Red Flags & Sunsets

There is fevered speculation in social media that RIFC Plc is on the brink and that its beleaguered board have reached out to insolvency practitioners with a view to engaging in a pre-pack administration. My informed readers who have been down this road before with Craig Whyte will know that this is an insolvency procedure in which a company arranges to sell all or some of its assets to a buyer before appointing an administrator to facilitate the sale.

 

Debts are ring-fenced. Pennies in the pound are offered to creditors. If a Creditor Voluntary Agreement can be achieved the company exits administration debt free. The attraction to a company that is £6m shy of solvency – as per the accounts – is obvious.

Is it time for jelly & ice cream? Another sugar hit after an insulin spiked festive period? Is someone engaging in wishful thinking?

Let’s look at the known knowns. Alastair Johnston and Barry Scott recently stepped up to the plate to keep the lights on at Ibrox until the end of the calendar year. Doubts continue to be cast as to whether Pedro Caixinha or Mark Warburton (whom has just been sacked at Nottingham Forest) have received their contracted severance payments. There are also considerable concerns apropos the monthly quanta required to pay players such as Pena, Alves and Morelos their contracted dues. In plain speak RIFC cannot afford them.

Then there is the three-week hiatus of the winter shutdown to consider. There will be no match day spend until January 24th when Rangers Lite host Aberdeen.

Of significant import is the mendacity of Dave King who promised auditors Campbell Dallas that he would deliver £7.2m to preclude the threat of insolvency. King has not delivered putting the board in a bind.

Furthermore there is my source who has unequivocally stated that George Taylor wants to wash his hands of any company in which City pariah King plays any part. One also knows that Douglas Park is all in and that George Letham has maxed out on his limited credit.

Then there is the shares issue to consider. Why would any director transform his loans into equity and then lose it all when the company folds? Our ursine friends are holding chits for £13.1m. King’s NOAL  which provided a loan of £2.8m – despite King’s claims of being pecuniarily disadvantaged in a Court of Session affidavit – would go to the head of the queue as a secured creditor. Our ursine chums who are no slouches when it comes to the dark arts of insolvency might well be minded to get in line.

Then there are reports of a meeting between Alastair Johnston and Stewart Robertson, in the private dining rooms of Hotel Du Vin, with SFA supremo Stewart Regan. A cynic might conclude that they were getting their ducks in a SFA row before pulling the trigger on Administration. Their plaintive cries of “We’ve been duped” would have received a sympathetic and no doubt empathetic hearing by the Ibrox stooge. Should one discount reports that Regan was on the blower to Darryl Broadfoot for advice on how best to ‘frame’ the narrative prior to the cheese board rearing its decidedly whiffy head?

The most compelling reason for a pre-pack administration is to rid RIFC of King and avoid the catastrophic ramifications of The Cold Shoulder. If King won’t budge the directors will have to force his hand.

A successfully executed pre-pack administration will result in a club playing at Ibrox  next season. The fifteen points hit may well preclude UEFA participation but this is preferable to The Cold Shoulder which could be terminal.

I will maintain a watching brief. This pre-pack narrative has legs.

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23 thoughts on “Red Flags & Sunsets”

  1. Sky Sports News on the other hand reports that Jamie Murphy is on his way for a medical to sign for Rangers for £1m.

    Either Rangers have money and this blog is nonsense, or the media are lying about the fee paid, which if it’s significantly less than £1m is incredible business by the Rangers board.

    1. Or, will they tell Brighton they’ll pay the money knowing that they’ll get out of paying by going in to administration?

      Remember the Daniel Cousins fiasco. The only club that tried to bring in new players during administration!

    2. Could it be that The Rangers are going on a final splurge knowing that it can all be rubbed out in the event of a pre-pack? Transfer fees are typically made in instalments.

      I think a combination of the two, a grossly exaggerated transfer fee provided by a High-Level source and perhaps a pre-pack plan to stiff Brighton

    3. On a certain level it might make sense to buy players before going into admin. Presumably they’d want to make sure those players would be available after admin, though, and that they had a team they could put on the pitch, thereby avoiding the situation they ended up in in 2012, when so many players buggered off.
      Rangers was wheeling in dealing in players right up until the moment that Craig Whyte came out on to the steps and announced they were calling in the administrators, if I remember correctly.
      I’ve been employed in companies that are teetering on the brink of collapse, and one or two did actually collapse whilst I was there. It’s remarkable how normal people act under those circumstances; even when they are owed money and haven’t been paid for months, you’d be amazed at how they still turn up, act normal, get on with it, and don’t talk about things.
      People are nuts.

