Administration: What would happen if… ?

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.

About rangerstaxcase
I have information on Rangers' tax case, and I will use this blog to provide the details of what Rangers FC have done, why it was illegal, and what the implications for what was (updated) one of the largest football clubs in Britain.

68 Responses to Administration: What would happen if… ?

  1. avidreader says:

    I don’t see how #2 could be the truthful explanation.

    If the fakeover is just a scam to sell season tickets, then Whyte would not be publicly arguing with Murray over the 2.8M. It makes Murray look bad and does nothing to encourage the uptake of season tickets.

    So I think we can rule out Whyte being party to any pretence. Given his actions, I’d say Whyte must believe he is a legitiate contender.

    Also, if this were just a fakeover, regardless of the complicity or otherwise of Whyte, why would Rangers now suddenly admit that the 2.8M is a true liability? That would also seem counter-intuitive, if their aim is to spin a positive PR story.

    I don’t know what’s going on here, but I don’t see how it can be theory #2.

  2. Ray Charles says:

    I said previously that I think the takeover will go ahead.

    We don’t have perfect information and the obvious analysis of this situation may therefore be flawed.

    There is something about Whyte and his relationship with Murray that strikes me as odd.

    If I knew all about Whyte’s relationship to Murray I would be in a better position to make a judgment.

    As it is, I suspect something is going on in the background that will make this takeover happen despite the fact it defies logic.

    I just feel there are certain hidden parameters at play.

  3. Ed H says:

    @Avidreader makes sense, ultimately No. 2 will have to be a dog that doesn’t bark, which would leave RFC looking incredibly stupid.

    I’ve just ordered a pick, a shovel and a torch from ebay.

  4. eventlogger says:

    According to the latest leaks to a favoured MSM hack, Whyte is adamant that the deal doesn’t happen unless Murray takes the HMRC risk with him as he rides off into the sunset; this is a negotiating position I would expect of someone who is rumoured to have amassed a £700M fortune. This being the case, why would Murray now insist on payment for his shares and at the same time agree to absorb a potentially massive future hit, given that he wouldn’t do so for the Ellis consortium.

    From a finance point of view (not my area of expertise), considering HMRC’s action is against RFC, I imagine it would be tricky for any buyer to formulate a sales contract which would guarantee that RFC is no longer responsible for paying future HMRC liabilities resulting from the dud EBT scheme.

    There again Whyte, may be worth £700M and is a chump fan willing to burn his wad living the dream.

  5. abrahamtoast says:

    If I was a season ticket holder at Ibrokes, I would not buy for next season for two reasons.

    1. If the club went into administration early in the season, say in September, any new owner would be left with little revenue for the rest of the season if they honoured season tickets. All the money collected from the sale of these tickets would go into the pot for creditors. Therefore, season ticket holders could easily end up paying twice to see their beloved bears.

    2. Anyone considering applying the final push to put them into administration would be wise to sit back for a few months until the season ticket money is in, as that is when the club will be most cash rich, therefore maximising any possible dividend, so by buying a season ticket, you may actually be hastening administration.

    RFC will be fully aware of these arguments, but can’t publicly advise fans not to buy season tickets because of the panic that would cause.

  6. Not The Huddle Malcontent says:

    “RFC will be fully aware of these arguments, but can’t publicly advise fans not to buy season tickets because of the panic that would cause.”

    hahahahahaha, like that is the top of their concerns? when does a club ever put a fan ahead of their own interests?

  7. Stippidoo says:

    News report states that £50million has been agreed, so what happens now?

  8. Not The Huddle Malcontent says:

    From Sky

    “Rangers owner Sir David Murray has agreed to sell the club to businessman Craig Whyte but is awaiting the approval of the club’s board, according to reports on Sky Sports News.

    Whyte is set to take ownership of Ibrox, as well as the club’s training ground, and will pay £33 million to complete the deal, with further amounts expected to be invested in the next five years.

    He will take over 75% of Sir David Murray’s shareholding, with London-based property developer Andrew Ellis becoming a 25% partner, once the buy-out is rubber-stamped.

    Whyte, who was raised in Motherwell, began his wealth creation by investing in the stock market during his school days and started his first business aged 19 when he set up a plant hire firm. ”

    Interesting wording – “Whyte is set to take ownership of Ibrox, as well as the club’s training ground,”

    not taking on the club, not buying Rangers FC, is he buying the assets and leasing them back to the Rearrangers who will then simply file for liquidation. He’ll then buy the league registration/place

    Murray gets his money, Whyte gets the club, the bank and HMRC are ripped off.

    In and out of admin in a close season – not affecting europe or league points penalty


  9. JohnBhoy says:

    Maybe Lloyds will have to turn their Preference shares into Voting shares. Very quickly.

