The SFA v Rangers – Part 2- Duff & Phelps React and Rebut the Blue Knights

In which I look at D&P’s view of the appeal, their comments about Brian Kennedy and Mr Kennedy’s creative structuring of the deal, the appearance that the Blue Knights deal can be criticised for doing exactly what Craig Whyte was castigated for, and that the Blue Knights business plan seems to be founded on the failed strategy which led Rangers to where it is now, the never ending bidder story, and I pose a quiz question.

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Yesterday D&P released a statement. It dealt with the SFA judgement, the state of the bidding and the Blue Knights complaints.

As before, I though a wee look through it might be helpful.

And we can start with a quiz question. Can the reader guess what word does not appear in the statement? This, as I am sure you will recall, is a statement issued by the administrators of Rangers Football Club PLC (In administration) who are obliged to act at all times in the interests of the creditors. No prizes for guessing…

Anyway, on with the article, and my comments are in bold.

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RANGERS’ administrators Duff and Phelps have released the following statement.

David Whitehouse, joint administrator, said: “The most important information today for Rangers supporters is that discussions with two bidding parties are at a very advanced stage and we hope to reach agreement with one at the earliest opportunity.

Two bidding parties? There were three, or was that four, on Friday. There was a deadline (hah) of Thursday lunchtime to choose the bid to go forward. There was all of the rush with Mr Miller, and thereafter, to get the deal done by the end of the season.

Presumably, apart form the desire of D&P to get shot of this whole mess as soon as possible, there was a reason to rush the deal through?

Yes there was – it was to avoid the additional penalties the SPL will now consider, for all affected teams and not just Rangers, at the end of May.

As an aside, is anyone else confused by Mr Doncaster’s comments regarding the adjournment of the meeting? He said, and I paraphrase, that (a) the rules did not relate to any specific member of the SPL but to all members and (b) the meeting was adjourned at the request of D&P and to allow the SPL to get more clarification of the situation at Ibrox. Shome mishtake, surely?

But it is great to see Mr Whitehouse so confident. And it is also great that he is addressing his remarks to the people who really matter, and whose interests he is by law bound to treat as his top priority…wait a minute…I can’t seem to find reference to “Rangers supporters” in the Insolvency Act…

However Mr Whitehouse is looking for a deal “at the earliest opportunity”….

 

“We have noted today the publication of reasons for the findings of the SFA’s judicial panel.

“We welcome the fact that the panel described the witnesses who appeared on behalf of the Club at the hearing as credible and reliable but as stated previously we were very disappointed that the panel did not differentiate sufficiently between the actions of the Club compared with the actions of individuals. We look forward to the appeal being heard next week.

I will write about this is more detail, but the witnesses for Rangers made an interesting crew.

Andrew Dickson, Head of Football Administration; Ken Olverman, Financial Controller; John McClelland, former Chairman; and Martin Bain, former Chief Executive.

That is a high powered list of witnesses, with many years’ business and football experience behind them.

The strange thing, which D&P do not mention, is that almost all of the factual allegations made against Rangers in the hearing were accepted. The SFA accepted the evidence of the witnesses. It seems from the report that there would have been little aggressive cross-examination of any of the witnesses.

The Tribunal stated as follows regarding the witnesses:-

The Tribunal considered that, although in certain areas the evidence of the witnesses, in each case, may have appeared to have been glossed to put the best possible complexion on an area of difficulty affecting their own position in the matter, these instances did not impact adversely upon their general credibility and reliability on matters affecting proof of the charges. The evidence of the witnesses called on behalf of Rangers FC was not substantially challenged in any significant respect by the Compliance Officer.“

So whilst the witnesses tried to put their own positions in the best possible light, this did not affect the view of their credibility and reliability. As I said, the SFA did not dispute their evidence.

It seems from reading the judgement that Rangers’ defence was that it was all Craig Whyte’s fault, and that Rangers should not be blamed for that. However, that approach seemed doomed to fail as soon as their lawyer accepted, as he was in law bound to, that the principles laid down in Tesco v Nattrass regarding corporate responsibility and the “controlling mind” test applied here.

The plea to “equity” rather than to law reminded me of early in my own career.

