The Secretive Mr. Whyte

Only a handful of days after he completed his purchase of MIH’s 85% stake in Rangers FC for a pound, Craig Whyte has already signalled that it is business as usual.  Those who might have hoped for an era of glasnost and some transparency in communicating with supporters about the running of their club, will be disappointed.  Craig Whyte is already showing himself to be more Putin than Gorbachev.  Hand-picked journalists attending Saturday evening’s inaugural press conference with Whyte were under a three-line-whip from Gordon Hay of Whyte’s PR firm Hay McKerron that there were two subjects that could not be mentioned:
– The tax case
– The source of the money used to buy Rangers’ debt from Lloyds

Draconian penalties were promised for anyone who dared cross these lines.  Exclusion from future press conferences and no more “leaks” would be akin to removing life-support from those who have become dependent on succulent lamb from the table of the owner of Rangers.  No one crossed these lines.  Not one journalist in attendance asked about the only real questions that face Rangers just now.

Whyte chose to address the tax issue in a Rangers TV interview / presentation last night.  I guess that it will take him time find pet-hacks with whom he can build the sort of trusting relationships David Murray had with Jim Traynor and Tom English i.e. “if I want it printed, you print it!”  So, Whyte took solace in a media outlet which he now owns.  Very brave.

Whyte’s statement that he does not believe that there is any chance that Rangers will lose the tax case beggars belief.  Either the man is a liar or a complete moron.  I doubt that he is the latter.  Decoded, Craig Whyte’s statement on the tax case can be seen as an admission that there is no ‘Plan B’ for losing the tax case.  The independent committee of the Rangers’ board appear to be right to be concerned about the lack of funding to pay a combination of bills that could reach above £54m.

Even I do not profess 100% confidence in any particular outcome.  Much like the OJ Simspon trial, a patently guilty man can be found not-guilty in the face of a combination of excellent and incompetent lawyering.  I know that the evidence against Rangers is extremely strong.  It is hard to conceive of a logical defence that Andrew Thornhill QC can have offered.  But Craig Whyte is 100% confident?

Sir David Murray has gone, but Rangers are still owned by a man who will deploy expensive PR resources to protect himself.  It will be interesting to see if he is up for “defending” Rangers’ supporters in the same manner as Murray. Rangers fans should be asking why David Murray gave away Rangers for less than a millionth of a penny per share. A man who was asking for a £6m payout for three years, suddenly decided to give away Rangers FC on the same day that the First Tier Tribunal that would decide the club’s fate concluded hearing evidence? Of course, Murray did it out of a love for the club! That Murray has considerably more provable personal wealth than Whyte should also be a red-flag. Murray was in a better position than Whyte to personally support Rangers. (Of course, over 23 years in charge, Murray took out much more than he put into Rangers. Take a look at Rangers’ ‘related party transactions’ over the last 14 years). The simplest explanation for the deal is that Murray and Lloyds wanted to be off-stage when the curtain falls. Whyte’s motivations? We can only guess. He is either an idiot or his ‘Plan B’ for the tax bill is not one that many will want to hear just now.

Of course, the other issue Rangers fans should ask about is ‘Who is funding Whyte?” The answer to that question will explain whether this is really a rescue or a pillaging. I do not expect the question to be even posed by the Scottish media, let alone receive an honest answer. The same sources who told me on 19 April that Whyte had secured funding and was serious about buying Rangers, have told me that Whyte has contributed very little money personally. The exact terms of the package are unknown. Has Wavetower borrowed the money to buy Rangers? Or are the backers equity investors?

As things stand, Rangers are in as much debt today as they were last Thursday. Rangers’ debt to Lloyds has been purchased by Wavetower. Rangers FC still owe that £18m to Wavetower. (Interest rates may not stay the same). Additionally, Rangers also owe an additional £6m to other lenders and for negative working capital. Nothing has changed except that Murray and Lloyds have left the scene. Perhaps that is a cause for rejoicing amongst Rangers fans in itself, but they might have cause to prefer “the devil they knew rather than the devil they don’t.”

We can expect a media onslaught from Hay McKerron in the coming weeks. Every device to distract and deceive will be deployed. As I have maintained from the start, Rangers’ future depends upon the outcome of the tax case. Some shuffling of commercial paper has not changed that.

Blinded by the Whyte

I am in little doubt that, in coming years,  at least one book or Ph.D thesis will be written about the takeover saga at Rangers.  If the author has any desire to faithfully record the events, much must be made of Scotland’s “Street of Shame”.  The most important aspect of this story is the way the journalism profession has plumbed new depths of obsequiousness and fealty.   In their fight to be next in the queue to receive the next “another 48 hours” exclusive, Traynor, Speirs, and Tom English have somehow managed to have daily conversations with their masters at Rangers FC, and with MIH’s notorious PR firm, Media House, without ever asking the the crucial questions.  (Or more accurately, they understood the issues that must not be discussed lest they lose their access privileges).  A host of minor characters from STV, BBC Scotland, and SKY Sports have also jostled with each other to sell their professional souls to be next in line to receive the next carefully crafted mendacious morsel from the Whyte camp.

