In which I look at what Sir David Murray thought was needed to give a CVA a reasonable chance of success and what this might mean for Mr Green’s efforts to make a profit out of his proposed investment.
As we await the formal revelation of the details of the CVA, which has already resulted in Duff & Phelps being on the receiving end of some less than complimentary comments, I wondered if any financial experts had offered their opinions on what would be needed to give a CVA a reasonable chance of being accepted.
I then saw that Sir David Murray had been asked this very question by Jeff Randall of Sky News on March 16. The full transcript of the interview is here. I recommend it as a good read.
However, and with thanks to Sky News, I reproduce the following part of the discussion.
“Jeff Randall – How much, in your view, would he (Paul Murray and the Blue Knights) need to raise?
Sir David Murray – It’s guess work because it’s interesting, we’re meeting today, the day that bids are going in for the club but I would have thought, probably, if it’s a debt free club, probably £20-25 million to then put into CVA to have a reasonable chance of paying a reasonable payment in the pound, I would have thought.”
Now, in view of the financial woes of the Murray Group and the mess Rangers is now in, and for which Sir David accepts some of the blame, do not think that I am holding him up as some Scottish Warren Buffet. However, he knows better than anyone the value, and costs of Rangers. If he thought, for example, that the assets were worth nowhere near £20-£25 million, would he be suggesting that that was the sum the Blue Knights needed. Is it rather a reflection of his view that the assets were worth more than this, but that sum was needed to put enough in the pot to entice the creditors into acceptance?
In addition, as Sir David had been dealing with the Big Tax Case for three years prior to Mr Whyte’s arrival, he might well have an insight into what HMRC want from the case.
He was later asked about his business model for the club failing.
“Sir David Murray – But you cannot run a football club on a normal, typical business model because a ricochet in the last minute of a game could win a league, lose a league, a Champions League game. So how you can ever put that in any business plan I do not know.
Jeff Randall – It’s not really a business then, is it?
Sir David Murray – No, it’s a very expensive … not hobby but very expensive pastime which cost me a lot of money.”
This should be words of caution for Charles Green and his consortium, whilst at the same time being the motivation for their plans. Mr Green plans, he says, to make money from Rangers. There is nothing wrong with that. That is what business is about in a capitalist society. However, no one, other than Fergus McCann has made money from owning a Scottish Premier League club in the last thirty years.
Put very simply therefore do we see in what Sir David has to say how Mr Green tries to make his money?
Make a lowball offer to creditors on the basis that, even without knowing what it is, it is assured of being the best available? If accepted, then he has acquired assets worth three or four times the value of his investment. He will not make money by continuing to run the club, as per Sir David’s line about it being an expensive past-time. Therefore Mr Green needs an exit strategy.
That can only sensibly work if carried out in the form of a very quick share issue, in the hope that Rangers supporters would chip in many millions of pounds to buy the club from Mr Green. This also presumes that he has, in some way, found a mechanism for relieving Mr Whyte of his shares too.
It would then leave the club in the hands of shareholders who do not want to make money from their ownership of their team, whilst Mr Green heads off with a large profit. In any rational market thereafter the share price would fall as, on a normal trading basis, the shares are worth far less than on a sentimental basis, and without the backing of a rich sugar daddy, how will a fan owned Rangers obtain the bank finding needed to keep them in the standards to which they have become accustomed.
Mr Green may very well have a smart plan, but there is such a thing as trying to be too greedy, and the low-ball offer might fall into that category.
When Fergus McCann arrived at Parkhead, he pledged to turn the business around, and, after five years, leave and take his profits. He was true to his word, leaving a new stadium and a solvent club. How long a haul is Mr Green in for? If he succeeds, will he talk of launching a share issue almost immediately? If he wants to make money, then he should, whilst the euphoria of rescue remains.
Would the fans be happy to pay for shares where the cash was going to the Green consortium rather than into their team? That is thought to be a reason for the failure of Sir David Murray’s share issue a few years back. The fans did not want to invest to reduce Rangers bank debts.
We shall see.
Posted by Paul McConville