Got into a brief conversation last night about whether administration and liquidation were likely at Newco Rangers.
The club’s creditors will be few and of comparatively low value, nothing like their predecessor club’s £100m debts. They will owe HMRC vat and PAYE money, utilities and other trade creditors will be owed no more than a small number of money’s month. Newco have not been able to secure bank borrowing, so that’s not a worry, but there may be directors’ loans, as well as wages in arrears.
The upshot of this is that money saved by ditching creditors is limited and unlikely to offset the damage administration would do to a club with less than two years trading history. The only significant action that could be taken in administration would be redundancies. Playing staff could have their contracts terminated by administrators, bringing to an end the Charles Green extravaganza.
Liquidation is an unlikely to occur as a consequence of the short or medium term challenges.
The most surprising element of yesterday’s news is that players were asked for such a modest pay cut. 15% of player salaries will not change the fundamentals and will save very little (circa £300k) between now and season ticket renewal time.
Keep your eye on the sale and leaseback of properties we discussed here since 2012. If Ibrox and Murray Park are sold (potentially to existing investors looking for their payback), Newco could get some relief between now and being able to reach the Premiership, while the investors would become less anxious.
The cynic would say that being able to lay blame for selling Ibrox on players for not taking a modest pay cut is a convenient line. Selling your main/only fixed assets to a commercial investor is a horrendous prospect as you will left to pay the consequences in perpetuity, you also lose collateral, making future borrowing more difficult and expensive, but, right now it’s a decent option for Newco. Their future is screwed, not because of a land deal (delightful irony), because of what has happened on that land over the last two decades.
The fundamentals remain:
Running a football club the size of Celtic, under normal conditions, costs anything between £17m and £22m – before you employ a footballer. Utilities, rates, policing, stewarding, insurances, maintenance, ticketing, PR and the tasks circa 200 people carry do not come cheap for a club of this size. When budgeting for football operations, start to count your football income after you’ve banked money around this level.
Newco Rangers will be a fraction below this at the moment, but if they are to continue to operate a business capable of entertaining (sic.) >30,000 people several times per month they will not be able to eat into these costs significantly. Insurance, rates, police and other costs need to be met; face painting is optional.
A club the size of Newco Rangers, or Celtic, is not viable without regular Champions League income, and is not possible short term without splurging into higher debt. If Celtic slip away from the group stage for an extended period, they will have to downsize all areas of operations. Football budget would be much more like Aberdeen’s.
Keep in mind the words of the magnificent Blue Knights. While ensuring Charles Green was left in an invidious position to start his new enterprise from, they were clear, only a CVA, leaving Rangers in top flight football with access to Europe, was viable.
This BBC article adds insight into what I referred to yesterday about former Southampton chairman, Nicola Cortese: “A presentation to the players in April last year did not ask if Southampton can win the Premier League, but how can they win it?
“Players were asked to fill out questionnaires. What time did they wake up at home? What were their habits? Did their children wake them, did the dog? The results were analysed and changes were made.
“When Southampton travel away from home, the hotel is often booked for two nights rather than one. On the first night, club staff arrive and clean the already pristine rooms. They vacuum up every particle of dust that might cause illness or carry a bug.”
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PFayr – Good to see ye posting amigo; tried to post last week from Puerto Vallarta but forgot my login details; all seems abit hazy now.
TET – I trust you are well to: i see the dram master is coming to see you soon; get some training in before the sclaf baw artist shows up with his ringer:0)
BT – i would have guessed the malt you were drinking would have been Glen Grumpy, you seemed to be in a mood:)
To the rest of my CQN amigos I say,
SLAINTE
tony
From the football post….
The End… …Again?
Those of you who read my piece on the Rangers AGM may remember the crux of it – that Rangers not getting pre-emption of disapplication rights passed would mean that they would struggle. It would mean that they would have to call an EGM at some point to get it passed if they were able to limp to a date where that would be possible. It means that the art of getting money is much harder.
They have a 120 day business review which we are 28 days into and already the manager has had his wage halved and the players have rejected a 15% pay cut. It perhaps goes without saying that these are the actions of a company that possibly aren’t long for this world.
However, Rangers are in a funny situation – they don’t have much debt, the bills are being paid and the lights are still on. Because the club doesn’t have much debt thanks to liquidating and resurrecting, there isn’t anyone chasing them for money (were there to be, it would have been all over the press and social media by now). They simply are just not making enough money.
And that, in itself, encapsulates the Rangers saga. Many may gloat about rash spending and hover pitches, but the cold hard fact is that Rangers don’t make enough money from Scottish football to finance their habits. It was missing out on the Champions League that drove the club to extinction last time, not anything Craig Whyte did – the club just couldn’t sustain itself when they missed out on a £20 million payday. This time round, the spending has been mad, yes, but the business plan was based on full houses, yet for all fans may think “We are the people”, the fact is that, more than anyone else, it’s the fans that did walking away. Spending rashly has driven the club close to the edge, but ever shrinking income is what is landing the final blows.
But the club aren’t heavily indebted, and that is a big bonus from last time – it means that a CVA can work. This time, Rangers won’t die, they’ll regenerate. Just in a very different form.
If Rangers aren’t in heaps of debt, then why go into administration? Football clubs’ incomes are very top heavy – season tickets tend to pay the way for the year. With little hope of improved income for the time being and expenditure that isn’t falling, administration would be the most sensible way out as administrators are able to make people redundant quickly without necessarily having to pay them all that much money. As such, administration would less be a shedding of debt, more an acceptance that credit isn’t available and administration is the only way to prevent a further accrual of debt.
