In which I look at the most recent pronouncements by the administrators; the Blue Knights v Bill Miller battle; the appearance that Duff & Phelps are uninterested in the interests of creditors; the brilliant plan by Bill Miller; the inevitability of liquidation; and as an aside, the suggestion that Messrs Whitehouse and Clark of Duff & Phelps could themselves be summoned for bringing the game into disrepute!
Rangers administrators, Messrs Whitehouse and Clark of Duff & Phelps (D&P), seem to be reaching the end of the road in the bidding process for Rangers. The final deadline, at least the most recent final deadline, has passed. Nearly 11 weeks have gone past in the administration process, with D&P’s costs running at over £200,000 per week.
After interest from Club 9, Bill Ng, a German consortium (did we ever find out who that was?), Brian Kennedy, the Blue Knights without Brian Kennedy, the Blue Knights with Brian Kennedy, the Blue Knights with Ticketus, the Blue Knights without Ticketus, and Bill Miller, we seem to have reached the final contest.
The Trucking Tycoon v the Blue Knights – Let’s Get Ready to Rumble!!!!!
In one corner, wrapped in the Stars and Stripes, we have Bill Miller, the trucking tycoon, who has bold £11.2 million, and at first demanded written confirmation from the SPL and SFA that Rangers would face no more sanctions other than the 10-point penalty already imposed. His demand was followed by the SFA Judicial Panel imposing fines totalling £160,000 on Rangers, and a 12-month embargo on registering players other than under 18’s.
There remains an SPL investigation into “double contracts” and illegal payments, and the SFA appeal process is still to conclude.
In the opposite corner, wearing the Saltire and the Union Flag, we have the pick and mix assortment of the Blue Knights, led by Paul Murray. Mr Murray of course was a director of Rangers for four years, during which time, undoubtedly based on detailed legal advice, the Rangers Board made no financial provision whatsoever for the “Big Tax Case” which would be crippling to Rangers if the actions of Mr Whyte over the last year had not already resulted in administration.
No one has yet answered the question as to how Mr Murray qualifies as a “fit and proper person” having been a Director of a football club in the five years prior to an Insolvency Event. Although, as the SFA Chief Executive Stewart Regan said, the test is a “myth” and the SFA relies on clubs to fill in the forms correctly, if Mr Murray does gain control, then as long as he ticks the correct box, the problem is solved!
His new sidekick is Brain Kennedy. He is a very successful businessman, but one who seems to have no attachment to Rangers, He is believed to be a Hibs fan, but in fact more interested in rugby. His involvement in this process seems to have been reluctant, with him saying earlier that (and I paraphrase) he did not want to be the successful bidder, but he would step up if no one else did to save Rangers and its legacy. That was not exactly Bruce’s speech to the troops at Bannockburn, or the Gettysburg Address as far as rallying cries are concerned.
However, this is set to be the final battle, and as the money at Ibrox runs out, as the players get closer to returning to full pay, as the time for selling season tickets has arrived but none can be sold till matters are clarified, how likely is it that we are near the result?
What Did D&P say on Friday 27 April?
(With my comments in bold)
David Whitehouse, Joint Administrator, said: “We can confirm this afternoon that we are in receipt of two formal bids for control of Rangers Football Club. Both bids at this stage remain conditional.”
The last date for unconditional, best and final, bids passed a while ago. However, what is a deadline for if not to be passed?
“We are in receipt of a bid from Bill Miller whose bid is conditional on securing greater comfort and clarity from the football authorities in relation to sanctions against Rangers. Clearly, the events of last Monday night when the SFA’s judicial panel imposed severe and, in our view, unwarranted penalties on the Club had a destabilising effect on the sale process. “
I wrote before about this. Good luck to Mr Miller seeking “comfort and clarity” from football authorities! I cannot see how the authorities can backtrack now from dealing fairly with Rangers. As has been discussed, for example by the NoToNewco group, it would be a travesty for Rangers to have its offences ignored.
Did the decision of the SFA Judicial Panel lead to a reduction in Mr Miller’s offer? If not, then it has not “de-stabilised” his offer. As he made clear just over a week ago, if he did not get the written guarantees he wanted, then he was out of the process.
D&P might find the verdict severe and unwarranted. They can argue this at the appeal!
One wonders whether their comments regarding the decision might render them liable for action by the football authorities. I will come back to that in another piece (if time permits).
“However, since then, Mr Miller’s bid team have worked to develop a structure which enables the wishes of creditors to be taken into account whilst ensuring that the Club is taken forward well-capitalised and the requirements of the footballing authorities are met. Mr Miller hopes a solution to all regulatory issues can be found and his team has been in constructive discussions with all relevant parties this week.
Hooray! D&P have mentioned the interests of creditors! It has taken nearly eleven weeks, but they have now done so! The Proposal to Creditors, running to over 30 pages ignoring Schedules and Appendices, mentions “the interests of creditors” once! This is in the context of the Ticketus deal.
The Insolvency Act requires more than taking the wishes of the creditors into account. Any and all actions by the administrators, whether to save the company as a going concern or to sell off the assets MUST BE CARRIED OUT IN THE INTERESTS OF THE CREDITORS. I think this phrase is becoming my version of Carthago delenda est!
