As well as the issues directly relating to Dundee United’s £30,000, analysed in detail below, the statements emanating from the Rangers FC regarding the matter contain some interesting comments, perhaps indicating that Mr Green is not entirely sure of his ground.
First of all, if Mr Green believed that the Rangers FC no longer owe any Scottish clubs a penny, as he stated, then he needs to be educated as to what “debt” actually is. It would be strange for a businessman to have attained the heights and successes he has if not aware of that!
In addition, one of the arguments for the continuity of Rangers is that, whilst the companies which from time to time own the club might change, then club itself goes on forever. Therefore the administration and liquidation of the former owner has no bearing on the continuity of the club. By that analysis therefore, it was not “Rangers” which went into administration, but simply the corporate owner.
Would it surprise fans of the Ibrox team to see Mr Green now admitting that it was the club, and not the company, which went into administration?
Finally turning to the SPL prize money issue, there are lots of interesting legalities regarding waivers, title and gratuitous alienation which I will look at in detail in a soon to arrive post re what BDO might and can do as liquidators. For now there is the possibility that (a) ambiguous legal drafting has caused this mess (b) that newco might have acted, with authority from Duff and Phelps, to the prejudice of oldco’s creditors or (c) some other possibility has resulted in this mess. (I suspect Douglas Adams’ Infinite Improbability Drive is generating the continuing events in this story!)
I posted a brief note on Wednesday pointing out the views of Rangers and Dundee United regarding settlement of Scottish football debts.
I have now had the chance to sit down at home to look at the additional statements which have been issued. Does this make matters clear?
You will find the relevant official statements, together with further information obtained by STV at the foot of this article.
The matter developed as follows.
Has the Rangers FC Settled All Football Debt, Except for the Dispute With Dundee United?
The official statement said that Rangers “settled all debts due to Scottish football clubs.”
This was followed by the sentence “Heart of Midlothian Football Club is due a further payment from Rangers in July next year and this will be paid when it falls due.”
Therefore the Rangers FC has not paid the debt in full, but has paid the debt presently due. Well done, especially as that was a condition of the transfer of membership of the SFA to Sevco Scotland Ltd.
However, Charles Green’s boast was “As of now, Rangers do not owe other Scottish clubs a penny”.
I hate to disagree with Mr Green, but maybe a simple example will assist. I decide to buy a house. I borrow the purchase price from a friendly bank, if such exists. The bank pays the cash to my solicitor who pays it to the seller. I then own a house.
What about the money borrowed from the bank under the mortgage?
I am obliged to pay it off by monthly payments for the next 25 years, and as long as I make all payments on time, money will not be “due”. However, if I am asked to declare what I “owe” and miss out the mortgage, then I would be wrong.
The debt exists, and will do until the final payment is made.
So, as of now, Rangers owe Hearts the final instalment for Lee Wallace, due to be paid next summer.
In the blanket coverage of Mr Green’s declaration that all the debts due had been cleared, this small, but financially significant technicality, seems to have been missed. And that is even before we get to the Dundee United scenario.
Rangers Admit that “the Club” Went into Administration, not the “Holding Company”
The statement goes on to say, and Mr Green repeats, “The debts were outstanding from the time the Club went into administration.”
Mr Green adds, “There was no obligation on the consortium buying the Club to pick them up.”
This seems to create another combination in the seemingly infinite set of theories about the continued existence of Rangers.
So we have the comment that the club went into administration – but the club did not go into administration, we are led to believe, it was merely the “holding company” or the company owning the club, or some other comment which works simply to distance club and company. But here the official Rangers FC website states that “the Club” went into administration.
However, “the Club” was then bought by “the consortium”. Not the assets and business of the club, but rather the club itself, which was apparently in administration.
Being legalistic about it, that cannot be and is not correct. Even by the standards of the present debate, it is not right. If the club is separate from the company owning it, how can the club go into administration? That suggests an admission that club and company are synonymous.
I am sure that is not what the statement means, but that is what it says.
When Did Mr Green Declare that Settling the Football Debt was the “Right Thing to do”?
