Stephen Henderson looks at where next for Glasgow Rangers FC.
Nearly a fortnight ago on Left Foot Forward I wrote about Rangers Football Club (RFC) in administration and how this came to pass. Now after two weeks under the management of administrators their situation is a little clearer but their likely fate is hotly contested.
Between now and the end of season, and excluding other unpaid debts, RFC have a £4.5 million shortfall in running costs. After a curious delay, Duff and Phelps have finally presented RFC players with a fait accompli: agree amongst yourselves to a 75% wage reduction or we will sack the players of our own choosing (or similar permutations).
At the moment it looks like no such agreement can be made and the axe will fall later on Monday.
Short of all players walking away, RFC should be able to limp on for the moment, albeit with a much-weakened squad. For other Scottish teams who badly need the match-day revenue this will be welcome; for RFC itself this looks like a stay of execution.
Let me briefly re-iterate the RFC position as far as we know it. Craig Whyte bought an 85% share of RFC from Sir David Murray (after six months of due diligence) for £1. He also paid off Lloyd’s bank’s £18m of secured debt – the so-called “floating charge”.
This debt is special as in the event of liquidation Craig Whyte, the new owner of the “floating charge”, can appoint his own receiver and will be at the front of the queue of RFC creditors and may be able to claim equivalent assets e.g. Ibrox Stadium or the training facility Murray Park outside Milngavie, a posh suburb of Glasgow.
Moreover in order to pay off Lloyds and get his hands on the “floating charge”, Craig Whyte reached an agreement with a Venture Capital Trust called Ticketus who gave him £24m, in exchange for ~£40m of future RFC season tickets.
Ticketus apparently have a claim against Craig Whyte should this deal go awry, but it is not clear – and opinions vary greatly – whether they have any claim over his “floating charge” on RFC in that case. Much of this was known or surmised many months ago; Rangers fans were warned but chose not to listen. Regardless, whilst the current RFC continues trading they will be financially hobbled by this deal for several seasons.
Then there is the matter of their other debts not least £9m PAYE and NIC owed to HMRC – plus “the big tax case”- a potential liability of £49m that looms large over everything else.
Now that it is too late and seemingly surprised by what they now know, Rangers fans are angry – they don’t understand why RFC should owe both Ticketus and Craig Whyte – indeed it doesn’t seem logical.
If you step back though isn’t his cunning plan almost exactly what Malcolm Glazer did to Manchester United? The Glazers borrowed money to buy 75% of Manchester United on the understanding that the borrowings would be secured and paid off by Manchester United. Spot the difference?
Well it was debt not tickets, plus Manchester United is obviously a successful club despite this drain on its finances. Yet fundamentally neither Craig Whyte nor Malcolm Glazer invested anything – they got it all for free (or a pound). Actually aren’t these both perfect examples of leveraged buyout? It’s your coin, heads I win (Glazer), tails you lose (Whyte).
If things work out well for Craig Whyte then the loser may be RFC fans and certainly the taxpayer.
The administrators Duff and Phelps are trying to claim for RFC some of the excess money from the Ticketus deal (£3.6m) that was not given to pay off Lloyds. Yet the core of the deal – unless Craig Whyte has made some mistake in the paperwork – and despite the fact he lied through his teeth, seems perfectly legal.
Where are we now?
A fortnight ago Duff and Phelps were optimistic they could reach a so-called ‘company voluntary arrangement’ (CVA) for pennies in the pound of RFC debts, restructure RFC costs and be out of administration in time to register for European competition on March 31st. For this they would need the agreement with 75% of RFC creditors including the 1,000 lb gorilla in the room: HMRC.
Their silence on the matter since suggests HMRC do not look favourably on this option. In any case this would not extricate RFC from the ruinous Ticketus deal or Craig Whyte’s ownership. The prospect of an early exit from administration and European football with its precious revenue has all but receded.
The favoured option pursued by Duff and Phelps is now a buyout of the unpopular Whyte and they set a date of March 16th for ‘expressions of interest’. They would have to meet Craig Whyte’s asking price.
Over the last fortnight a number of potential buyers have come and gone but a group christened the ‘Blue Knights’ under the leadership of former RFC director Paul Murray remain interested.
There is a lot that could be said about the Blue Knights, but suffice it to say it is curious that someone like Murray, who oversaw RFC’s financial collapse in recent years, would, after all the fuss about the character of Craig Whyte, be deemed a ‘fit and proper person’ by the SFA – or another “saviour” by RFC fans.
Regardless of this the question that I asked in my previous article remains:
‘Why would someone buy a club with an impending £49m debt hanging over it?’
The L word
I have no privileged knowledge of the RFC situation but I suspect no one will buy RFC before the outcome of the “big tax case” is known. Further I expect that if RFC lose the “big tax case” (or even partly lose), and regardless of any redundancies or wage cuts in the meantime, then RFC will be liquidated.
Seemingly neither Craig Whyte nor Duff and Phelps want to be held responsible for liquidation but the ‘big tax case’ would certainly give them an airtight excuse.
There are more optimistic opinions as to the outcome.
