. Managers contributed 68 hours. Seniors worked 10 hours, Assistants 3 hours and Support staff 15 hours. Therefore, D&P contributed 267 hours to this heading over six weeks. The average hourly rate charged for this work over the whole period since February 14th amounts to £483.53 per hour.
The total cost of this activity over the six weeks was £128,000.
After the assets had been sold, what “planning” and what “control” was required? Enough for almost 30 hours of Partners’ time being spent on this topic alone in the six weeks covered by the last report? Is this the heading for the hours that do not really fit elsewhere?
Messrs Whitehouse and Clark, busily engaged on Rangers business
Statutory Matters (Meetings, Reports & Notices)
In the six-week period Partners carried out 13 hours of work under this heading. Managers contributed 106 hours. Seniors worked 13 hours, Assistants 3 hours and Support staff 0 hours. So D&P contributed 135 hours to this heading over six weeks. The average hourly rate charged for this work over the whole period since February 14th amounts to £390.28 per hour.
The total cost of this activity over the six weeks was £55,000.
Is this the heading under which the work changing the company’s name was put under?
Financial Reviews and Investigations under s238, s239 etc
In the six-week period Partners carried out 52 hours of work under this heading. Managers contributed 94 hours. Seniors worked 3 hours, Assistants and Support staff 0 hours. So D&P contributed 149 hours to this heading over six weeks. The average hourly rate charged for this work over the whole period since February 14th amounts to £419.10 per hour.
The total cost of this activity over the six weeks was £63,000.
What, one might ask, are s238, s239 etc? The Insolvency Act 1986 Part VI includes sections 238 to 246. This part of the Act is headed “Adjustment of prior transactions (Administration and liquidation)”.
In total, from the start of administration up till 10th August, the total sum charged for this category of work is £163,618. Partners have spent 163 hours on this area of work, and Managers 196 hours.
Ironically sections 238 and 239 are relevant to England. As the Rangers Football Club PLC, which is now called RFC 2012 PLC, is registered in Scotland, it is in fact sections 242 and 243 which apply. I presume that the time and fees charged list is a D&P pro-forma, applicable to both Scotland and England. I am not suggesting that D&P have got wrong which country they are dealing with the administration in!
Bearing in mind however the speculation about the issue of gratuitous alienations in respect of the sale of the business and assets of Rangers, it seems noteworthy that, in the spell after all the assets have been sold, D&P seem to have spent a lot of high powered, and high priced hours considering the issues.
If the liquidators raise this as an issue, then we can expect D&P to provide a full, prompt and detailed answer to any questions asked of them.
Sale of the Business
In the six-week period Partners carried out 9 hours of work under this heading. Managers contributed 27 hours. Seniors worked 15 hours, Assistants and Support staff 0 hours. So D&P contributed 52 hours to this heading over six weeks. The average hourly rate charged for this work over the whole period since February 14th amounts to £411.80 per hour.
The total cost of this activity over the six weeks was £20,000.
As the sale took place on 14th June, and these figures given above run from 30th June, one wonders what they found to spend almost 52 hours dealing with in connection to the sale?
Trading : Accounting
In the six-week period Partners carried out 0 hours of work under this heading. Managers contributed 21 hours. Seniors worked 54 hours, Assistants 25 hours and Support staff 59 hours. So D&P contributed 159 hours to this heading over six weeks. The average hourly rate charged for this work over the whole period since February 14th amounts to £246.28 per hour.
The total cost of this activity over the six weeks was £35,000.
By comparison with the matters above, this one seems almost economical! However, it is nearly £6,000 per week spent on doing the books for a business which is no longer trading, and whose only asset is the purchase price paid for the assets!
Working like Trojans
The figures disclose also that in the period from the start of administration up to 10th August, a period of 25 ½ weeks, the Partners spent 2,865.50 hours attending to work chargeable to the administration.
That averages out at a total of 112 hours per week of Partners’ time, each and every week.
It also ignores the time spent on matters which D&P cannot charge the creditors for. That includes the application to the court in March to “fix” their appointment as they had failed to carry out all relevant notifications properly in February. It also does not include any time spent by the partners dealing with Lord Hodge’s requirement that a report into conflict of interest allegations be prepared. It is arguable if time spent by D&P taking advice about suing the BBC, as was promised following the last Inside Story documentary regarding Rangers, would be a charge in the administration. In any event, the court action does not appear to have arisen.
How many D&P partners were involved? There must have been more than Mr Clark and Mr Whitehouse, one assumes.
