Administration: What would happen if… ?
04/04/2011 68 Comments
Many people have been asking about what would happen if Rangers were to file for administration and what the basic nuts and bolts of the process would be. As opposed to a 5,000 word essay on the subject (that would struggle to retain anyone’s attention), I thought that a series of shorter snippets and observations might help.
So let us start with a seemingly random question: Who would be the creditors in an administration filing?
Assuming that the First Tier Tribunal result would be a catalytic event , in order of size, the main creditors would be:
– HMRC (unsecured)
– Lloyds Banking Group (secured & preferred)
– The Rangers Bond Holders (unsecured)
– Trade Creditors & Accrued Liabilities (unsecured)
– Employees (mixture of preferred & unsecured)
The Accrued Liabilities group is interesting. At the time of the administration filing, anyone who has paid Rangers to deliver on a product or service but has not received that product or service, will have the value of their contract with Rangers included on the Rangers balance sheet as a liability. This would include the “unused” portions of season tickets.
What many season ticket holders may not realise is that depending upon the outcome of an administration process- whether a CVA, or selected assets & liabilities are carried into a new company (with the bad assets and undesirable liabilities left behind), or liquidation, no one- not even Alastair Johnston nor Sir David Murray- can guarantee that seasons tickets purchased for the 2011/2012 season will be honoured for the whole season if there is an administration filing before the season is complete.
It would be at the discretion of the administrator and the new owners to decide which contracts will be honoured and carried into a new business and which would be left to wither, taking their place to ask for a pennies on the pound distribution from money rasied by selling the club in administration. Of course, in restructuring any company, if you have hopes for the business to continue trading, you would not wish to incur the wrath of the customer base. However, I suspect that a fear of a collapse of season ticket sales might be behind the “all hands on deck” PR campaign to sell a nonsensical takeover as being “another 48 hours” away.