Tag Archives: Ticketus

Rangers + Ticketus – Part 3 – Loans, Sales, Financial Assistance and Unjustified Enrichment

On Friday Lord Hodge issued his decision in the application by D&P for “Directions” in connection with their handling of the Rangers administration.

Prior to going into the bulk of my post, can I suggest a visit here for another, but different, legal perspective on why a Rangers “fire sale” is the most likely outcome?

Back to the regularly scheduled programming –

From Lord Hodge’s judgment I have extracted the following section:-

[16] The administrators’ legal advisers have challenged the enforceability of the STA (Season Ticket Agreement). It envisaged that Rangers would use the payment for the first tranche STA tickets to effect the repayment of its debt of about £18 million to Bank of Scotland plc. It was also proposed that Rangers would lend £16 million to Wavetower Limited (now called The Rangers FC Group Limited) to enable that debt to be repaid and that the bank’s debt and its securities would be assigned to Wavetower Limited (Schedule 19). The administrators’ legal advisers have asserted that the STA is illegal on the ground that it was an agreement for the giving indirectly by Rangers of financial assistance for the acquisition of its shares contrary to section 678 of the Companies Act 2006. The existence of this challenge is not however relevant to the directions which I have to give as I must assume at this stage that the Ticketus agreements are valid.

As I mentioned in my last post, this discloses (a) that Rangers lent, or it was proposed that it should lend, Group £16 million and (b) Duff & Phelps are trying to strike the Ticketus deal down on “financial assistance” grounds.

 

What Chance Do the Administrators Have of Striking Down the Ticketus Deal as Illegal “Financial Assistance”?

Slim.

OK – I’ll explain. My “workings” are shown below but, put simply, it looks as if, even if the loan from Rangers to Group was “financial assistance” the sale to Ticketus is a normal and legitimate business transaction. Whilst it might be argues that the sale is “tainted” by illegality in the loan deal, the two transactions can be separated.

However, even if the Ticketus “sale” is struck down, Ticketus would have a claim against Rangers for return of the money on the grounds of “unjustified enrichment”. Ticketus will either have a valid contract or will be creditors. They will not, to coin a phrase, be walking away!

Continue reading

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Rangers & Ticketus – Part 2 – What Does Lord Hodge’s Decision Mean for a Newco Rangers?

On Friday, Lord Hodge determined the application by the administrators of Rangers Football Club PLC (Rangers) to receive directions from the court regarding the Ticketus deal and whether the administrators (D&P) could get out of it, without being tangled up in litigation.

He declined to give D&P carte blanche to rip up the Ticketus deal on the basis that he did not have sufficient information about how that would affect the bids for Rangers to do so. It was left, after a general re-statement by the court of the principles under which an administrator has to operate, that D&P would need to give more detail to the court about the effects on the generality of creditors should the Ticketus deal be breached by D&P, thus making Ticketus a creditor.

The trade off for oldco Rangers would be that repudiation of the contract with Ticketus would give Rangers access to its full season ticket income, but at the expense of adding a sum close to £40 million to the creditors.

Ticketus’ claim against oldco Rangers would, in those circumstances, be for (a) the money paid for the tickets and (b) the lost profit from the deal, less (c) anything paid to them so far. It is very hard to see how the addition of such a large sum to the pool of creditors helps D&P achieve the purposes of administration, especially in light of the huge deficit which still exists.

As I suggested in an earlier post, I do not believe that there is any hope for oldco Rangers to avoid being wound up.

Therefore the second option considered by D&P is “a sale of the business and assets of Rangers … combined with a CVA”.

How Would a Sale of the “Business and Assets” Work?

If Rangers was a “normal” business, then it is almost certain that administrators would immediately have got rid of the high earning staff to see if the business could be sold as a going concern, perhaps to a competitor with an interest in taking over the shell of oldco.

The nature of a football club renders the matter worthy of very different considerations.

I believe that D&P have deliberately kept their first option, that of a share issue, alive so as (a) to keep up the spirits of the fans and (b) to keep alive the hope that HGMRC, for some bizarre reason, might approve a CVA contrary to its own published principles.

Realistically however, I think their goal must be to raise funds by way of a sale of the business and assets, and in these circumstances the suggestion of a CVA is a fig leaf.