    1. I sure the SFA can be relied upon for a ‘friendly’ definition of football debts.

      Football creditors rule (https://en.wikipedia.org/wiki/Administration_(British_football)#Football_creditors_rule)
      In a situation of insolvency, the “football creditors rule” means that debts to other clubs or players are prioritised and must be paid in full before the club is eligible to compete again in the league.[18] The Enterprise Act 2002 made reforms to the insolvency act and, from 15 September 2003, the altered procedures for administration were implemented.[19] Most notably it abolished the Crown’s preferential right to recover unpaid taxes ahead of other creditors.[20] As such, HM Revenue and Customs (HMRC) is now often not paid in full (between 2003 and 2010, outstanding unpaid taxes to the HMRC amounted to £30 million).[21] This legality of the football creditors rule was challenged in 2004 in Inland Revenue Commissioners v The Wimbledon Football Club Ltd. However, it was found that “full payment to football creditors (out of third party funds) ahead of preferential creditors did not infringe the provisions of section s4(4)(a) of the Act” and “differential treatment may be necessary to secure the continuation of the company’s business and may be regarded as supportable”.[22]

      In 2011 HMRC brought another challenge to the football creditors rule in the High Court, this time on the basis that it breached fundamental principles of insolvency law, including the pari passu rule that all unsecured creditors should be paid on a proportionate basis. However, in May 2012 the court rejected the challenge as it found that the rule was not a deliberate evasion of insolvency law.[23]

      JJ’s narrative has a rationale and could provide the least hazardous exit route from the CCK minefield.

    2. Correct and you don’t get a uefa license with outstanding debts to players and managers.
      Uefa have previous in enforcing this but someone has to tell them.

  2. We all know that the current Rangers is indeed a new club. However, there will be a very, very interesting sub plot should administration occur.

    From what I recall, in the updated rules in Scottish football, a club going into administration for the first time receive a 15 point points deduction. If a club suffers any more administration events, the deduction is 25 points.

    So, will they still insist that they are the same club and take a 25 point deduction, putting them in last place (based on the current standings) and a possible relegation dogfight?

    Or, will they try again to have their cake and eat it and make up more fantastical yarns to try to maintain the continuation lie AND try to limit the deduction to 15 points?

  3. Rashi

    Rangers have signed a loan player who has played all of 6 games for QPR, yet the media would have us believe he’s the next Carrick.

    I remember well when the next Gerrard (Rossiter) signed…and we all know how that went.

    And a longer memory….Daniel Cousins signs for Rangers.. .all’s good here – nothing to see Timmy

    Ignore the MSM they tend not to tell the truth…

    Keep up the good work…not just you JJ but the rest of the blogging community…

  4. How can this farrago of a klub afford to send players off to the States and continue to employ an intergalactic PR advisor when apparently staring into the abyss?

  5. Transfer fees get paid in instalments or on completion of certain milestones and as “football debts”, are essentially quasi secured debts, because without honouring the football debt, the licence to play football is not moved or is withdrawn or is subject to UEFA sanctions. Football looks after its own when it comes to debts. So a selling club can sell fairly confident they will be paid, eventually. where Rangers at getting the deposit from though is another question.

    The real point is though that admin and a pre-pack make no sense. The debts, according the accounts, are all unsecured, including NOALS, but yes, if anyone was stupid enough to transfer them to shareholding then they are then worthless. So getting rid of the debts / loans gets them nowhere – the loans are not incurring costs and can sit there until someone demands his money back.

    Even then what does RIFC do? Sell TRFC as the asset holding company, but to whom? This company is still loss making and has been since birth. The only advantage is to whoever buys it that he can get it for what – £5MM, 10MM, 15MM absolute max and can then have it as a plaything? Can’t see it myself as if there was such a sugar daddy they would have appeared by now surely?? Then they need to budget a min of £10MM/year for at least 5 years to fund losses, repair the ground and improve the playing staff. The only true thing to escape GASLs lips was that TRFC would need “North of £50MM…” investment. Of course everyone though that was going to be his money, but sadly no.

    Selling TRFC to whoever then basically shafts the shareholders and the 1872 members for a second time in 6 years. That is not going to go down well with those who paid top dollar for the shares in the original IPO (80p wasn’t it?) or have been forking out every month from years and then find themselves with nothing. PR disaster Mk1 there.

