02/11/2011 713 Comments
The revelation that Craig Whyte’s Rangers is selling off more of the family silver to stay in business just a while longer answers a few questions about this puzzling situation. It is now abundantly clear that Whyte’s tardiness in paying creditors is more than just a bad habit. It is also clear that there are no vast pools of wealth on which Whyte can draw to keep Rangers on life support.
For those of us who have indulged in reading entrails to try to understand Whyte’s actions, it is becoming ever more clear that there is no plan. Any semblance of a grand design evaporated into the Scandanavian air on 3 August when Rangers failed to qualify for the group stages of the Champions’ League. Even the booby-prize of Europa League qualification would not have come close to filling the chasm in Rangers finances that opened that night.
With records released on the Companies House website confirming that Rangers have given a fixed charge security over their assets to an English finance company called Close Brothers, it is clear that Whyte is selling the family silver in return for delaying insolvency. The news that Rangers came within a few hours of having a winding up petition approved against them yesterday is quite remarkable. That Whyte has had to resort to the desperate end of the corporate finance spectrum shows how close to the edge things have become.
We do not know how much has been borrowed. Therefore, we do not know if this was just a small amount of funding that keeps the wolf from the door for a few weeks or whether he has established the line of funding that will see Rangers through to the opening of the transfer window in December. If Whyte’s negotiation tactics have improved since the summer, he might not over-price his sellable players again. He might even attract an actual offer for Jelavic this time. To ignore the transfer window and fund Rangers through to the First Tier Tribunal (Tax) returns its findings (possibly as late as March 2012), Whyte would need to have borrowed about £15m. Only at this time could Whyte legitimately claim that insolvency was caused by the legacy tax issues rather than his inability to run Rangers.
Borrowing against Rangers’ assets now not only reduces Whyte’s prospects of making a profit on Rangers (as faint as they were), but this greatly complicates any insolvency filing. The odds of a Rangers liquidation and a disorderly meltdown in insolvency have now risen from the fanciful hopes of dreaming Celtic supporters to something that needs to be given serious consideration.
Whyte seems to be either holding out hope of Rangers getting an against-the-odds result in its dispute with HMRC or is trapped in the ‘bargaining’ phase of grief: trading all he has for more time. Until now, Whyte-watchers had to consider the possibility that the Motherwell-born-billionaire had a plan that would outfox everyone. It looks increasingly clear that he has just been making it up as he is going along since the Malmo game.