I posted this as a comment on the Rangers Tax Case Blog last night:-
“The Blue Knights are to be the preferred bidder! The world is rosy again! Let us fill Edmiston Drive and sing our sings of triumph!
That seems to be the consensus amongst internet Rangers fans just now.
Indeed plans are already afoot for a £50 million share issue. Wealthy Rangers fans will contribute £40 million and the rank and file £10 million.
The less wealthy fans are already making their plans however, to ensure that a part of them will remain in Rangers, and vice-versa.
As one of them commented:-
“Holidays and nights out will be a memory after I take out a bank loan for as much as I possibly can to invest in my Club. The hope just now is utterly overwhelming.”
Wait a minute! Perhaps this poster is Sir David Murray in disguise – after all, was his MO not to fund Rangers by way of ever increasing bank lending!”
Forgetting the attempts at humopur in the above comment, I wondered if the plan was near fruition.
The plan seems now to be as follows, with what I see as obstacles noted.
1 The Blue Knights take over, and pay the administrators slightly more than Mr Miller’s £11.2 million offer.
2 As the Blue Knights are set against liquidation and a newco, this must, by necessity, involve them buying Rangers Football Club PLC (in administration).
3 That company is 85% owned by Rangers FC Group Ltd, which is in turn, and eventually, owned 100% by Craig Whyte.
4 To displace Mr Whyte, the administrators will need to go to court (and what about the owners of the remaining 15% of the shares)?
5 IF Mr Whyte’s ownership is overturned, then who owns Rangers? Murray International Holdings?
6 Let us assume that the “purchase price” paid by the Blue Knights is in fact to go in its entirety into a pot to pay creditors. The order of preference is as follows:- Duff & Phelps (administration expenses); Close Leasing (finance re catering); Rangers FC Group Ltd, as holders of a floating charge; and finally unsecured creditors (potentially HMRC/Ticketus etc).
7 How much money will be left, if any, to propose an acceptable CVA to the creditors? D&P’s costs will now be around £2 million; Close is due £1.6 million; Rangers FC Group Ltd might be due £10 million, £20 million, who knows!
8 Therefore, unless I am missing something, like the floating charge being declared invalid or Group not being a creditor (which will involve a court decision), there is nothing left for a CVA.
9 D&P had a share issue, followed by a CVA as one of its two strategies (the other being an asset sale and a CVA).
10 The publicity regarding the Blue Knights seems to suggest that the plan is a CVA, followed, once the club is debt free by a share issue.
11 That, if achievable, would seem to meet the first purpose of administration, namely to rescue the business as a going concern.
12 However, paragraph 3 (2) of the Insolvency Rules contained in Schedule B1 to the Insolvency Act states “the administrator of a company must perform his functions in the interests of the company’s creditors as a whole.”
13 Is it “in the interests of the creditors as a whole” to rescue the club with a CVA, if accepted, which meant unsecured creditors receiving 1p to 5p in the pound, if that?
14 The assets are valued at far more than the £11 million being offered. In that event, surely it would be better for creditors for D&P to (a) limp on till the transfer window opens, funds permitting (b) sell every player with any value and (c) either pre or post liquidation sell the fixed assets of Murray Park and Ibrox?
15 Also, if a share issue post CVA might raise £50 million, being one of the figures bandied about, might the creditors wonder why D&P would not attempt one pre-CVA, as indeed is their stated plan?
I am sure I am missing many important factors, and very wise people can correct me on them. However, if Mr Miller bids £11.2 million to buy all the assets of Rangers, which are in the books at far more than £100 million, how on earth is that generating a better result for creditors than a sale as described in para 14 above?
It all comes back to para 3 (2) of the Insolvency Rules. Whilst I am sure D&P have not forgotten what that says, I suspect other people, in the rush to “save Rangers” have done so.
The purpose of administration is not to save Rangers for the club, for its history or for its fans; it is to save it for the benefit of its creditors!
Addendum – The always on the ball James Doleman has pointed out to me the following story from the Herald this morning:- “RANGERS’ administrators are likely to pull back from naming a preferred bidder for the club today after hours of intense negotiations ended in stalemate last night.”
And so the saga continues…
Posted by Paul McConville