It is the Whyte “camp” that we will discuss today.  One of Craig Whyte’s first actions when deciding to investigate a bid for Rangers was to hire a PR firm: Hay McKerron.  The Whyte project was masterminded by Gordon Hay, a partner at the firm and former Daily Express hack.  I am told that one the first objectives of the campaign was to convince the world that Craig Whyte is a Rangers fan.  That seems like a reasonable objective.  It would kill any innuendo suggesting that Whyte is a carpet-bagger intent on asset stripping Rangers FC.  It would reassure all concerned that Whyte would be a safe custodian for the club.  It would eliminate the need for David Murray to sit in a nice-London-hotel and ask: “ok, gentlemen, before we do this, can you tell me how you’re going to run this club?”  With a devoted Teddy Bear at the helm, Scottish football could finally breathe easy.    It should be a simple task.  You would have Whyte pull out all of those childhood photographs with him sporting the famous blue jersey, interviews with old school friends who could attest to Craig’s lifelong passion for the club, and you could include an interview with the man himself waxing lyrically about those great Rangers days of his youth: Souness’ first game for Rangers; beating Leeds United home and away in 1992; and winning 9 in a row.  At least it would be easy if the buyer of the club had any historical or emotional attachment to Rangers.

Instead we saw planted posts on FollowFollow.com claiming to know Whyte back in the old days in Motherwell attesting to the blueness of his nose and a three-line whip to Hay’s journalist friends that their supply of stories would be cut-off if anything with a negative tinge was to be printed.  Such actions helped kill a line of enquiry that had many Rangers fans wondering: “Who is Craig Whyte?  Is he one of us?  Why does he want to buy Rangers before the tax case is settled? ”  With journalists refusing to do their job, the information vacuum was filled with a constant stream of “almost there!” and “another 48-hours!”  It worked.  Rangers fans were marionettes with Gordon Hay as the puppet-master tugging on their heart-strings.  Distracted by the excitement an imminent deal, few Rangers fans (and no journalists) have found time to ask the obvious next questions:

• Where did Whyte get the money? (He has no publicly verifiable track record of legally obtained wealth)
• Does Whyte understand the gravity of the tax situation and how much the bills could be?
• If he does understand the tax case, then why would he buy Rangers now?
• Is Whyte just buying the bank debt? i.e. that Rangers’ debt will not change?

Of course, the Scottish media will be rushing to curry favour with the new man. They will need to kiss-up with extra vigour out of fear that they could have their lunch-lines cut as the Ibrox ‘Old Guard’ prepare to exit.

The facts of Rangers under Whyte’s ownership remain the same:
– A tax case that was scheduled to finish this afternoon
– Tax bills of £36m (underpayment and interest) and a penalty case to start in some months
There are no other questions worth asking until Rangers supporters receive honest and forthright answers about Whyte’s plans for the various tax case outcomes. This blog has made clear that the only financial model that makes sense for Whyte is that he will have purchased the debt from Lloyds Banking Group directly (preserving their security interests and preferred creditor status) and will have paid £1 for MIH’s shares. He must then be ready to sell any playing asset that attracts a reasonable price. If the tax bomb detonates, he would exercise his security rights. If HMRC do not agree to just walk away and accept zero (or close to it), the only way for Whyte to claim what is his in law, is to see Rangers liquidated.

Rangers fans also need to understand that the terms of the deal that have been leaked so far would not leave Rangers debt-free. Firstly, only the £18m bank debt will have been paid. That would still leave at least another £6m in other loans (used to pay for Jelavic), capital leases, and negative working capital. If he has just purchased Lloyds’ debt, Rangers’ debt will not have changed at all! They will just owe the money to Whyte and whomever has funded him. (Who would be more reluctant to foreclose on Rangers FC? Lloyds Bank or a shadowy group of barely known investors?)

We should be in no doubt that Rangers are now much more likely to be about to jump out of the frying pan into the fire.  That Scotland’s media has been so easily placed in Whyte’s back pocket is a testament to the skills of Gordon Hay.  As his company’s own website boasts:

Often keeping something out of the news is as important as securing publicity. As poachers-turned-gamekeepers, we know how the media thinks and how it works. Our easy-to-follow 12-point plan for dealing with the media in a crisis could make all the difference between making or breaking your business.