Mr Green Was Grilled by Keys and Gray Yesterday – Provides More Evidence of “Gratuitous Alienation” of Rangers Assets

Charles Green endured a testing and forensic examination yesterday. He went on the Talksport radio programme of Richard Keys and Andy Gray. Not for nothing are they known as the Marshall Hall and Clarence Darrow of the airwaves!

I considered listening to the entire 55 minute broadcast, but even I have my limits.

I have therefore taken the article below from the Herald, and have comments on Mr Green’s statements, my comments and thoughts being in bold.

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Charles Green has revealed that Craig Whyte is suing the club for money he believes he is entitled to for agreeing to sell his shares to Green’s consortium last summer. Whyte made several demands during talks about the shares, including a request for £1m a season and seats in the director’s box, and he wants to be paid for negotiating with the club. The Ibrox board rejected Whyte’s demands out of hand.

Green reiterated, during an interview today on Talksport, that Green has never been part of his consortium, and neither has the finance company, Ticketus, which lost £22m they loaned to Whyte against future season ticket sales when the club went into administration last February.

“I’ve never worked with Craig Whyte,” Green said. “I was introduced to him by Imran Ahmad [Rangers’ commercial director], Craig Whyte did introduce me to Duff & Phelps. We needed to get hold of Craig Whyte’s shares, so Duff & Phelps would treat us as credible.

Where do we start with this?

Let us go back to what Mr Green said, as long ago as 17^th October.

“The facts are that direct contact was made by our consortium with Craig Whyte in the first instance as it appeared at that time that his shares would have to be secured in order for any purchase of the Club to progress.  

“I was not present when contact was initially made but subsequently met Craig Whyte who introduced me to the administrator. I had no previous association with Craig Whyte and it is misleading to suggest he ‘brought us in’. 

“I was brought to the transaction by Imran Ahmad following Duff and Phelps contacting Zeus Capital’s Manchester office in February, due to their experience in the football sector.

So, based on what he said two weeks ago Mr Green’s timeline runs as follows.

• Duff & Phelps contact Zeus Capital in February.
• Imran Ahmad of Zeus Capital contacts Mr Green and “brings him to the transaction”.
• Mr Green’s consortium contacts Mr Whyte because the consortium believes it needs Mr Whyte’s shares.
• Mr Green in due course meets Mr Whyte.
• Mr Whyte introduces Mr Green to the administrators.

Now there are a couple of odd things about that timeline.

Firstly, as per the Zeus Capital website:-

Imran joined Zeus Capital in April 2012 as Managing Director.

If D&P contacted Zeus in February, then Mr Green could not have become involved, if he is accurate, until April at the earliest, which cannot be true as he has already said he was involved in February!

Secondly, if Zeus Capital is part of the consortium, as they are, and Zeus were invited on board by D&P, why does it require Mr Whyte to effect the introductions? Surely that would come better from Zeus?

Now, in what Mr Green said yesterday, he states that his group needed Mr Whyte’s shares, to be treated as credible by D&P. This again seems confused. Surely, if that was the position, with D&P having touted Zeus, they would be the ones introducing Mr Whyte to bidders?

It also seems odd that Mr Green is now saying that Mr Whyte demanded “£1 million a season and seats in the director’s box, and … to be paid for negotiating with the club”.

On 13^th May the Guardian reported:-

Green confirmed he had given Whyte £1 – the same value paid – for his 85% stake in Rangers, and said: “I gave him a pound out of my own pocket too, so he has made a 100% profit.”

On 7^th June the Telegraph reported Mr Whyte saying as follows:-

“My shares will form part of the consortium’s shareholding and after that I will focus on other activities”.

So it would appear from what Mr Green said that he had bought and paid for Mr Whyte’s shares. How then, if the shares had already been transferred, was Mr Whyte demanding the items stated by Mr Green?

Either Mr Green was mistaken in May, or he is mistaken now.

Could Mr Whyte be suing? Yes, but if it turns out he has a case, then Mr Green would almost certainly have comeback against his own advisers. As it turned out, the purchase of Mr Whyte’s shares was only necessary where the existing company was to be saved by a CVA. Therefore one would imagine that the buying of the shares would have been contingent on the CVA being accepted.

 

“We didn’t need them in the end because it went down newco route. I met him four times in London, Imran Ahmad has had loads of meetings with him. People thought we were working with Craig Whyte, [but] I believe he is now suing us, because he believes he was entitled to something for handing over the shares.

Mr Green is an excellent businessman. One would imagine therefore that he would know if he was being sued by the former owner of the football club. It seems a lapse if the Chief Executive only “believes” this to be the case. However, it maybe that he has delegated these matters to other members of the management team.

If he is suing then there can be no claim as he was paid his £1 plus £1 profit, wasn’t he?

