Rangers FC is in administration.
That’s the headline many people assured us that we would never see. It was just some fantasy made up by the club’s opponents. A Celtic supporters’ wet dream. It could surely never be allowed to happen to such an important club.
But the day has come.
The board of Rangers Football Club is no longer running things; instead joint administrators Paul Clark and David Whitehouse of Duff and Phelps are now in charge of what should now legally be referred to as “Rangers FC PLC (in administration)”.
The job of the administrators is to run the club for the benefit of the creditors. Not for the benefit of its shareholders, fans, players or Scottish football. The creditors.
The Insolvency Act of 1986 tells us that the administrator must either rescue the company as a going concern, achieve more for creditors through running the company than they would get through liquidation or sell off property to pay debts.
Good luck to them is all I can say!
It has amazed me how much of a shock the current state of affairs has seemed to come as to many Rangers fans. Surely enough information has been available for a long enough time that those with a direct interest in Rangers should have been aware of how dire the club’s position was?
This is partly down to the Scottish mainstream media, which has downright refused to investigate the matter properly. There have been few questions asked, a scarcity of reports written. No difficult questions asked. Up until now Craig Whyte’s credentials as saviour have not been questioned. It all looks so different now, doesn’t it?
But the information has largely been in the public domain. The new media has taken the lead in examining documents and filings that any good investigative journalist should have had his or her hands on months ago. It wasn’t that they couldn’t get to the truth. They simply refused to go looking for it.
So what happens next?
Can any extra income be generated for the club? Well, there are no cup matches coming up to sell tickets for. A few tickets can be sold for home league games, but not enough to make a real difference. Catering and the like are contracted out so even selling a few extra pies won’t bring in additional cash.
When Motherwell went into administration a number of years ago they cancelled season tickets. You see, if you hold a season ticket you effectively become a creditor. You have paid in advance for something and the administrator could simply add you to the list of creditors rather than supply what you have paid for.
So in theory all 30,000 plus season ticket holders could now be charged at the gate to attend home matches. That would bring in an additional £1M or so from each home match. But would fans who had already paid out for season tickets be willing to pay again, knowing that the money was simply going to be used to pay the club’s debts?
The administrators will try to cut costs for a start. And the key area they will look at is the salaries bill. It is likely that playing staff will go as well as support staff. Players whose contracts end soon will be first out the door as they have no resale value.
Every other area will be looked at too. Can the club be run with less advertising or hospitality? What bills can be reduced? Which supplies are nice to have rather than must have?
But how long can a club that is currently running at a £10M per annum loss (Craig Whyte’s figure, not mine) survive? How can a figure of that magnitude possibly be turned into a profit? Because if the club continues to run at a loss that simply means more creditors looking for a share of less money – and remember that the administrator has to act in the interest of the creditors.
Just how much does the club actually owe in total?
That’s a difficult question. We know that what is called the Big Tax Case concerns Rangers appeal against a £49M bill and that they are likely to lose. We know that there is now a further £9M in outstanding income tax, National Insurance and VAT owed. We know that Craig Whyte’s company is owed £18M for the bank debt he paid off and that a further £24M has been borrowed from Ticketus.
So that little lot comes to £100M. That’s one hundred million pounds. £100,000,000.
Then there’s the matter of the 6807 fans who bought debentures in the club deck at Ibrox in 1990 at prices ranging from £1000 to £1650. The issue document states that ”the debenture shall immediately become repayable at par without interest” if ”any administrator or receiver is appointed to the undertaking of the company or any of its property or assets”
We can therefore add somewhere between £6.8M and £11.2M to the total debt.
We also know from press reports that money is owed to several other football clubs. Hearts are due further payments on the Lee Wallace transfer. Dundee United and Dunfermline are owed ticket money. And Inverness have effectively extended credit to Rangers by giving them tickets for a forthcoming game.
Now Craig Whyte’s business practice in recent times has appeared to be to pay bills at the last possible moment, in many cases only when court action is taken. So would anyone be surprised if money is also owed to the police, the local authority for business rates and to a multitude of other smaller companies for goods or services received?
The total debt then? I’m guessing at somewhere around £125M. Unless of course there are other big bills which I don’t know about.
Could the administrator ever generate enough money to pay off these bills? Simply, no. Even if Ibrox Stadium and all of the first team squad could be sold off it would generate nothing like that sum.
Talk amongst fans is of an agreement being reached with creditors that they will take only a percentage of the moneys owed to them, on the basis that some money is better than no money.
To get such an agreement, creditors owed at least 75% of the total debt must agree, giving the tax man an effective veto. And Her Majesty’s Revenue and Customs will not agree to any such deal. The idea is, quite simply, dead in the water.
So what is the future for Rangers FC PLC (in administration)?
I simply can’t see any way that the club can get out of this situation. The debt is too much, the damage is done. Unless someone comes up with a spare £125M or so that they are willing to donate, then liquidation is the inevitable outcome.
Rangers FC will cease to exist.
As I’ve already written, a new company will in all likelihood be formed, call it Glasgow Rangers (2012) Ltd or something similar. Like any new clubs it will have to start from scratch and to gain a league position. And that raises a whole host of new arguments.
But the current club, the one with 140 years of history, the one that refused to employ anyone of a certain religion for so many years, the ones whose supporters rioted from Barcelona to Manchester and everywhere in between, the one run into the ground by Sir David Murray and Craig Whyte, will be no more.
And one small point to anyone who says that could never happen – you were telling us exactly the same thing about administration just last week.