Credit Where Credit Is Due

The idea of Rangers ever facing an insolvency event was once dismissed as being in realms of science-fiction fantasy.  Scotland’s biggest football club could not go bankrupt.  It was just unthinkable.  Yet, in the past few months the idea has gained more currency.  The main EBT tax case, which was variously denied or said to be the responsibility of others, is now discussed openly in the media (albeit with the characteristic  commitment of Scottish journalists to getting the facts wrong).  “The Other Rangers Tax Case” has shot to prominence with the serving of court documents by Sheriff Officers last week. Contrary to Rangers’ media spin, these documents are part of a process that will lead to a winding up order being issued within weeks if the £2.8m underpayment and interest bill is not paid.  The £1.4m in additional penalties, which were not part of the original agreement, can be delayed by initiating an appeal that will start yet another First Tier Tribunal.

This less heralded tax case, which centres around the offering of share options to employees at below current market prices, is a strange case to precipitate a crisis at Rangers.  However, the full impact of Rangers’ failure to qualify for the Champions’ League is starting to show.

The defeat over two legs to Malmo will result in a net reduction of Rangers’ turnover by approximately £13m this season (allowing for an estimate of Europa League revenues).  In terms of cash flow, the club could face a shortfall of about £8-12m for the year.

Timing of cash flows are critical for any football club teetering on the brink.  Alastair Johnston’s warnings to Rangers fans to be vigilant stemmed from concerns that Craig Whyte had failed to appreciate the risks and the amount of financial support that Rangers will need in years without Champions’ League money.   In any season, as tickets are renewed, cash reserves pile up for football clubs.  In a season without Champions’ League money, that cash pile has to be stretched until renewals resume towards the end of the season.
Some additional cash will come in from commercial operations, TV, domestic cup games, and Europa League games. However, the Europa League is small beer compared to the money from the big European stage.

Despite promises of providing cash money for ‘front loaded’ investment in the team, Whyte is using season ticket receipts to support capital investment in playing staff.  However, whether enough cash will remain to cover wages and all other expenses before season ticket renewal money starts to come in is in doubt.  Rangers have been in this situation before and have not faced a crisis.  What is different this season?

The problem for Rangers appears to derive from their lack of a credit line with a bank.  When Rangers had loans with Lloyds, the bank would extend credit to prevent insolvency.  It was in the bank’s interests to support its clients through short-term funding gaps.  Now that Rangers’ debt is owned by Craig Whyte’s company, no bank has a compelling reason to lend to Rangers.  A troubled firm facing unpayable tax bills, and a supporter base that threatened a bank with boycotts for daring to exert its legal rights to get its money back: what bank manager would take on such risks after Lloyds Banking Group worked so hard to escape them?

Cash flows are uneven for every business.  Sometimes your outgoings exceed cash coming in and vice-versa.  This is not a problem if you have a cash pile or a credit line to draw upon.  Credit lines from banks are usually secured.  For troubled businesses, unsecured credit lines are virtually unheard of.  If Rangers had established a new line of credit with a bank, a new floating or fixed charge would have been published on the Companies House website.  (Lloyds, in the form of Bank of Scotland, are still listed as the holder of the floating charge on Rangers assets.  It seems inconceivable that they would reopen old wounds by lending to the club and beginning that cycle again).

I am told by someone familiar with the timing of cash flows at Ibrox, that with £2m having been spent on players and a £2.8m tax bill due to be paid within weeks, that the club would almost certainly have periods this season where it could not pay all of its bills.  To boil this down to its essence: unless Rangers find a source of credit or Whyte is willing and/or able to invest more cash, Rangers survival to even hear a result in the EBT tax case is in doubt.

Mr. Whyte could clear this all up quite easily.  He could tell us that he has invested more cash or is providing the club with a credit line from another source.   Or he could release his PR hounds again to continue spreading disinformation and deceit.

What would happen if Rangers became insolvent before the big tax case is heard?  It gets messy.  Craig Whyte may be forced to use his ‘silver bullet’ and to file for receivership.  Legal battles would then begin on whether the tax debts of the existing company, The Rangers Football Club plc, would carry forward to a new incarnation.  HMRC has had its powers extended in recent years to deal with the alienation of assets for the explicit purpose of avoiding a legitimate tax debt.  However, Rangers do have a floating charge of sufficient vintage to allow for a receivership process.  I doubt that there are many lawyers in Scotland who would confidently predict the outcome of such a battle.  It will be a knock-down, drag-out fight.  The one aspect that is clear is that SPL rules require that a team that experiences an insolvency event in the middle of a season is subject to an immediate 10 point deduction.