 

“Ticketus don’t have any involvement whatsoever. They were involved with Craig Whyte, which caused a problem, and previously to that DM used them when he was running the club. The season ticket money that came into the club [during the summer] is sitting in the bank. It is Rangers Football Club’s [money]. The club has got cash, and it’s still got no debts.”

As I have repeatedly said, Mr Green is an excellent operator. How else to explain how, 4 ½ months after the takeover, and despite the huge drop in income, not a penny of the season ticket money paid this season has been used!

Based upon a rough average of £300 per ticket and 36,000 season tickets, that means that his company has over £10 million in the bank.

In that event, why does he need to raise another £20 million now by way of a share issue. It would not, I am sure, be in any way connected to Mr Green’s entitlement to a bonus equivalent to 10% of the value of the company post-flotation, especially as he is now not leaving till the Champions’ League returns to Ibrox.

 

Talking ahead of the club’s launch on the AIM market before the turn of the year, Green repeated his assertion that the club will not play in the Scottish Premier League while he remains chief executive. He intends to remain in the position until Rangers qualify for the Champions League again, however, and explained this by noting that the leagues in Scotland are likely to be restructured.

This will be an interesting part of the Prospectus. How does Mr Green see Rangers getting back in the Champions League to make the profits he assures the fans will be there? If this is, as he says, dependent on league reconstruction, then he seems to be taking a gamble.

Mr Green’s business history shows that he is not risk-averse. Will the fans and the institutional investors he says are clamouring to “chat him up” agree?

The risk section of the prospectus will be a good read!

 

Green also categorically denied rumours on Celtic supporters’ websites that sale and leaseback of the club’s properties – Ibrox, Murray Park and the Albion car park – are being considered, and that the club had been “massaging” attendance figures this season.

“I’m running the club, I’m making the decisions and I’m going to protect the club with my life,” Green said. “Nobody’s going to abuse it, [or say] rubbish that I’m going to sell the ground. Absolute nonsense. The blog I’ve seen said that we’re going to enter into a sale and leaseback for £8.5m, you can shove the offer where the sun don’t shine. We’ve got a valuation in the share prospectus in excess of £80m. I might be Green, but I’m not a cabbage. It’s just rubbish put out by people trying to disrupt the IPO.

Gratuitous alienation….

Mr Green bought all the assets, including the right to over £3 million in cash due to the former Rangers, at a cost of £5.5 million. Now he says that the fixed assets are worth in excess of £80 million, and that a sale and leaseback at a price of £8.5 million is nonsense. What about a sale and leaseback at a price of £80 million?

What about the title to the assets being in the name of the PLC and leased to the football company? That is perfectly legitimate.

If BDO challenges the transaction as a gratuitous alienation, then it is for the purchaser to establish that “adequate consideration” was paid for the assets. That is NOT the same as saying it was the best offer anyone made.

If BDO do raise a court action, I struggle to see how Mr Green can state that he has paid “adequate consideration” for the assets. Maybe someone could ask him, as I am sure he must have been advised that this is an issue he might have to face.

 

“We haven’t [been massaging attendances]. The turnaround at Rangers and where we are taking it is fantastic news for Rangers fans, but many of our competitors are unhappy to see us rise as a phoenix. [So] people go to police under Freedom Of Information, but those numbers in every stadium will be less than the official numbers.

Mentioning the word “phoenix” is, I am sure, a slip by the CEO. After all a “phoenix company” is seen as one which dumps its debts and re-emerges as the same business debt-free. Indeed HMRC has powers to take action against phoenix companies.

Legally Mr Green’s Rangers is not a “phoenix”. However mentioning the word won’t help those who perceive the club as having taken advantage of the system to avoid huge financial obligations.

 

“They don’t have access to all the corporate hospitality and sponsors [numbers]. That’s thousands at Rangers, so there is a disparity between the numbers the police book in. We have no reason to massage the numbers. We’ve got a stadium and anyone can look at a stand and see a few empty seats.”

The Rangers fans who turn out every week in such huge numbers deserve great credit for the support given to their team. It is  carping to try to argue about whether or not there are 5% or 10% of the seats empty.

If less than half the tickets are sold, for example, then this might become an issue, but they seem to be a long way from that point.

 

Conclusion

Mr Green keeps drumming home the message that the club is on the way back to the heights of the Champions League, and that this is why fans should buy the shares now. He continues to build on the “No one likes us – we don’t care” attitude which seems to have been successful so far.

However he continues to make “hostages to fortune” with his comments, and the risk is that his repeated references to the huge value of the assets will be quoted back to him in a witness box at the Court of Session.

Mr Green’s recollection of the time line, as mentioned above, is also creating more questions than it answers, although either the media do not ask the questions, or if they do, they do not report the refusal to respond. Either way, there remain a number of queries, not all of which will be addressed in the prospectus.

Posted by Paul McConville