I wonder if their definition of chargeable time matches an accountant of my acquaintance some years ago. The accountant was based in the south of England, but had a client living in Scotland. The accountant and the client got on well together personally and, after a meeting in Scotland, the accountant took the client out for dinner. I have no doubt that the discussion was entirely about the client’s case.
When the client received the bill from the accountant, they were astonished to see that the firm had charged for every minute of the accountant’s time from the minute of leaving the English office until returning there the following day, including the cost of the dinner as a disbursement! As the accountant was engaged on nothing other than the client’s business at all times, one assumes that the charge of 24 hours at £600 per hour was entirely justified and appropriate. It is fair to say that the client took a contrary and rather jaundiced view of the accountant’s “generosity” with time!
I am not suggesting that Messrs Clark and Whitehouse necessarily charged the administration for travelling up and down from Glasgow, although travelling time would be a legitimate charge, one imagines. I am sure all charges are legitimate.
The administrators attended various football matches. As they were responsible for running the business, then this would have been work, rather than play, and, as they sat in the Directors’ Box, the meter was spinning wildly and the bill increasing.
It shows how huge the fees are when the reaction on seeing that the weekly charge is now “only” £60,275, the immediate reaction is how much of a reduction there has been!
A commenter said on here last week that the concern might not be that this administration was out of the ordinary in terms of the amount of the assets eaten up by the administrators, but that in fact it was the norm, and it was only the public scrutiny which brought this into the light.
Anyone who deals with Insolvency Practitioners knows how high the charges can go, as a result of the onerous and vital job they have to do. It does seem somehow to indicate that three should be a better system though, when so much of the money nominally for creditors goes to the administrator or liquidator.
That, however, is an issue for another post!
Posted by Paul McConville
Random Thoughts Re Scots Law by Paul McConville 
One way or another the creditors (mainly British taxpayers) have been treated in a most outrageous manner
Paul, I’m sure I read all of this in the Daily Record. Ahem, maybe I’m mistaken…
Seriously though, when the papers are desperately trying to get some great back page headlines here’s a story for everyone. Everyone hates Duff and Duffer, The Rangers and Celtic fans alike, what a great front page story you have here, all laid out for them.
Proper journalists would have been all over this stuff like a rash. Instead we get endless, mindless drivel. They say we get the politicians we deserve. I think we can say the same about the MSM. It’s over for them, it really is. The battle is over, the bampots have won!
Once again, Paul, you have pampered the lazy commenter. In the recesses of my mind, there has lurked a festering suspicion that Duff and Phelps were ‘taking the Mick” (no reference intended to other renowned posters). Your extensive breakdown of fees, times and charges has satisfied my craving for answers. I love the cynicism that has silently crept into my life in old age and that is why your aside regarding the possibility of such rip-offs being the norm was gratifying. I find it curiously interesting that without being witness to events one can just sense what is happening. It is as satisfying for me as it must be for the cop who solves the crime from his gut feeling when ‘going by the book’ enquiries reach parallel conclusions to his instinctive deductions. You have undertaken the door to door enquiries on my behalf and reached concurring conclusions. Which is the superior method, my gut or your brain? One argument you might have lost, Paul :).
Magic break down of cost Paul ,all those charges are fraudulent a just hope bdo and the tax man sue them and claw some back ,is whyte on a brown envelope commission lets not forget the fact there m8s ,
“31 May 2012 Last updated at 02:35
Duff and Phelps ‘agreed’ to cap Rangers fees at £500,000
By Mark Daly BBC Scotland Investigations Correspondent
Rangers’ administrators Duff and Phelps agreed with owner Craig Whyte to cap their fees at £500,000 two days before they were appointed.
Emails obtained by BBC Scotland reveal the firm also agreed to try to minimise the time spent in administration.
Duff and Phelps’ fees and charges now stand at more than £5.5m.”
“The best-laid schemes o’ mice an’ men Gang aft agley,
An’ lea’e us nought but grief an’ pain,
For promis’d joy!”
(Robert Burns)
I’m still confused as to why the Administrators thought/ state the sale of the club as a ‘going concern’ would realise more than liquidation.
It is a fallacy! The intention has always been to stiff the creditors and make the “club”, in some form or other, survive.
Paul.
Has this money been paid to Duff/Phelps or has duff/p only billed it?
Where does this cash to pay D/P come from?
Most of it has been paid out of the sale price of the assets.
Paul, if the assets only raised £5.5m where does the other £4m+ come from?