So, lots of ifs, buts,  and conditions.  Whyte might find funding from the same people who helped him buy Rangers or he might be able to obtain an unsecured loan from friends to cover the immediate bills.  With the transfer window still open, becoming insolvent for the lack of selling a player would look like carelessness.  However, the clock is ticking very loudly for Mr. Whyte.

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 are for one of the largest football clubs in Britain.

1,362 Responses to Credit Where Credit Is Due

  1. well said Jean as you say we’ll believe it when we see it :)

  2. droid says:

    the dam is cracking –

    “I think a winding-up order would be unlikely. A more likely course of action would be that they would identify assets which could be realised, or liquidised, if the money was not paid.”

  3. The Black Knight says:

    andycol says:
    02/09/2011 at 10:16 am
    Am I totally misreading this MG01S? It looks to me as if Close have been charged with collecting a debt from Azure Catering/Murray.

    To my mind yes! Its the other way around.

    It will be RFC that owe Azure Catering. It looks like Rangers have sold off their ‘profit/ benefit’ from the contract with Azure Catering, to raise some capital (loan from Close).

    I read it as Rangers have assigned the security of the contract to Azure Catering and any money due to / from Azure Catering as security of a loan / charge provided by Close.

    Then again? (remember, remember the invisible MG05s)

  4. Lloyd S Bank. says:

    It really would be funny to see the Sheriff’s Officers go to Ibrox and start poinding. Driving off with Steven Davis sitting in the back of their car with a glum confused expression on his wee face.

    (I know it can’t happen btw, it’s for comedic effect.)

  5. Mark Dickson says:

    The most obvious items of quick (aution/re-sale) value at Ibrox would be the silverware and other metals & ornaments from the Trophy Room …….. just saying likes! :)

  6. Don't tell Billy says:

    What about all that marble and the oak furniture? That’s got to be worth a few quid!

  7. Mark Dickson says:

    IF HMRC were of a mind to be especially ‘aggressive’ towards Rangers and/or Craig Whyte then Sheriff Officers seizing the contents of the Ibrox Trophy room (ie assets) and forcing Rangers to buy back at Auction would be one way of hitting them where it hurts (assuming of course Rangers wanted to keep their trophies and most cherished footballing and historical possessions.)

  8. tomtom says:

    Surely the owners of the catering franchise would pay a yearly fee for their rights? Or do they pay RFC a percentage of the takings on a match by match basis? Either way I can’t see it amounting to a vast sum of money (I’m assuming that McCoist gets his pies for free)

    Are things that bad or are we jumping to conclusions?

  9. Lloyd S Bank. says:

    No things aren’t that bad.

    Out of Champions League

    Out of Europa Cup

    Little spending in spite of promises of between £5m and £15m

    Visits by the Sheriff’s Officer to Ibrox

    Vists by HMRC to give a warning that if they don’t pay up soon action will be taken

    Absolute certainty to run at a loss this year unless players are sold

    Likely cash flow issues unless there is a significan overdraft to cover them

    All of that and the huge tax case still to be ruled on.

    Things are just hunky, as they say, dory.

  10. timtim says:

    HMRC must realise that no other taxcase can have had
    such an interest and public disection of the situation as the current
    set of affairs. Wee Craigy is a serial pest in their eyes and not only is
    the case important for setting a marker for others I’m sure it will be enjoyable
    to ensure he is seen to get his commupance at last
    Surely Whyte would be found out if he uses this for any administration /liquidation
    after all its just half a Jelavic thats owed
    I think chipping away 1 piece at a time is HMRCs best option
    Been all quiet on the Martin Bain situation -anyone any news on that ?
    If as has been suggested they are borrowing against future pie sales just to pay
    the wee tax bill then a win for Bain could seriously damage Whytes ability to run the club
    paying the wage bill may be an issue in the not too distant future

  11. Duggie73 says:

    Whyte engineering a fans buyout is a possible profitable exit strategy.
    This backfiring and leading to a mass fan boycott would leave Whyte making little or no profit.

  12. Duggie73 says:

    When Alisdair Johnstone called for Rangers fans to remain “vigilant” over Whyte, was this meant as a hint that they should give themselves an opportunity to perform due dilligence on the occassion of a takeover bid?

  13. Doesn’t CW have previous with HMRC? Is that why they’re playing hardball now…once bitten?

  14. Fritz Agrandoldteam says:

    I think most of the posters on here are giving credit where credit is not due” to paraphrase.

