The Craig Whyte disaster: who benefits?

Over the months leading up to Craig Whyte’s takeover of Rangers, I was sceptical, to say the least, that anyone would want to take over a club so riven with problems. The options for explaining the motivations of a buyer were:

• Billionaire ready to lose close to £80 million to cover the cost of repairing the damage left by the Murray legacy
• Asset stripper intent on liquidating the club and making a quick profit
• Shrewd strategist who will help Rangers to safety and survival
• Idiot

The claims that Whyte was a billionaire with “off the radar” wealth were obvious fictions propagated by Hay McKerron (Whyte’s PR firm at the time) and eagerly repeated by a cowed and compliant Scottish media.  It is difficult to believe that any journalist wrote those stories without knowing that they were baseless.  Evidence then and now renders the idea of Billionaire-Whyte as laughable.  The preponderance of evidence seems to indicate that Whyte is just an aspiring entrepreneur with a string of business failures behind him.

Similarly, we can dismiss the notion of Whyte as a cynical asset-stripper, at least he is not one intent on maximising profit.  Had Whyte been interested only on a quick profit he would have been a little more focused on selling players and his club would not have had a net spend during the recent transfer window.

One of the theories which we have speculated upon on in this blog is that Whyte would be protected in the event of a Rangers insolvency.  Rangers’ debt holder is protected by a floating charge security interest on that would give the holder of that floating charge priority in repayment ahead of HMRC and other unsecured creditors.  This idea seemed to make a lot of sense. The Shareholder Circular released by Whyte seemed to confirm this idea.  It seemed like Whyte had bought a no-lose propisition: Rangers continue to qualify for the Champions’ League for the next few years (and all debts including the tax bills would be affordable) or he gets to control the relaunch of a debt-free Rangers following bankruptcy.  Was Whyte really the only “wealthy” man in Scotland with an affection for Rangers who could see this opportunity?  Or do fools rush in where angels fear to tread?

In reviewing some old records related to this situation, I started to wonder about the idea that Whyte will win regardless of what happens.  The MG05s that was filed with Companies House some weeks ago: it listed Lloyds’ subsidiary, the Bank of Scotland, as the beneficiary of this security interest.

With the reported purchase of Rangers’ debt by Whyte’s company, we should have expected that Lloyds would have assigned the mortgage on Rangers assets to The Rangers FC Group Ltd, the holding company Whyte uses to own Rangers. The assignation of the mortgage on Rangers’ assets would usually be the subject of a public filing in the form of an MG01s form filed at Companies House. No such filing has been made: the Bank of Scotland are still listed as the holders of the floating charge on Rangers’ assets. This alone did not give me much pause for thought as such a filing would be voluntary. However, a source has approached me with information that Whyte’s deal to purchase Rangers’ bank debt was something other than what Whyte and his co-conspirators in the Scottish media have made out. I am told that Whyte has indeed signed a contract obliging him to buy Rangers’ debt but that he has not paid for much of that debt, possibly not any of it. This would imply that Whyte does not “own” the security interest on Rangers’ assets. If this proves to be true, it would deny Rangers of their perfect rescue. In the event of an insolvency filing, it would be Lloyds who would control a receiver and it would be for Lloyds benefit that assets would be sold. This would crush the “shrewd strategist” theory.

When we add up the evidence: Whyte’s lack of any track record of legally making significant money since the collapse of his plant hire business and his dash to Monaco; the compliance problems involving corporate records for many shell businesses in which Whyte has been involved; the rank incompetence of Whyte’s leadership of Rangers to date- evidence is building that point to another explanation of Whyte’s takeover of Rangers: he was a useful idiot for the real villain of this piece, Sir David Murray.

If we stop and ask: “what was Sir David Murray’s worst fear related to Rangers?” The answer must surely be that the extent of the club’s illegal actions while he was in charge would become public knowledge. What would be the perfect outcome for Murray now? That an idiot would emerge who could be persuaded to take on the glory of owning Rangers for the price of a single pound. This perfect idiot should be administratively incompetent and should not have deep enough pockets to help Rangers over any cash flow problems. His real specification for Rangers next custodian might have been very different from the one he discussed in public. Murray benefits most by having a bumbling amateur with little cash in the hot seat. If Rangers can go bankrupt, and even disappear, before the big tax case returns then Murray might hope to duck the blame for his own actions.  Murray’s media poodles would be able to muddy the waters with a debate over whether Rangers would have survived had so many fan groups not pressured The Great Leader to sell. Rangers’ problems could be blamed on Whyte, and Murray’s legacy would remain largely intact in the minds of the newspaper reading public in Scotland.

This hypothesis is very Machiavellian and assumes an extreme degree of advanced planning. However, of all of the stories about David Murray that have been circulated, none have ever claimed that he was stupid. Murray is a man of high intelligence and great cunning. I do not think that setting up Whyte as a patsy is beyond him.  During the takeover, the degree of harmony between buyer and seller was unusual.  The haste with which David Murray shot down the soundings of an alternative proposal from Rangers director Paul Murray was odd.  Lastly, I know of one other attempt to buy Rangers just before the takeover.  Graham Duffy may not have had the benefit of an expensive PR campaign to burnish his image and he might have had credibility problems of his own.  However, he made several desperate efforts to try to talk to Murray to discuss a deal in the weeks before the Whyte deal was announced, but Murray would not respond to his requests for a meeting.  Duffy may not have been any better for Rangers than Craig Whyte, but when you are surrendering your entire interest in a business for £1, you might be expected to explore all options before resigning yourself to your fate.  Murray’s actions certainly give the appearance of someone who was working hard to ensure that Whyte was the only option.  I find that difficult to explain.

As the wheels start to come off the Rangers wagon, we should not lose sight of the fact that the current custodian has inherited a situation not of his own making.  Whyte may just be another victim in a long line of businessmen who has fallen for a David Murray sales-pitch.