BDO will be going through Duff & Phelps’ files with a ‘nit’ comb and asking some weighty questions on their administration of RFC’s liabilities. If there has been any malfeasance on the part of RFC or D & P; BDO will find it. Before she passed away; Lesley Strathie (Stranraer lass) the boss of HMRC was quoted telling staff ” to relentlessly pursue whose who bend or break the rules” . There are a lot of Rangers employees (past and present) who will be having sleepless nights during the term of this investigation. And as my old mum used to say … ” Hell mend them!”
D&P’s only pro argument is that they thought they could get the CVA, which as we all knew and speculated frequently was all BS, Ticketus and HMRC were just owed too much. HMRC has never really said much about this whole affair I assume the plan is slowly taking play in the background, Ticketus going after Whyte.
There was a strong indication by D&P and Green that HMRC were cool with the CVA, why in god’s name could D&P not have had this early guarantee in place (documented), there must be a means for this even, speculating on the amount available to creditors. If they said we will work to try and get £10m for creditors if we succeed will you Mr hector vote for a CVA, Yeah or nay, this would have saved an awful lot of money, time and effort and D&P would have known the number they needed else sequestration.
Those large sums are ludicrous especially as they are looking after a bank account and nothing else or are they feverishly trying to close loops, tie up all the loose ends they created through this shoddy affair.
Any company worth their salt who audit this shambles will surely pick a thousand holes.
on what do you base your assumption that bdo will act any differently to d and p ? there are fat fees to be earned and trashing/exposing people in the same line of business is not likely to be on their to-do list.
scottish football didn’t have a football creditors rule until now. funny how one was quickly thought up and implemented and now will be the norm for ever one assumes. the insolvency laws need an overhaul to rectify the present iniquitous situation where small traders are shafted while the perpetrators go scot-free. (sic).
Does this not all look like a device to legitimately transfer money from one place to another?
And is the other place the final destination or stop off point on a longer journey before fnally arriving at somewhere like CW junction?
CW being a lable covering much wider territory that still has Ibrox within its borders?
We need a couple of conductors/whilstle blowers to step from the train.
Nice one Paul,
lets see if Kieran or Ian have anything to constructively add to the post, maybe not, not heard from Andy for a while either……maybe they can contribute on objective view from supporters of the club who caused this damage to individuals, businesses and reputation of Scottish football.
Charging.
The time element is usually charged at 6 min sections on automated (computer software) programming for the unaccustomed to professional charges, they are sofisticated enough to run when fee earner either manually opens the file or more likely takes or responds to a call, email, fax, letter, visit, etc. Cost accountants are appointed to recheck through the files and ensure that no duplication of charges or time has been made to the dettriment of the client, in this case the creditors.
Regarding the “english” elements I suggest they are related to CW RFCGroup PLC which is english registered company and if memory serves me was the 85% shareholder, but then again maybe not.
The point that always really stick with me and has been voiced by blackKnight is that in absolutely no way was the sale of undervalued assets better than liquidation. Even to the most uninformed when you look at the most basic facts, – assets “on a bad day”, £50m+ against the “purchase price” it represents 90% of the true value AND the costs have still to be paid out first so there was never anything left for the creditors. Additionally it sticks in the throat that the likes of CFC have been paid in preference to the small businesses. Why should agreements have been put in place for these creditors?
Again when the legal aspect is looked at and the actual “saving of the club” where at least the other Scottish clubs were not going to be left out of pocket, (despite the delay in payment), has left every other creditor out of any financial settlement. The other matter of interest is that most of these creditors are not in any position to take expensive legal action in any form, the people who would be are ALL being settled.
This is something that in all seriousness the serious fraud office should be concerned with as not only have creditors been conned but ultimately the HMRC and therefore the public purse.
I am astonished that NO authority seems to be interested in potentially £200m sting once all the component parts are actually fitted together. (£150m known + £40m tax offset + creditor
Expect Immodium shares to increase in the Govan area. But again Paul can I ask why was the valuation based apparently on one Company’s view as appears in the report from D&P (Fixed Assets Valuation)?
D&P you have suggested will have been paid out of the property etc sale, but from where do BDO get their piece of the pie ?
Has a date been set for their appointment ? Or is it “definitely in the near future”.
Unrelated but relevant,
Was reading through the difficulties of the Qatari royal family and stumbled on this,
Direct comparison with SFA and RFC and ……….”have we not been punished enough”
When Malaga should have been strengthening to ensure Champions League progression, they have been selling to stay afloat with the owners’ interest waning.
Of course, Arsenal were one of the first beneficiaries of Malaga’s problems. Star man Santi Cazorla was sold to the London club for £15m – £1.5m less than the Andalusian club paid Villarreal for the Spain midfielder last summer.