  10. Chris says:

    I was of the opinion that the Rangers ‘debt’ to Murray Sports was a prelude to Murray doing a Glazer and loading the share issue debt onto Rangers if Rangers ever managed to get onto an even keel financially. He owned over 90% of the shares so could execute a compulsory purchase of the rest of the shares and do this. It would also allow him, if things went belly up at Rangers and administration became a possibility, to control such a process by being the biggest creditor….he may have owed £30 million to the bank and £30 million to HMRC but an £80 million debt to a shadow company would allow him to do a ‘Leeds’ and control the CVA and any sale. Just look at what Bates did…offer 1p in the pound for the debts!

    Now that LBG have unravelled all of MIH and opened all the cupboards, I have to admit I’m intrigued as to just how the saga will end…..a story that began as A False Hope, the second part of the trilogy, subtitled LBG Strike Back, now unfolds. As long as the third part is subtitled Return to the Third Division ….I’ll be happy!

  11. Mark Dickson says:

    STV reporting slightly differently on current events

  12. Not so fast! 🙂

  13. Boab says:

    I love the £50m deal stuff. That’s including the alleged £5 per year over 5 years = £25m. How in God’s name is that part of the deal between Craig Whyte and MIH. If he buys their shares, for whatever amount, then what he does in the next 5 years is really none of their concern. So how does that relate to any deal. Total nonsense, it’s just bumping up the amounts involved for senationalism and so as not to give them impression that Rangers were being sold for £25m, which included paying off all of their outstanding debt.

    Let’s think about the £25m over 5 years for a second. As I understand it there are 4 ways to get money into a PLC. Put simply 1, net profit 2, loans 3, share issues 4, gifts. If we look at them individually

    1, Net profits – That depends on CL football. Without it, or a very good Europa run it just isn’t going to happen. Even a very good Europa isn’t likely to generate the £5m net profit.

    2, Loans – surely he isn’t paying off all of the debt, to then continue to borrow money in the hope of getting the CL money and generating the net profits that way. I suppose that’s possible. We like to think of it as the David Murray Model.

    3, Share issues – least said soonest mended.

    4, Gifts – it is possible that Craig Whyte, the venture capitalist, and Andrew Ellis, the property developer are buying Rangers to then gift the club money on an ongoing basis. It is however highly unlikely.

    Kind of leaves us with 2, and 1, Borrowing money to hopefully increase sales, at the same time as reducing costs. In the hope of generating at least £5 net profit per year, to be then re-invested in players. Meaning that, even if it does work, Neither Mr Whyte nor Mr Ellis get any return for 5 years.

    I’m happy for someone to tell me what the alternative is. I’m afraid i just can’t see it.

  14. peter lamb says:

    what will the takeover do if anything for the tax case does whyte have the funds ready to pay this bill?
    and does he have the money himself to buy the club or is it a case of gillett at liverpool and the glazer at man utd? getting a massive loan to pay for the club!!

  15. Auldheid says:

    Tellng porkies about spending £5M on buying players?

    £5m a year is probably low enough to take it below the FFP formula, but the underlying FFP principle is that clubs can only spend within income earned from football.

    So there has to be a question in principle of where the £5M is being earned. I may of course have just blown Whyte’s excuse……

  16. Boab says:

    Excellent point, I had forgtten about that. Money gifted into the business must be precluded from any profit, avoiding the like of Abramovitch just buying players on the club’s behalf and strengthening the team that way.

    A lesser scale, yes, however the same principal.

    A wee link if the blogger doesn’t mind.

    You will see there are some exception though, particularly with regard to stadium expenditure and in the early years.

  17. Timcognito says:

    Not surprised to see the “takeover” is still not quite there. However, would however there be anything to stop Whyte setting up Rangers Properties PLC, sister company to Rangers PLC as part of a larger group. Cash injection from RP PLC pays off the bank in return for any property assets that Rangers have, long term lease rents them back to Rangers PLC, leaving Rangers PLC with few assets to liquidate. If Rangers go bust then Whyte is in prime position to pick up the pieces but protects Rangers main assets( and his investment) from HMRC. Does that work? Might also explain some of the rather strange chat about Ibrox needing “14m repair bill”, handy to persuade your customer base that by stripping their main asset you are actually doing them a favour!

  18. Boab says:

    I would suggest that, whilst there is an ongoing tax investigation then concealing, transferring, removing or converting assets may leave them open to charges of money laundering under The Proceeds of Crime Act.

    Only if the person doing it knew, or suspected that the assets represented (directly or indirectly) the proceeds of criminal conduct, obviously.

    Just a guess though.

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