We don’t do walking away either

The tedium of being an executive secretary at Ibrox in recent years:

“The more you refuse to hear my voice. The louder I will sing.“

On to more pressing matters: yesterday’s excitement- the deal with Ticketus and The Blue Knights. As the emotional pendulum takes its swing to the other extreme, we will try to place this event its proper context.

For those who wish Rangers to complete a CVA and maintain the continuity of 140 years of history, it is certainly good news. It was one of four major walls that needed to be scaled. However, the other three are much higher.

– Craig Whyte’s Debt & Floating Charge
Even on this board, debate has raged over whether the Ticketus deal would extinguish Craig Whyte’s floating charge over Rangers’ assets. At best it means a knock-down drag out court fight. If Whyte wins, then his only practical way to extract repayment is to force the liquidation of Rangers FC. If he loses this claim, it would be another wall scaled. We would need to see the actual Ticketus contract to place odds on an outcome and neither side have made a convincing argument in public so far.

– Craig Whyte’s Shareholding
Whyte holds all of the good cards as long as he owns 85% of the club’s shares. There are those who say that this transaction can be nullified due to ‘financial assistance’ rules against borrowing against a firm’s assets to buy its shares. They might be confusing debt with equity! While Mr. Whyte now freely admits that he is not a billionaire, I am quite sure that he managed the princely sum of £1 to buy his Rangers shares from his own pocket. Even the SPA (still available on this site) does not offer negation of the contract as a remedy for any failure to fulfill promises. (There is a chance of Whyte’s debt and floating charge being cancelled as a result of certain terms, but these are so loosely worded that it is hard to imagine that they can be enforced). Short of an as-yet-unpublished aspect of the agreement surprising us, it would appear to me that Whyte’s grasp on 85% of Rangers shares should be quite secure. This means that he will demand a price for giving up control.
I am quite sure that Whyte’s treatment from the directors of the old board and the assorted supporter banners blaming him for all of Rangers’ ills will have done little to warm his heart about the need for ‘the big hoose to stay open’.

– HMRC & The Big Tax Case
With about £15m owed in unpaid PAYE, NIC and VAT from just the last year, Rangers are in quite enough bother with HMRC. Then there is the Big Tax Case. Allowing for trimming at the edges, my estimate is that Rangers will owe about £20m in unpaid taxes and about £20m in accumulated interest. With a total of about £55m plus a penalty tribunal still ahead, the only way anyone in their right mind would buy The Rangers FC plc as a continuing entity would be if HMRC were to do a deal that paid them pennies on the pound and forgot all about the penalty (which could add £15-20m more to the bill). Many point to the logic of “something is better than nothing”. This might be true, but this situation is more complex. If Channel 4’s reports are correct and Rangers directors were engaging in activities such as document shredding, it will mean that ill-will to the club will stretch back further than just the arrival of Craig Whyte. If Rangers have been involved in a decade of persistent lying to the government, it could make a deal difficult. A pennies on the pound deal for such a company would signal that paying taxes in-full and on-time is for mugs; the smart money takes advantage of every dubious scheme going and pays a tiny amount even if caught. There is an issue of ‘moral hazard’ in letting Rangers get off lightly.

To assess the odds of Rangers avoiding liquidation you would take the probability of Rangers scaling each of these walls and multiply them together. As any smart 14-year old can tell you, when you multiply numbers smaller than one together you get a smaller number. The arithmetic of this compound probability problem does not favour Rangers’ survival. With one wall scaled already, their chances of survival are not zero either. However, playing the odds, avoiding liquidation does seem improbable.