When talented young forward Salomon Rondon and experienced Netherlands defender Joris Mathijsen followed him out the door, it looked like a full-blown exodus. High-earning coach Manuel Pellegrini’s position was also questioned as rumours grew of the club’s impending sale.
In reality, the warning signs have been there for months. Former Manchester United striker Ruud van Nistelrooy and Cazorla were among a handful of players to threaten legal action over unpaid wages last season.
The LFP (Liga de Futbol Profesional) had imposed a transfer ban in January after the club missed a payment to Osasuna for Spain full-back Nacho Monreal. January 24 – La Liga outfit Malaga, one of the richest teams in Spain, have been banned from transfer activity until they have paid back a debt to rivals Osasuna.
Malaga were earlier this season the subject of a complaint from Villarreal over VAT owed to them following the transfer of Spain playmaker Santi Cazorla, the Andalusians’ record signing when he arrived last summer.
Transactions at the club can take up to two months to go through due to their convoluted payment structure.
Wait I’ve heard that one before….DM CW and D&P must be involved somewhere along the line, was wondering about the suntans…………
This penalty was swift and just with severe warning of more to follow if not sorted…….SFA take a lesson
Posted Today, 08:32 PM
Community Share Scheme
Wednesday, 29 August 2012 21:02
For the past two months the board of the RST, in partnership with other members of the Rangers Family, have been working on a Community Share Scheme.
The Community Share Scheme is designed to bring about a significant stake in Rangers FC by way of investing in the club as a collective and helping to secure the club’s long term future.
Because of the size of the task involved, we sought out help from our members and the wider Rangers support. We were delighted by the response and the calibre of individuals that have got involved.
Supporters Direct, the governing body for supporters trusts in the UK, have also supported the process through their network of resources.
Ian Davidson MP’s involvement to date has been to, very helpfully, broker a meeting with the club.
Paul Goodwin (SD), Ian Davidson MP and Chris Graham (Chris has been helping to co-ordinate the project) all attended a meeting with Mr Green and Mr Stockbridge recently to discuss the concepts of fan investment and involvement in the club. Mr Green and Mr Stockbridge were very receptive to these concepts.
The content of this meeting and previous discussions has been communicated to The Rangers Supporters Assembly and Rangers Supporters Association in order to hopefully achieve widespread backing for the project. The groups will reconvene after consultation.
Despite all the troubles of the past six months, the Rangers Family will hopefully soon have an opportunity to invest in, and have a real say in the future of, the club we all love. The Trust Board will further update members if and when the project is ready to launch.”
-9
found this on the darkside,
Isn’t it strange that when discussing the Rangers issue with their fans, they are always quick to point out that it was the holding company that went under not the club – as if they are different entities, but when talking about investing, their money is going to the club!!
Another great read Paul.
As for who’s making money out of this farrago (and at the risk of bigging myself up!) I draw your attention to the 6th paragraph from the end:
D&P are taking the piss.
If you compare the fees charged by KPMG in the Leeds Utd administration from 4 May 2007 (date of administration) to 8 February 2008 (date of creditors voluntary liquidation of Leeds oldco) the fees charged by KPMG totalled £732,364.50 representing 2,778.9 hours. Rates (admittedly at 2007 levels) were £400 to £465 per hour for partners, £290 to £365 for managers, £150 to £205 for administrators, and £95 for support staff. In addition £20,000 was charged for the administrators’ role as nominees. £7,829.81 was charged in disbursements.
£12,402 was charged by valuers for valuing the property, plant, machinery and fixtures & fittings. £358,804 was charged in respect of legal fees, plus £44,850 for counsels’ fees.
The Leeds United administration lasted for 9 months, the Rangers one has been so far for nearly 7 months.
Both are similar, although I accept that there are far more legal cases going on with Rangers than there was with Leeds. If the D&P fees turn out to be justified, I can only assume that most of the difference (even allowing for fee inflation) is on dealing with unhappy Rangers fans bombarding them with queries.
Hope this info helps.
Good grief, I must say, to a layman those figures look extremely suspicious.
What are the chances of the Liquidators accepting these charges as perfectly legitimate?
There’s little question Duffers and Flops agreed to cap charges at 500K. I’m sure that e-mail has already been published on this very site.
How on earth can they get away with this ?
Geddy Lee
In fairness there was discussion between Craig Whyte and D&P about capping of fees, but agreement was not reached before Whyte was forced to press the button on administration earlier than he intended.
Perhaps the difference is an uplift in fees for D&P for danger money?