But if it is to be liquidation: what then? Most RFC fans naturally see this as a disastrous outcome, a break with their cultural history, an end to their club.
Some RFC fans, however, have come to grudgingly think this might be their only way out – an escape from their creditors, their taxes, their liability to Ticketus, and an opportunity for the ‘Blue Knights’ (or others) to step in buy the assets and start a phoenix club – or ‘newco’. Sadly, this may not be as easy as it sounds.
Firstly it would be at least three years and possibly five before UEFA would allow re-entry for ‘newco’ to European competition. If such a ‘newco’ club wanted to play at Ibrox, then they would have to buy or rent it from Craig Whyte, Ticketus, HMRC or whoever controlled the liquidated RFC assets. Indeed in the likely event of protracted litigation over the control of Ibrox and other assets this maybe untenable.
Setting this problem aside the ‘newco’ could reach some mutually beneficial arrangement with all parties or perhaps decide to rent Hampden for a while – as Celtic did for a season in 1994-95.
Then citing their substantial fan-base and the dire finances of Scottish football they might argue that the Scottish Premier League (SPL) be reformed and ‘newco’ Rangers parachuted back in. Many anguished Scottish sports writers have been making this argument very persistently – but there are strong rumours that several SPL clubs would look unfavourably on this idea, not to mention the bottom team being unlikely to vote for their own relegation.
Perhaps then, the best option may be to apply to the SFA instead and try to reach the SPL by qualifying through three divisions of Scottish football. For this to work they would either again argue for a league restructuring to make a place, or buy another team, rebrand it, and move it to Hampden (or Ibrox).
There is a precedent for rebranding, with Airdrie United being a buyout and rebranding of Clydebank and a successor to the liquidated Airdrieonians. Nevertheless it would be a long and weary return from playing at Berwick (avgerage crowd 450) to playing at Celtic Park (average crowd 50,000). The returning RFC would be a much-reduced institution.
Quis custodiet ipsos custodes?
Rangers need help if they are to recover in any shape or form. They need very serious financial backing, they need sponsorship going forward (in whatever form), and more than anything they need the goodwill of other Scottish fans and their clubs. Now, however, yet more revelations are jeopardising their good name.
Quite simply, as illustrated by the Carlos Tevez/West Ham saga, a player’s full contract must be to his club alone and it must be declared to the parent football authority. So, early in the ‘big tax case’ story, the question was asked: was the EBT scheme declared in players’ contracts to the SFA? Evidence has now emerged from two sources that separate undeclared contracts existed.
Firstly, the Scottish Sun found a contract and published a redacted version, forcing the SFA to announce an independent inquiry to report to Campbell Ogilvie. the SFA president.
Then, in a hugely damaging revelation, Hugh Adam – a 30-year employee and director at RFC till 2002 – spoke out in the Daily Mail:
“They [EBT] weren’t included in the contracts. They definitely weren’t. That was the whole point of them. If they’d been included in the contracts, they would have had to have paid tax on them.
“All the directors heard about them but didn’t take them seriously because they didn’t appear in the books. People didn’t want to know about them. There was a lot of that (EBTs) going on at the time (I was there).
“You knew it was cheating but some of them not only hoped but believed it was above board. It was just something that crept up.
“They (EBTs) were always regarded in my time as a bit of a joke. They were getting away with it but nobody really thought they’d get away with it forever.”
It is difficult to imagine a more damaging interview. Essentially Hugh Adam is admitting that RFC, during his time working for the club, was “financially doping”, outspending their rivals through illicit offshore tax avoidance of (at least) dubious legality.
The context is worse though as it pushes back the potential illegality far earlier than previously confirmed. This period overlaps with that of fellow RFC secretary Campbell Ogilvie – yes that’s the same Campbell Ogilvie at the SFA since 2003, now president and now waiting for the EBT investigation to report to him.
The question arises: What could this inquiry possibly reveal that he doesn’t already know? Campbell Ogilvie has been removed from oversight of the inquiry – as he may be “heavily conflicted”.
To some there is strong whiff of collusion between RFC and the SFA – or at the very least a willful blindness. Campbell Ogilvie is only one of several Rangers directors of the past couple of decades who have moved between RFC and executive positions in the SFA and SPL. All have questions to answer.
And still further wild rumours abound of players not contracted to RFC itself, massive points deductions, and of even earlier EBT schemes stretching well back into the 90s. Many of the rumours may be ill-founded gossip, or “taxi-driver rubbish” as some call it. And yet as the RFC story has unwound, so many remarkable and specific allegations have turned out to be true; I find it hard to discount anything right now.
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• Rangers FC: How a market leader went bust – Stephen Henderson, February 22nd 2012
• Scotland unites in wanting to save Rangers – Ed Jacobs, February 15th 2012
• Action must be taken whenever racism rears its ugly head – including in sport – Sabby Dhalu, November 12th 2011
• Sectarian Law will address “ugly element” within Scottish society – John Finnie MSP, November 3rd 2011
• Has racism returned to football? – Shamik Das, October 25th 2011