Mr Green then refers to knowing that settling the football debt was the right thing to do. However, I have clearly missed his public expression of his intention to do so which only, as far as I am aware, appeared after the SFA, SPL and SFA ordered this done as a condition of SFA membership.
I would be very grateful to any reader who can provide details of when Mr Green or Sevco first made that suggestion.
Of course, if Mr Green thought that, for his £5.5 million, he was buying many millions of pounds worth of players, for immediate re-sale, he might have thought that agreeing to pay football debt was a “good thing”.
What About The Non-Hearts and Non-Dundee United Football Debt?
The BBC report today in this story commented that:-
“Domestically, Rangers owed: Hearts (£800,000), Dunfermline Athletic (£83,370), Celtic (£40,337) and Inverness Caledonian Thistle (£39,805).
In a financial report produced by the oldco’s administrators, Duff & Phelps, Dundee United were listed as being owed £65,981, however BBC Scotland has learned the amount is believed to be closer to £30,000.
English clubs are owed more than £700,000. This breaks down as: Manchester City (£328,248), Chelsea (£238,345) and Arsenal (£136,560).
European clubs are also owed more than £1.6m, including the £1,011,763 due to Rapid. St Etienne are owed £252,212, Palermo are due £205,513 and there is a £150,000 debt to Orebro.”
Mr Green seems at pains to mention the Scottish football debt. What about the English, Austrian, French, Italian and Swedish clubs identified?
Maybe someone will ask Mr Green?
£2.3 million is a lot of money to have to find, even for such a cash rich, but not debt-free, club as the Rangers FC.
OK – But What About Dundee United?
Finally, after nearly 1,000 words I get to what the piece was meant to be about!
I will refer to Rangers Football Club PLC (in administration) and now known as RFC 2012 PLC (in administration) as oldco, and to Sevco Scotland Ltd, now the Rangers Football Club Ltd, as newco. You will recall that oldco is soon to be liquidated for the benefit of creditors and newco acquired the full assets and business of oldco.
The time line looks to be as follows.
Oldco finishes the SPL season in administration, as it had been since February.
Oldco is entitled to receive prize money from the SPL for finishing second in the league.
On 18th May 2012, the SPL Secretary wrote to oldco stating-
“The Board of the Scottish Premier League Ltd considered the application by Dundee United that the outstanding sum due by Rangers to Dundee United of £31,031.20 be offset against the next sums due to Rangers by SPL Ltd, with the offset sum being paid to Dundee United. The board decided to accede the application to Dundee United and accordingly the sum will be withheld from the next sum payable by the SPL Ltd to Rangers, and the sum will be paid by the SPL Ltd to Dundee United.”
On the face of that letter therefore the SPL were going to withhold prize money due to oldco to settle the debt of £30,031.20 due by oldco to Dundee United.
In the period from 31 March to 29 June the SPL paid oldco £519,200, as shown in Duff and Phelps’ report dated July 2012. It can be assumed that this was paid before the SPL Board decision to withhold money from oldco for Dundee United, so was paid prior to 18th May.
Having paid a first tranche of the money, further sums were due to oldco.
On 14 June newco bought oldco’s “business, history and assets“.
Money owed to a company is an asset. Did Mr Green believe that he had bought the rights to the SPL prize money still held in respect of newco? Buying the whole assets of the business would suggest he had acquired those rights.
Therefore, as at 14 June, either (a) the SPL prize money was now due to newco, having been acquired from oldco or (b) it remained due to oldco and newco had no claim on it at all. In the former scenario, as a matter of law, there would have been no obligation on Sevco Scotland Ltd, as it then was, to settle any debts owed by oldco.
Scenario A – Newco Acquire the Rights to the Prize Money
If this was the case, it makes the sale of assets to Mr Green’s dream team for £5.5 million even more remarkable (and questionable).
However, in this scenario, part of the conditions for membership of the SFA “club” was that the right to any such prize money was waived. If the right to the prize money had passed to newco, then, when newco was forced to agree to settle the footballing debts, one wonders why the SPL failed to deal with the latter, or at least tell the parties when the settlement would take place. Neither of these things seems to have happened.