    The real scoop here would be to find out who the buyer was / is going to be……

  6. The Bears are talking about war chests, sugar daddies, cargo cults and a host of new signings and you are writing about the reality of pre pack administration and a possible CVA why is there such divergence? Why have the Scottish media failed to warn about imminent collapse? What harm comes from learning the truth versus being treated like mushrooms?

  7. So JJ I dont know where I am with your talk of 1,2 and now 3 website options. I contibute on a monthly paupal account, I have no intention of emailling you to provide the payment details becuase simply put thats your job. So please do me the favour of a comprehensive article guidance on how all interested parties should make the most of your informative and witty bloggs. I’m sure there are more that need thzt little guidance

  8. If this is indeed the case (and I don’t doubt it) how can there possibly be strong indication of signing Jamie Murphy and offloading Pena back home?
    Ref the latter (who is by all accounts on a significant salary) – how can they be so confident in the prospect of him simply upping sticks and returning to Mexico? He might not be enjoying Scotland but we’ve seen (on many occasions) players sitting tight on their fat contracts when it suits them so why can people be so sure that he’ll happily walk away unless a pay-off is being proposed?
    Would or could TRIFC have such a brass neck that would allow them to quickly rush through transfer & severance deals in the knowledge that they fully intend to renege on said agreements by folding the company a matter of days/weeks later?
    Surely not?

  9. Indeed they should be but this is the SFA you’re speaking of.

    When did rules or precedents ever mean anything regarding any of the clubs playing at The Death Star?

  10. JJ, nice article. A couple points:

    (1) I believe all the Director loans are unsecured. DK will be just one of many in line to be paid, or not as the case may be.

    (2) within the FFP regulations, there is an explicit clause that prohibits a team from obtaining a license to play UEFA tournaments if it has been under protection from creditors (administration) at any point in the previous 12 months, regardless of whether the club is currently in administration or not. Depending on the timing of the filing and the official exit date, an administration event would preclude Rangers from Europa for a MINIMUM of 1 year, and it could be longer depending on the entry/exit dates. I believe it’s part D.4 of one of the Annexes.

  11. The cost of an administration company is approximately $600,000 and this is payable upfront. No administrator takes on the job when there is any risk that they will not be paid. Rangers Lite have left it too late. They do not have a spare $600,000. Ignore the press bullshit of buying a player for $1,000,000 today. This is just a hire purchase agreement. Without an administrator there can be no administration and no CVA. Liquidation is the only option. When wages are not paid in full this month then contracts are broken and players are free to use the last week of the transfer window to seek employment elsewhere (with the probability of a signing on fee and a guaranteed wage packet) Even in February a player with no valid contract is free to move on. If you thought 2012 was astonishing wait till you see what’s left at the end of January 2018

  12. Company Directors bluff everything is ok right up to placing a firm into Administration.

    They regard the deceit as their job. To pretend everything is ok. To keep confidence high in the brand, etc…

    This is a transfer window. They must pretend it’s business as usual. However, there’s two snippets that concern:

    1. Is Pena being bundled out the door in flagrant breach of his contract?
    2. Has the loanee guy been instructed to rip up his contract to get him back again in flagrant breach of the other club’s contractual rights?

    Sevco have gone through six years of trampling all over others in the football world; managers, players, other clubs, …. more so during the three years of glib than the initial three years of formation.

    Joey Barton, Warburton, Weir, Pedro, Aberdeen, McInnes, RB Leipzig, Barrie McKay, Celtic toilet vandalism, Motherwell playoffs invasion and player assaults, hibs invasion assaults, unlawful takeover, unlawful contract breaches with sports direct, not paying the Wi-fi company, fan threats against individuals, shareholder alienation, lies in the press, pretence at same club as LIQUIDATED RFC, illegal euro entry 2017?, trading as Rangers, employing directors who should be banned, entering secret furtive deals, not paying fines in full, trampling sporting integrity, claiming another clubs titles including a decade of cheated titles, etc……

    Why do decent people in the game put up with this delinquent child?

  13. The issue here is that the whole enterprise is built on sand,quicksand at that.Add in the fact that you have a leader who renders the show uninvestable and you have a pretty nasty cocktail.

    This has to go through the washer another time before you find the floor in this car crash.

    Not entirely sure about the auditor point-anyone can sign off a set of accounts as you aren’t normally asked to put up value when you underwrite the cashflow-more a practical point as to what happens when you need the cash.Of course,telling the Court of Session that you are skint is not clever when you have other flanks to defend.

    I think the mere whiff of insolvency will be troubling King and he may decide to make a sharp exit-that might be the game being played out by the other directors.’Im skint’ is hardly going to rally his Board around him and they will scent blood.

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