If Rangers’ assets are sold off, will this generate enough to pay (a) the fees of D&P; (b) the secured creditor, if any; (c) HMRC, for all liabilities claimed to be due; (d) Ticketus (if D&P breach the contract); and (e) everyone else.

No.

Will there be enough for a CVA to work, in those circumstances?

No.

Even if there were, what would be “saved”? A football team with no ground and no players and no money and no prospect of getting out from under the debt burden. Continue reading

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Filed under Administration, Football, Insolvency Act 1986, Rangers

Rangers’ Administrators Want to Rescue the Club with a Share Issue – Why It Won’t Work

On Friday Lord Hodge issued his decision in the application by D&P for “Directions” in connection with their handling of the Rangers administration.

Put very simply (and with due respect to the 63 paragraphs of the decision), he decided:-

A             that any rights Ticketus hold in Ibrox Stadium, the season tickets for the stadium and the proceeds of future tickets sakes are personal contractual rights. This means that Ticketus can only enforce their agreement against Rangers Football Club PLC, and they would have no rights against any other party who acquired Ibrox Stadium for use as a football ground during the currency of the Ticketus agreement, which ends after season 2014-2015.

An excellent analysis of that aspect of the decision can be found here, and I commend it to my readers.

B             that he was not wiling, standing the information he had been given, to make any order or give any guidance to D&P permitting them to break the Ticketus contract with impunity.

 

D&P, as stated to the court, see two ways of achieving the purposes of administration. As you may recall, the primary goal is to rescue the company as a “going concern” which failing to achieve for the generality of creditors a better result through administration that through insolvent liquidation.

Their two ways of doing so are as follows: a share issue and sale of the majority stake in the company; or a sale of the assets of the business. In either case this would be accompanied by a CVA.

I will look at both in more detail now, with reference to the Ticketus scenario. (For fans of large thrillers, doesn’t “The Ticketus Scenario” sound like a Robert Ludlum title? I digress.)

 

The Share Issue Option

The Rangers Debt Situation

Rangers Football Club PLC is in a dreadful financial mess. It presently owes at least £9 million to HMRC in connection with unpaid taxes accruing since May 2011, as stated by counsel for D&P in the Court of Session. That figure may be as high as £15 million.

Rangers owe the Debenture holders who contributed some years ago to ground improvements around £8-9 million, the Debentures becoming due and payable upon the company entering administration.

Rangers owe HMRC in relation to the “Big Tax Case”. Whilst the case awaits a decision from the Tax Tribunal, HMRC cannot enforce payment, but they will move to do so as soon as they have a judgment. The determinations under appeal by Rangers date back to February 2008. The appeal was commenced in 2009. HMRC will have lodged a claim with D&P for the full sum it is seeking, together with interest and penalties. This liability was described by Craig Whyte as possibly running to £75 million! Continue reading

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Filed under Administration, Bain v Rangers, Craig Whyte's Companies, Rangers, Ticketus

Rangers’ Administration – Lord Hodge’s Decision re Ticketus – Part 1 – New Information

 

Yesterday Lord Hodge issued his decision in the application by D&P for “Directions” in connection with their handling of the Rangers administration – [2012] CSOH 55.

 

New or Extra Information from the Case

 

1                     Rangers Football Club PLC (Rangers) was and remains unable to pay its bills as they fall due.

 

2                     The application for the Administration Order referred to a £9 million liability to HMRC.

 

3                     The administrators (D&P) want either to rescue Rangers with a share issue, or to sell off the assets of the company, in either event with a CVA.

 

4                     D&P wanted the court to give them carte blanche to breach the Ticketus deal, without fear of legal action by Ticketus.

 

5                     D&P based their original sale prospectus on the Ticketus deal being void, but had to amend this to include the possibility of it staying in place.

 

6                     “Ticketus” is a combination of two Limited Liability Partnerships, Ticketus LLP and Ticketus 2 LLP, both consisting of a large number of companies under the Ticketus umbrella.

 

7                     The Ticketus agreement was with Rangers, not with Rangers FC Group Ltd (Group) or anyone else.

 

8                     The agreement was signed, and first payment of £20 million made, on 9th May, 3 days after the takeover.