    I don’t believe CW, after the European exits has any clever strategy. The money is not being paid because they simply don’t have it. When rfc rejected the alleged £6.5m for Jelavic, I think it was in the belief that an improved offer would be made. As EasyJambo pointed out earlier, the £6.5 would have been swallowed up by the tax payment, player’s cut & sell-on fee. However, Leicester did not improve the (very generous) bid and signed another player. So rfc invented the fantasy £9m bid – perhaps this was what they were asking/needed to keep them going. This may have even left £1m to spend on the Greek striker they were linked with, to keep the hordes at bay. According to press reports, (no sniggering there!) they have even paid £1m to the taxman for the £4.2m bill, just “hundreds of thousands”.

    I conclude that there is no strategy, poker game, or Plan B. They will struggle to keep the club going on a day-to-day basis, until, well, until they can’t – and I think that day is almost here.

    So, does CW now realise that he can’t keep everything limping along until the big tax case gives him the opportunity to asset strip bigtime, or does he pull the plug now?

  15. Lloyd S Bank. says:

    Does anyone think a fan buyout is or ever was a realistic option.

    The fans failed to buy into the club in their droves when David Murray tried to save them through a share issue. We are mid recession and the club is £18m in debt, which will increase over the coming season, provided someone is willing to lend them more money. Where is the incentive for anyone to buy into Rangers just now.

  16. Fritz Agrandoldteam says:

    Er…. that should be “they have NOT even paid £1m to the taxman”

  17. Duggie73 says:

    Lloyd S Bank
    even with AR working as a silver bullet entirely dodging both tax bills, Whyte doesn’t make much of a profit and leave the picture without a buyer does he?
    I really, really don’t know

  18. greengrass says:

    charge no 14…do they have 14 charges or is this a ref no…

  19. Mark Dickson says:

    It takes deep pockets to run Rangers Football club to the way that their fans have become accusomed over the last 2 decades, Craig Whyte doesn’t have that kind of money to flush down the loo bank-rolling and subsidising footballers high earnings and fans constant demands and expectations …. Minty Moonbeam didn’t really have the money either – he just borrowed it all from bank of Scotland and the tax-payer and when the well ran dry took a massive haircut on the onwership & value of his other companies and his Rangers shareholding………basically the big spending era at Ibrox is over, permanantly – it’s just that most people have failed to realise this isn’t just a period of enforced austerity it’s the new normal!

  20. Lloyd S Bank. says:

    Duggie73 says:
    02/09/2011 at 1:25 pm
    Lloyd S Bank
    even with AR working as a silver bullet entirely dodging both tax bills, Whyte doesn’t make much of a profit and leave the picture without a buyer does he?
    I really, really don’t know


    Personal opinion, and no more than that, worst case scenario for Craig Whyte is that he walks away pretty much unscathed. The gamble was that he got into the CL and won all of his tax cases. Then after a year or two he owned Rangers debt free with no outstanding tax to deal with.

    He could then go ahead with whatever plan he had to make money. A share issue or something like that might have been possible in that scenario. Fans buying into a debt free prosperour Rangers.

    I really think that Malmo and Maribor were a bigger disaster for Rangers that Kaunus.

    I genuinely believe that Craig Whyte’s plan was gamble £1 and if it pays off you have Rangers debt free. If it doesn’t you lose your pound.

    I know others disagree. that is simply my take on the matter.

  21. timtim says:

    What happens with the £200m stadium and the £10m training ground
    surely Whyte will not be allowed to pocket these against what he is owed
    If their valuation exceeds Whytes dues then HMRC would demand they were sold
    to pay them surely. I know Ibrox isnt worth the quoted figure btw

  22. Duggie73 says:

    Lloyds s Bank
    it seems a decent enough reading of it.
    Is it realistic though to expect that there won’t be a significant dropoff in the level of Rangers support in the event of AR, which would give slagging rights to any and all supporters of other clubs?
    Rangers aren’t profitable with their current level of support, an abandonment by “decent fans” (no sniggering up the back please) makes a continued Whyte regime a guaranteed significant loss-maker.

  23. droid says:

    99% crap? I’m a fly round whyte

  24. The Black Knight says:

    “greengrass says:
    02/09/2011 at 1:40 pm

    charge no 14…do they have 14 charges or is this a ref no…”

    878 of the companies act 2006

    “Charges created by a company. Daily default fine removed”

    Clue is in ‘DEFAULT’ I think.