If however the rights were transferred to newco, and then waived by them, the money would not revert to oldco, but would stay in the SPL coffers, potentially for re-distribution to its members.
In that event, it would not be available to settle the Dundee United debt.
Scenario B – Oldco Kept the Rights to the Prize Money
In this scenario, notwithstanding the purchase by Mr Green of the assets, he did not buy the rights to the SPL money. Those rights stayed therefore with oldco.
In that case, Duff and Phelps, the administrators, should have been getting that money back as soon as possible as it would belong, effectively, to the creditors.
However it had been flagged up long ago that the retention of prize money was a risk. In the Duff and Phelps report in April they said:-
“14.35 The SPL and SFA rules both contain offset provisions whereby any prize money or other amounts due to the Club can be withheld to offset against any monies which are owing to the SFA/SPL themselves or other members of those organisations. These rules do not appear to include monies falling due at a future point in time.
14.36 As at the Appointment Date the Joint Administrators were aware of such creditors (ie the SFA, SPL and SPL member clubs) totalling approximately £1,063,082.
14.37 As noted in paragraph 8.6, Dunfermline has notified the SPL of the Club’s failure to pay over ticket monies and a disciplinary hearing had been convened to consider this matter. The outcome of this hearing could have resulted in sanctions against the Club, which could have included a significant financial penalty. Given the above noted offset rule, it was possible that both the monies owed to Dunfermline and any sanction could have been deducted from the Club’s future prize money. In order to avoid the possible financial sanction and consequential increased offset from the future prize money, the Joint Administrators reached an agreement with Dunfermline which has been completed, as noted in paragraph 8.6.
14.38 To date no other payments have been made to football related creditors.
14.39 If the Company continues to trade in Administration to end of the season, it is possible that any prize money receivable for the Club’s finishing position in the SPL may be subject to offset applied in respect of amounts due to other member clubs of the SPL. Any offset applied by the SPL will be subject to legal review.”
Clearly this was on the agenda then. The fact that D+P were able to receive over half a million pounds from the SPL suggests that their behind the scenes discussions, if any, were effective.
If the rights to the money remained with oldco, then I think the problem comes from the definition of the League, as requiring members, and former members, to be operators of football clubs. In this instance, once oldco sold its assets (excluding the rights to the prize money) to newco, oldco no longer owned or operated a football club. The SPL may have decided that, in those circumstances, money due to oldco simply went back into the pot for all its members, as envisaged in the SPL rules. In that case getting Mr Green to waive any claim by newco was simply a “belt and braces” approach.
I cannot imagine that D+P agreed to waive a claim to the SPL money. That would clearly be prejudicial to creditors.
It therefore leaves the intriguing possibility that the liquidators could pursue the SPL for the oldco prize money, if not satisfied that the SPL withheld it legitimately.
Where Does This Take Us?
Dundee United are still owed £31,000.
The SPL is not going to pay that sum. After all, they seem to be saying, newco waived any right to the money, and therefore cannot demand it be used to pay a debt newco accepted.
Mr Green feels he is being punished twice – newco does not get the prize money, and still had to pay Dundee United.
The football authorities, in this case the SFA, might well have to adjudicate among newco, Dundee United and the SPL.
I think the explanation for the mess lies in the five party agreement signed by the SPL, SFA, SFL, newco and oldco. I suspect that the drafting of this has not been tight enough to deal specifically with this issue, or ambiguous enough for both the SPL and newco to believe they are correct. Put simply, Mr Green thought newco was waiving its rights to the money once bills had been paid from it, and the SPL think that the waiver came first.
There is one final potential issue arising here too.
We do not know who agreed the five party agreement on behalf of oldco. Was it Mr Green, acting under the authority of D+P? After all, he had been given an active role in the running of oldco by D+P.