“Mr Miller hopes a solution to the regulatory problems can be found”. I hope to find the Treasure of the Sierra Madre, but if I don’t leave Hamilton, it will be difficult.
What “relevant parties” have Mr Miller and his team had “constructive discussions” with? Presumably in light of the Rangers fans opposition to the SFA as expressed in their march yesterday, they might not take kindly to Mr Miller sitting down with the SFA?
Will Mr Regan or Mr Doncaster tell the public, or even their own members what these discussions are, and whether or not there is any consideration being given to Mr Miller’s “demands”? I suspect not. Will Mr Miller’s discussions be disclosed to the Blue Knights? One assumes that, if the SFA give reassurance and comfort to Mr Miller, this would apply to any other bidder? Has Mr Murray asked for this, in the interests of “transparency”?
“This afternoon Brian Kennedy and Paul Murray submitted a bid which is conditional on a CVA being approved by creditors and we will seek guidance from prominent creditors. It is also conditional on the acquisition of the shares of Craig Whyte in the football club and we have asked for this and other points in the bid to be clarified.
The Blue Knights + Kennedy bid is conditional on a CVA. Therefore they need to make a proposal which gives something to D&P to allow a payment to the unsecured creditors.
To do so requires:-
(a) enough to pay D&P, whose bill will now be over £2 million, and running at £200,000 per week;
(b) enough to pay preferred creditors, such as employees with unpaid wages though this figure will be small and may in fact be zero;
(c) enough to pay the secured creditors, being Close Leasing for at least £1.6 million and Rangers FC Group Ltd, for a sum of unspecified millions; or
(d) action by D&P to eliminate or invalidate Group’s Charge.
If the plan is to rescue the existing club, then there must also be:-
(e) enough to buy Mr Whyte’s shareholding; or
(f) action taken by D&P to dilute his control or to invalidate his purchase.
If I was a “prominent creditor” I would be very interested to see how on earth the bids so far get anywhere near covering these issues!
It is also interesting that Mr Whyte was declared to be “irrelevant” or “not an impediment”. Now the bids have to deal with buying his shares!
“We note the statement today issued by Ticketus and its withdrawal as a potential partner for the Blue Knights.
So Ticketus join the list of unsecured creditors, or else the “rescued” Rangers needs to pay a huge percentage of its season ticket income for the next three years to Ticketus?
“What should be clarified is that neither bid involves liquidation of the football club. In terms of quantum, there are significant differences between the two offers in terms of a prospective return to creditors and approach to future funding and these have to be evaluated. We will provide a further update as soon as possible.”
Thank you Mr Whitehouse for the clarification that neither bid involves liquidation. Of course that decision is not ultimately in the hands of the bidders. It is in the hands of the administrators, acting IN THE BEST INTERETS OF THE CREDITIRS!
For all the talk of “incubator companies” and corporate heart transplants and the like, I have not yet seen a cogent explanation, short of someone wanting to put tens of millions of pounds into the pot for creditors, as to how Rangers avoid liquidation.
That was Friday. Over the weekend, so farm, there have been further discussions. Scotland on Sunday reports the latest position today.
I have extracted Mr Whitehouse’s comments from Andrew Smith’s piece and, as above, have added my own beneath in bold. I would commend the whole article as well worth a read.
“We’ve had two bids and we continue to discuss them with both parties,” Whitehouse said. “The Blue Knights bid needs to be increased so that it is more value to creditors. They need to increase it significantly. Bill Miller’s position is clear. The Blue Knights position is not clear.
“The Blue Knights’ position is not clear”. After all of the to-ing and fro-ing, after the weeks of discussion and analysis, the Blue Knights’ position is still unclear, yet they have submitted an offer. If the offer is not clear to D&P, how can it be capable of acceptance?
If, as commentators such as Professor David Hillier believe, the Blue Knights are “low balling” because they do not believe Mr Miller can come through with his bid, have they too forgotten about the interests of creditors?
They are being told, in clear terms, that the administrators want more. How much more do they need to meet goals (a) to (f) as outlined above?
“We are in detailed discussions with the Blue Knights to see if their offer can be increased to a level which will be acceptable to creditors. We would encourage both bidders to focus on finalising their bids in terms of deliverability rather than seeking to discredit the other. We only have two bids and therefore it is important that the removal of one of those does not make liquidation actually more likely.
A sensible call for the bidders to focus on their own bids rather than the PR. However, as many consider there is no alternative to liquidation, then surely any bid, short of an offer far larger than either party is contemplating, can only be PR.
Interested parties are moving into position to proceed with an offer to buy the assets from the administrators, leaving oldco to liquidation, or to buy the assets from a liquidator. However, as neither wants to be seen as having delivered the coup de grace, they have to maintain what appears to be the pretence of not planning for liquidation.
“It is important that the removal of one of those does not make liquidation actually more likely.” That is an odd sentence, I feel. Of course having two bidders is better than one as there is more prospect in a normal case of the bidders competing to raise the price – that does not seem to have been the case here.