I was sent at short notice to conduct a hearing for one of my boss’ clients. From a  read of the papers, I could not see the argument I would have to put up. My boss took me aside, and told me to write down what he was going to say. I sat, pen poised for his words of wisdom.

“Here’s what you need to say Big Paul. ‘Come on big Sheriff, gie’s a brekk!’ That always works!”

I now realise that I was being instructed to appeal to equity, rather than to law, and, you know, it works, but only occasionally!

I think the “appeal to equity” in the Rangers case shows its limitations!

 
“It is most unusual for us to comment publicly on individual bids but due to the allegations made by Mr Kennedy and Mr Murray today with the regard to our conduct as administrators we feel compelled to reveal important facts in relation to the various Blue Knights attempts to buy the Club.

“For the avoidance of doubt some of the comments made at today’s press conference were grossly misleading.

I like the statement that it is unusual to comment on individual bids. Have they not been doing so for weeks? However, as D&P’s conduct is being attacked, then perhaps it is justified to defend themselves here. It does make difficult the prospect of the Blue Knights re-appearing at a later date, as the atmosphere across the table will be sub-zero, not just frosty!

What is ironic is that the time and money which D&P need to spend on rebutting such criticisms will, ultimately, reduce even further the pot of money available for those to whom Rangers are indebted.

 

“First I would state unequivocally, that every opportunity was afforded to these parties.

“The fundamental reason we could not proceed with the Blue Knights/Ticketus combination was that we were advised there was not agreement within the consortium in relation to the funding of their bid.

That is a good one to start. If the consortium could not agree on funding, then how could D&P treat it as a credible bid? That seems a good starting point – after all, I could bid £10 million for Rangers, subject to obtaining funding. Such a bid is meaningless until such funding exists.

(For the avoidance of doubt, I am NOT bidding for Rangers, just in case the press reports a mystery bidder from Lanarkshire).

“Throughout the process Mr Kennedy told us repeatedly he would be the ‘last man standing’. As Mr Kennedy today made a virtue of explaining publicly details of his bid we are in a position to comment on those remarks. Of the £5.5 million cash on ‘day one’ figure Mr Kennedy quoted, £3.5 million of that would be provided by us in any case from the Club’s debtors.

Mr Kennedy is a very astute businessman. That can be seen from the terms of his purchase offer.

From what D&P say, the proposal was that the Blue Knights would acquire all of Rangers’ assets, lock, stock and barrel, including rights to collect all money owed to Rangers (some £3.5 million). The Blue Knights therefore would be putting up £2 million to gain ownership of all of this, including fixed assets valued in the books at in excess of £100 million! (I do know that the book value and “real value” bear no relation, but still, what a deal!)

The Blue Knights’ bid was using the club’s own money, it could be argued, to buy it! That of course is one of the things Mr Whyte is criticised for.

 

“The bid structure also factors in performance in Europe, and reaching the later stages of the UEFA Champions League which cannot be achieved next season for example.

One of the reasons for Rangers’ demise this season was the failure to make any money in European football. Rangers’ financial strategy, since long before Mr Whyte, depended on success in Europe. Here the prospective new owner was, in part, founding the business plan on success in Europe! One can see where the flaws lie, especially as Rangers will not be in Europe next season. In fact they might not be there in later seasons too, either as a result of a ban, or simply through non-qualification (or indeed through not existing).
“We therefore find it extraordinary and very disappointing that Mr Kennedy in particular should assert that the amount being offered is irrelevant. Time and again he and others have been afforded the opportunity to become the best bid in play and it has not happened. We have a statutory duty to accept the best bid that is deliverable.

Mr Whitehouse nearly managed it there. He nearly said the word which for him seems to have the same need for avoidance as the name “Voldemort” in Harry Potter. Quite how Mr Kennedy thinks that the “quantum” of the bid is irrelevant, where there are other bidders, I do not know.

It might well be dais that Mr Kennedy wants to avoid the normal answer to the question as to how to make a small fortune out of owning a football team. The answer is to start with a large fortune!

