A brief note (yes – it will be brief).
Rangers International Football Club PLC’s interim results are out and can be read in full here.
People will pore over them but is seems clear that all is well on the Good Ship Rangers, and that Captain Green, Commodore Murray and First Mate Stockbridge are steering a course as plotted in its business plan and flotation document.
There is one squall on the horizon that I want to mention at this point.
As with weather approaching a vessel on the high seas, it might change course, missing the boat. It might blow itself out before reaching it. It might even turn out to be a smudge on the lookout’s telescope, and not there at all.
The squall goes by the name of BDO, and more particularly “gratuitous alienation”.
I have mentioned this before, at some length, but put very briefly is as follows.
A liquidator can challenge an asset disposal if he considers that “adequate consideration” was not paid for it. This does not require any underhand or dishonest action by the vendor or purchaser. It is one of the few times when the courts can intervene to protect someone from a bad business deal, in this case protecting the creditors.
Sevco Scotland Ltd, now Rangers Football Club Ltd, a part of RIFC PLC, bought all of the assets and business of Rangers Football Club for £5.5 million in June 2012.
According to the Interim Results posted today, the assets were revalued “on acquisition”.
The relevant paragraph reads:-
A revaluation process was undertaken during the period; Ibrox stadium and Murray Park were revalued at £40m, and intangibles were valued at £19m on acquisition.
So, ignoring everything else, including the cash and rights to money which Sevco Scotland Ltd bought, it now treats the fixed assets as worth £40 million, and the intangibles as worth £19 million. (Remember that the “intangibles” were sold by the administrators for £1).
Will BDO, acting for the liquidators, decide that a sale price of £5.5 million was “adequate consideration” for assets revalued immediately at in excess of £59 million? Is that in the interests of the creditors?
If BDO do nothing, then Mr Green will deserve the title of Businessman of the Decade, not just of the year!
If asked to guess what will happen, I think that BDO will raise the issue and that RIFC PLC will use some of its accumulated cash to settle at an early stage. If, and this is a guess, BDO found that it could get, say, another £10 million for the assets from RIFC PLC to conclude matters, I see little reason for them to engage on a long drawn out and expensive court battle to get more, and I would see RIFC jumping at it, to end any further issues.
Posted by Paul McConville