There is, in the absence of transparency and clarity from all parties, the intriguing possibility that Mr Green, on behalf of oldco, as well as newco, gave up any claim to the SPL prize money. In that case, short of there being any compensating benefit for creditors, it is hard to see how such a waiver could stand. The liquidators could be very interested in exactly who represented D+P/oldco and precisely what the five party agreement showed.
Yet again the phrase “gratuitous alienation” looms…
Posted by Paul McConville
It read as follows.
RANGERS have settled all debts due to Scottish football clubs. The debts were outstanding from the time the Club went into administration.
Heart of Midlothian Football Club is due a further payment from Rangers in July next year and this will be paid when it falls due.
Charles Green, Rangers Chief Executive, said: “As of now, Rangers do not owe other Scottish clubs a penny. These debts were incurred prior to the Club going into administration and there was no obligation on the consortium buying the Club to pick them up.
“From the outset, I have made it clear that I firmly believe the correct thing for the Club to do is settle these football debts as a priority and we kept our word.
“That is what we have done and substantial funds were lodged with the SFA 10 days ago to be discharged to settle the outstanding debts.
“Furthermore, the Club was given a written commitment from the SPL in May that it would settle an outstanding debt to Dundee Utd.
“It was frustrating to be informed by the SFA several days after they received the funds that they did not wish to be a ‘clearing house’ and in fact wanted us to settle the debts directly. Arrangements were then put in place by the Club.”
Following recent press reports and consequent follow up enquiries, Dundee United confirm that the outstanding sums due from the Scottish Cup tie played at Ibrox Stadium last season have still not been paid.
This matter now rests with the football authorities and no further comment will be made by the Club.
RANGERS Football club has today released the following statement.
Rangers Chief Executive Charles Green said: “As previously stated, Rangers Football Club can confirm it has paid all outstanding debts to Scottish football clubs, in addition to agreeing to waive all claims to unpaid fees accrued last season, as part of the Five Party Agreement which was a condition of SFA membership.
“A letter from the SPL to the Club – dated 18 May 2012 – stated ‘The Board decided to accede to the application of Dundee Utd and accordingly, the sum will be withheld from the next sum payable by the SPL Limited to Rangers and the sum will be paid by the SPL Limited to Dundee Utd.’
“Why the SPL have not paid Dundee Utd the outstanding sum as previously agreed is a question that they need to answer.
“We wrote to Dundee Utd on Monday explaining the SPL had previously confirmed they would pay it.
“I spoke to Stewart Regan and his solicitor this morning and provided them with copies of all relevant documentation.”
Rangers insist the Scottish Premier League are to blame over an outstanding amount due from the club to Dundee United.
The Ibrox side waived any claim to £2.55m in prize money from the league for the 2011/12 season, as part of the agreement which saw them granted the transfer of the club’s Scottish FA membership.
Rangers also agreed to settle all football debts, this week making payments to Celtic and Hearts. Responsibility for a circa £66,000 debt to Dundee United, relating to gate receipts from a Scottish Cup tie last campaign, was taken on by the Scottish FA and SPL, Charles Green believes.
STV has learned that half of the approximate £66,000 share of gate receipts was paid by the Scottish Football Association last season after money due to Rangers was diverted to Tannadice.
STV understands the SPL does not believe that there is a firm agreement to make the remaining payment. However, the amount remains unpaid and Rangers have reiterated that they have a written agreement with the SPL for the league to pay United from prize money from the 2011/12 season.
The agreement was clarified in a letter, the wording of which has been obtained by STV, sent by SPL secretary Iain Blair to Rangers on May 18 this year.
It read: “The Board of the Scottish Premier League Ltd considered the application by Dundee United that the outstanding sum due by Rangers to Dundee United of £31,031.20 be offset against the next sums due to Rangers by SPL Ltd, with the offset sum being paid to Dundee United. The board decided to accede the application to Dundee United and accordingly the sum will be withheld from the next sum payable by the SPL Ltd to Rangers, and the sum will be paid by the SPL Ltd to Dundee United.”
Should agreement not be reached over payment then the Scottish FA could be asked to act as arbitrators by Dundee United.