  25. tomtom says:

    Credit Limit (£) : 0 Risk : Credit Rating is Suspended

    Company Information Risk Financial Ownership Directors Reports Summary Identity History Search History Company Name: AZURE SUPPORT SERVICES LIMITED
    Registration Number: SC203913
    Registered Office: 3-5 MELVILLE STREET, EDINBURGH, EH3 7PE

    Date of Incorporation: 14 Feb 2000
    Latest Annual Return: 14 Feb 2011 Accounts Reference Date: 30 Sep
    Date Accounts Lodged: 31 Jan 2011 Issued Capital: £4,866,666
    Latest Filed Accounts Date: 30 Sep 2010 Next Accounts Due Date: 30 Jun 2012
    Company Type: Private Limited
    Scottish Companies Act 1948 part 1
    Type of Accounts: Group
    Trading Address:

    Telephone Number:
    Auditor’s Qualification: No
    UK SIC Code(s): 5552: Catering
    Parent: 05166358 : ELIANCE EVENTS LIMITED
    Ultimate Holding Co: HBI SCA

  26. The Black Knight says:

    3. The prescribed particulars for the purposes of section 878(1) of the Act are—
    (a) the particulars prescribed by regulation 2; and
    (b) in the case of a floating charge, a statement as to any provisions of the charge and of any instrument relating to it which prohibit or restrict or regulate the power of the company to grant further securities ranking in priority to, or pari passu with, the floating charge, or which vary or otherwise regulate the order of ranking of the floating charge in relation to subsisting securities.

    Interesting times indeed. Looks like CREDIT where Credit is due RTC!!!!!

  27. weeminger says:

    I see Craig Whyte’s exercised some convertible loan notes in Merchant House Group today. This is a little unusual because he normally sells shares at market value then exercises his loan notes in order to maintain his holding.

    Today though he’s essentially sold his conversion straight to another party at nearly 1/3 of yesterday’s closing price and roughly half of what he’d get on the market after the share dilutions. To me this says he can’t wait for them to sell at market price and or he couldn’t find somebody to take a £100k chunk at market rate. Whereas the buyer probably can.

    Interestingly the buyer is noted as Willow International Limited domiciled in the Seychelles. The only references I can find to Willow International Limited are to a now liquidated UK company that was involved in a land banking scam. They couldn’t be the same could they?

  28. Paulie Walnuts says:

    I agree with Fritz. The current nonsense is not part of any plan – they just can’t meet the day to day bills as they fall due.

    A fans’ buyout is a non starter. Realistically you could never get a fans’ collective starting from scratch taking shape to get to the stage of organisation that they could achieve that. If it is ultimately to go to the fans there will have to be an intermediate owner. By that I mean someone who rised to the rescue, saves them from the brink of extinction on the basis of a pledge to sell on to the fans as soon as he stabilises it. But such an owner would have to devise the share structure etc and effectively have a sort of flotation.

    No one in their right mind would touch them though til the big tax case is resolved.

  29. jonny says:

    I sincerly hope all you guys are right regards Whyte being out of his depth .Some of the info coming out on here is astonishing .
    Maybe Whyte did not realise the scrutiny his actions would attract ,maybe he was assured the LL would dance to his tune (very believable).
    What the peepil may have misjudged is the sterling work and dilligence of guys like RTC,CQN and PHIL .
    I for one would be extremely angry if my tax money was wrote off to the benifet of ragers .

    The thing that keeps gnawing at my stomach is ,why the hell would anyone walk straight into an spl club with a 60m tax demand looming .
    pound or no pound .

  30. Jason says:

    We will lose the tax case, its a cert. The way that the takeover has been structured is very clever by tight Whyte. He had no other option but to factor in protection for himself in this takeover. By transfering the debt to Wavetower, if Rangers become insolvent, he will not lose a penny. It would also mean that he could restructure Rangers as a new company and as our main creditor he would pick Rangers assets up for hee haw. I think this has led to sites like this and fuels the speculation Whyte is a asset striper. I dont think that is the case, but i can see the thoeries behind the notion. I think that Whyte knows we will lose the case and will build the club again from scratch, debt free and no HMRC liabilities. If this is the case, whyte could sell Rangers as a debt free company with turnover of £50m. He will get rich out of Rangers

  31. Hugh McEwan says:

    He was possibly told they would win it 100%.

    With that and CL money he would have a debt free Rangers within quite a short period, based on current outgoings on wages etc.

    He would then be in a fairly decent position to make some money from them.

    None of it has worked out so far, long may it continue.


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