Mr Kennedy, who at all times has been the reluctant bidder, stating previously that he was there as a “long stop” to prevent Rangers going out of business and that he did not want to end up owning the club, seems to have overcome his diffidence now. And is aggressively pursuing his goal.

I do not expect he is in this as a benevolent or charitable gesture. Instead he will be looking to make a profit, and there is nothing wrong with that. However, making a profit in the SPL which justifies the sums at risk seems to have beyond everyone since Fergus McCann.

 

“The bid should also be commercially better than the liquidation of the business. Mr Miller’s bid was deliverable but he chose not to proceed. We firmly believe the best interests of the Club would be served by all involved in the process respecting the bidding process.”

Aaaaaaarghhhh! The best interests of the club! No Mr Whitehouse! Your job is to act in the INTERESTS OF THE CREDITORS!!! Carthago delenda est!

Maybe Messrs Whitehouse and Clark are great fans of the Championship Manager football simulation. Maybe they have always wanted to run a football team. However, they are administrators. Their duty is, and I apologise for repeating it, to act in the interests of the creditors.

I am sure they have not forgotten this, and it may well be that they have received PR advice to speak as if they were running the club normally, but quite how these statements persuade creditors that, in the end, D&P will achieve the best deal, I do not know.

 

Answer to the Quiz Question – In case you missed it by the way, the word not used in the statement was “CREDITORS”.

 

To follow – some thoughts on Mr McCoist’s view of the appeal

 

Posted by Paul McConville

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6 Comments

Filed under Administration, Football, Rangers

6 responses to “The SFA v Rangers – Part 2- Duff & Phelps React and Rebut the Blue Knights

  1. Nicely dissected again, Paul.
    Speaking of creditors, we have still had no word of the results of their vote, unless I’ve missed the announcement. How can that be taking so long?

  2. Michael

    Hi Paul, Great work you are doing here on your site.This could end up being made out as comedic play of Shakespearian proportions.My question is …Why have all (not just the so called main) creditors never called into question D&P handling of the rfc administration.As it would seem to every man and his dog they are being treated as an irrelevance .Thanks

  3. Den

    Interesting that D&P become embroiled, I would have thought they would just put out something non commital noting the comments and dismissing them.

    This is more entertaining though.

    Seems like rhe BK were trying something even more blatant than Whyte did. Using the clubs own assets on the Balance Sheet (debts) to taleover the club.

    “we were very disappointed that the panel did not differentiate sufficiently between the actions of the Club compared with the actions of individuals”

    I think the “bad boy done and ran away” defence has been discredited in Law and in fact, stop bleating and get on with saving what you can in the interest of what do you call them – the people owed money.

  4. peter groom

    paul tks for all your articles introducing me to such an interesting legal minefield…if you have the time grateful to know if the following is valid:
    I’m wondering if in fact there was a level playing field for all bidders. not many days ago tbk-ticketus you may remember did not have their bid accepted only because they declined to pay the non-refundable £500k exclusivity fee. no mention then from the administrators that the option of non-exclusivity ( ie no fee ) was available. so how come bill miller was allowed to make a non-exclusive bid ? this also allowed d and p to continue courting other bidders including green ( for the preceding 3 months we are told ) . smells a bit as if d and p were stringing along tbk-ticketus, tbk-bk and miller while waiting for green to get his bid together. seems to me tbk-ticketus should have been awarded preferred bidder status. d and p used one rule to prevent it and then modified it to let other bidders in. that does’nt seem right.

  5. 2-iron jeff

    my very limited understanding of law, if an appeal is to be successful, surely their requires to be further evidence to be reviewed and considered. Are Rangers going to continue with the Craig Whyte did it all and we were just looking the other way approach!!!

  6. Boss Hogg

    According to press reports, Sir David Murray is railing against the findings of the SFA Disciplinary Tribunal published here (and elsewhere) in full.

    The discerning reader may form the view that Sir David’s disdain appears to focus principally on process, namely that he believes he was unfairly excluded from the disciplinary hearing. On the matter of substance – the facts of the tribunal’s investigation, findings and verdict – he appears relatively restrained.

    Not that we should infer anything from that of course. He may not have been quoted in full.

    In accordance with established traditions, he is apparently considering his options with regard to legal action.

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