“We are not in a position of supporting one over the other. Bill Miller has made it very clear that he values the support of the Rangers fans tremendously. He sees the fans as his customers in support of his bid. We would encourage the fans’ groups, therefore, to embrace both bids at this stage to keep alive the prospects of a successful outcome.”
“Mr Miller sees the fans as the customers”. Basil Fawlty would have referred to that as a statement of the bleeding obvious!
Those prospects should become clearer in a matter of days, according to Whitehouse, who accepted that “people would be fed up with hearing” of possible end-points to the bidding process. But this has been the case only because Duff & Phelps have received no bid that accounts for owner Craig Whyte’s 85.3 per cent shareholding, no “quantum” offer that makes a CVA seem genuinely deliverable and no word about the timescale for a decision of the tax tribunal that could land Rangers with a £60m bill for the use of an Employee Benefit Trust scheme.
At least there is a recognition of the varying end-points and the problems this has caused.
Mr Smith has either taken the last part of the paragraph verbatim from Mr Whitehouse, or else the writer possesses a very dry wit.
What are the obstacles to a successful bid?
(a) No bid accounts for the 85% shareholding owned ultimately by Mr Whyte.
(b) No bid is of sufficient value to make a CVA deliverable.
(c) No decision yet about the First Tier Tribunal.
To quote the great Mr Fawlty again “Otherwise OK?” Short of having two dead pigeons in the water tank, how could it be worse!
“This really is the last minute,” he said. “Bill Miller is basically there in terms of his bid and we would expect to know by Monday or Tuesday whether we’re dealing with Bill Miller or not and whether we’re dealing with the Blue Knights or not. Both parties need approval from the football authorities, otherwise it makes a mockery of the business plan.
The vital words in the statement come here. Bill Miller is “basically there in terms of his bid”. That implies that Mr Miller’s £11.2 million bid is acceptable to D&P.
Does this suggest that the vital votes by creditors have gone in their favour, allowing them to batter on with a CVA?
What approval from the football authorities has been asked for? Do the SFA and SPL consider they have duties to consult their members, or id the Chief Executive of each company happy to use executive powers to reassure the bidders?
It is also telling that, in an echo of what counsel for D&P said in the court last week, Mr Whitehouse is saying this is the last minute.
“There is no reason, in our view, why these bids should drag on into the later part of next week. If the successful bidder goes down the stand-alone CVA route they can be in control of the club before the start of next season. If it‘s a newco with a CVA on a side route then they can take control by 11 May.”
Here we are again at the “with one bound, it is free” position. After all of the posturing, D&P have said that the Miller option, “a newco with a CVA on a side route”, can allow control to be taken by 11th May.
Alternatively, under a traditional CVA, the new owner can be in control by the start of next season. Both options depend on the matters mentioned above, and neither looks to be putting up the money needed to give a CVA any chance. So whilst in theory a CVA could result in a new owner being in charge by next season, I do not see how it can be achieved.
Let’s look at the “newco with a CVA on a side route”. This is, I assume, D&P’s analysis of the “incubator company” route.
First of all, a newco implies the end of the oldco. More realistically, it involves the assets of Rangers being sold to a newco, and then, supposedly, the proceeds of the sale of the assets being used to fund the CVA for unsecured creditors so that, once everyone is happy and the debt extinguished, the newco and oldco merge and the history is saved!
Such a plan, which seems to be an acknowledgement that the company cannot be rescued as a going concern, would still have to overcome the issues I identified at (a) to (f) above. Otherwise Rangers Football Club PLC will be wound up.
In a business sense, and Mr Miller has made clear he s in this for the money, as indeed he is entitled to be, there is no case at all for the “incubator company” route. It is far more likely that Mr Miller would buy the assets and put them into his newco “by 11th May” as D&P say and then winding up of the oldco would happen.
Why have the change made by 11th May?
That seems to be an effort to resolve the problems caused for a newco in relation to a licence to play in Scottish football, membership of the relevant bodies and ownership of the SPL share by having the newco step into oldco’s shoes before the last game of the season.
Under this plan newco, owned by Mr Miller, would become oldco. It would inherit oldco’s points and position in the league. It would be bizarrely similar to Mr Whyte, who completed his takeover last year just before the league was won, and pranced about with the SPL trophy as if he had been an ever present in the team, rather than the owner of the club for a week!
Mr Miller might think that, if newco gets to inherit oldco’s position, then newco can start next season in the SPL, no questions asked, and indeed, in those circumstances none of the SPL penalties to be discussed tomorrow would apply!
It would be a brilliant plan, except that it depends on the SPL allowing newco to buy all of oldco’s assets, to include its points this season! It depends on the SPL agreeing, mid-season, to the SPL share being handed over from oldco to newco. It depends on the SFA and SPL agreeing to permit a newco, with no trading record, to parachute directly into the league.
It would depend on the SPL agreeing that such an event was not a liquidation so as to save Hibs or Dunfermline from relegation.
It would depend on natural justice and good corporate governance and sporting integrity being dumped overboard.
Mr Smith ends his piece with his own line of commentary, which I think is suitable to end this piece too.
And if it is a newco, the old Rangers timeline will effectively end.
Posted by Paul McConville