 

9                     It was proposed that Rangers would lend Group £16 million.

 

10                 A second payment of £5 million was made six days after Martin Bain was granted a court order freezing sums in the Rangers accounts.

 

11                 Notwithstanding any other argument D&P have, they are trying to have the Ticketus deal declared unenforceable on “financial assistance” grounds.

 

I aim to discuss the new information revealed in this case below in more detail.

In later posts I want to explain some of the implications of the case for Rangers’ future and potential sale of the Club.

Finally, it is also the case that the decision could have serious consequences for the Scottish finance sector, which I will try to address. As always, I am happy to be educated and corrected by those wiser than me.

 

Do We Learn Anything New From The Decision?

Yes.

This case and Lord Hodge’s decision are the first public acknowledgement of many issues which have been causing confusion since the Rangers situation started to deteriorate.

The relevant, and in some cases, newly revealed facts are as follows:-

Rangers Insolvency

As we know D&P had to go back to the court on the basis that their original appointment by Rangers was defective, because of a failure to notify the FSA. When Mr Sellar (D&P’s QC) asked the court to grant an administration order backdated to 14th February, this confirmed (a) that Rangers accepted that it had been insolvent as at 14th February and (b) that D&P accepted that Rangers remained so on 19th March when the retrospective administration was dealt with.

Mr Sellar referred the court to a debt of over £9 million to HMRC. That is assumed to relate to the unpaid VAT and Income Tax accrued by Rangers whilst under the control of Mr Whyte, or more correctly of his companies.

 

How Do D&P Aim to Get Rangers out of Administration?

D&P have come up with two alternative ways of achieving the purposes of administration. They are laid down in the Administration Rules. The primary purposes are, in order, to rescue Rangers as a going concern, which failing, to achieve a better result for the creditors as a whole than if it was wound up without first being in administration.

D&P have identified, and told the court, that they see two realistic options.

Option one is a “subscription of new shares in Rangers and a sale of the present majority shareholding combined with a Company Voluntary Arrangement (CVA) between Rangers and its creditors”.

The alternative is “a sale of the business and assets of Rangers, again combined with a CVA”.

I will come back to these later. Continue reading

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Filed under Administration, Bain v Rangers, Companies Act 2006, Craig Whyte's Companies, Football, Insolvency Act 1986, Rangers

Rangers’ Administration – Round Up Part 4 – Money

The Rangers Fans Fighting Fund

First of all, praise for the Rangers supporters. In the first few days of the Rangers Fans Fighting Fund over £100,000 has been raised to help the team. Bearing in mind that other smaller clubs in the same position have resorted to buckets and collecting tins, this is an excellent achievement.

The fans have united in the cause of their club, answering criticism from other teams that Rangers fans are less cohesive than their rivals.

However, the very success of the campaign (and we can pass over Mr Custard as a humorous but inconsequential aside) puts into some perspective the battle facing RFC and D&P in their attempts to have the club rescued or bought as a going concern.

D&P stated that they needed to save £1 million per month to get to the end of the season.

Why Do Duff & Phelps want to make it to the end of the Season?

What advantage do they get from reaching the season’s end?

In the going concern context, it can only be that D&P would get to the transfer window and could realise some assets by selling players. There are two problems with this. First of all, the players can’t be forced to go, and an enterprising agent, acting in his client’s interests, might suggest that his client becoming a free agent on liquidation would be financially advantageous as the new team would not need to pay a transfer fee, leading to more cash for the player. Secondly there would figuratively be a big sign on the front door of Ibrox saying “Everything Must Go!” Buyers will know that they have the advantage, and there are few “hot properties” on the club’s books just now.

So players sales in the summer might not generate very much at all, and even if they do, this mostly takes place at the end of August.

What about season tickets? Ticketus is due the sale proceeds of around the first 25,000 season tickets for the coming season. If D&P cannot persuade the Court of Session to allow them to ignore the deal, then 25,000 season tickets would need to be sold before RFC derived a single penny benefit (excluding the admin fees RFC would charge Ticketus for selling the tickets for it). Continue reading

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Filed under Administration, Football, Insolvency Act 1986, Rangers