The business plan of running Rangers present like Rangers past has been totally discredited. The cloth must be cut to fit the income. What does this really mean, though?
It means that the sale and leaseback of the assets is almost guaranteed. Ibrox and Murray Park cost a lot to maintain – getting them off the books makes sense for a club who will benefit from being able to negotiate a buy-back or rental price based on third tier incomes but will be able to work with it in 5 years on top tier income. This will not be popular, but it will allow the club a lot of breathing space and, crucially, ensure that the club can be brought through a CVA for pennies – Property is Rangers’ only valuable asset (aside from players, but more on them in a second). As such, splitting these in a purchase as part of a CVA gets you the club on the cheap and the property on a long term rental agreement that, ultimately, would benefit the club as Ibrox is in need of running repairs and incomes are not likely to be at a stage where such repairs can be carried out for the foreseeable future.
How that particular scheme would be carried out is interesting. While some have theorised that it would likely be sold into a company of new owners (again, more on that later), there is another option on the table – one called “Flats, Glorious Flats!”
The potential threat of Rangers going out of business forever and the threat that the only thing that would prevent that would be sale of Ibrox may push a political button somewhere in the caverns of powers and Ibrox being picked up (for a more inflated price than it would go for otherwise to a private sector buyer, natuarally) by Glasgow City Council and then rented back cannot be ruled out, particularly as Ibrox can be argued to have irreplaceable cultural value and that the threat of it no longer existing, becoming low priced housing or simply falling into disuse is enough of a justification for public action. With that sort of threat on the table, the market price of Ibrox can also be played around with forcing either a higher purchase price or lower leaseback price (or both) than may be possible to achieve through sale in the private sector.
With regard to employees, administrators can make players redundant. On many occasions, they will simply opt to arrange a negotiated pay cut (as Duff and Phelps did). Unlike Duff and Phelps, though, the new administrators have an ace up their sleeve – the employees have already refused to take a 15% wage cut. This refusal gives any administrator just cause to say that their hands are tied and that they have no option but to make redundancies as the only way to actually make any savings at the club. Meanwhile, Ally McCoist, having already taken his substantial wage cut (albeit, having waited, it seems until the point where he was confident it would make little difference to the immediate financial future at the club) will linger on with his pockets unmolested.
Ultimately, this alone will make the savings the club needs. With a playing staff trimmed to about 20-25 youngsters, they will still have enough to win League One at a canter while also ensuring that the club benefits from a low enough wage bill to make bringing in a couple of quality new recruits a possibility.
The key to the Rangers business model is simply to bring expenditure down to a level whereby the club can afford to have 20,000 empty seats at every home game and still turn a profit. Administration would shed the club of boardroom staff, playing staff and any other excess wages. It is gastric band surgery rather than a slim fast diet but it will have the same effect.
No longer being on AIM is a certainty and barely merits discussion – the aim is to bring the club to a level, for the time being, whereby it can operate without the need for a share issue and financial steroids. The club will come out of it privately owned.
By who? The Easdales, no doubt. Having gained control of the boardroom, they also control the destiny. It is theirs to appoint administrators and, as shown with Duff and Phelps, the right administrators can be as pliable as you want them to be. There is no scenario where they don’t come out with the club – they are in the right position to do it, they haven’t disgraced themselves in their actions so far (at least, compared to Charles Green and Craig Whyte) and, with a likely rock-bottom price on any CVA, they actually have the means to takeover and operate a vastly slimmed down Rangers without massive external investment (although it is clear they may be able to call on that if required).
Prominent Rangers opinion spewer Chris Graham once stated that Craig Whyte was nothing like Michael Knighton. Whyte may not have been, but it’d be hard not to draw comparisons between what seems like an attempt by the Easdales to acquire a big club on the cheap and the attempted takeover of Manchester United by Michael Knighton (who had, of course, gotten David Murray on board as part of his takeover plan). Both large clubs operating far below their potential. Both low prices for a potential massive return. Both risky attempts. Both could end in tears.
In fact, perhaps the only certainty about this all is that Rangers march to the Premiership will be delayed.
Fans may have to accept that that delay is the price of having a club at all.
Rangers now stand frozen in time, off the cliff, much like the iconic last frame of Thelma and Louise. Time will tell as to whether they will just hang in space forever or crash to the earth.
Right now, we just don’t know.
TET
Just looked working this end
FromTSFM last night
Refuse to listen to Clyde SSB? Me too. But just found out you can watch the pain! http://www.clyde1.com/on-air/superscoreboard/live-stream/
Valentinesday
Turn it off…it’s utter nonsense
Pogmathonyahun aka Laird of the Smiles
19:01 on
17 January, 2014
My very good friend and his son at CP:
http://www.celticfc.net/newsstory?item=5273
That’s a nice story and a cool mosaic!
Till later all
It was worse looking at snottery keevins :)))
Torontony
Yer well ?
And Mike ?
Any home trip planned this year ?
valentinesday 2 coming soon
19:02 on 17 January, 2014
Seriously stupid comment. Get a grip.
TET/starry
Paraphrased – he even sounded like John Smeaton and if he was interviewed properly he’d fold under questioning.
What’s got seven eyes but canny see?
Torontony
Long time no speak.
Looking forward to the sclaf about, fair enjoyed our last one.
I will have the clubs out honing the swing, haven’t played since the last time with him and his bhoy, been too busy and the bloke I used to play with can’t play anymore.
Enjoying a fine Ribera Dle Duero >}
HH
……………..
Still the same 403 error, I think I will have to ask Mrs TET
HH
….pfayr supports weeoscar
18:37 on 17 January, 2014
FatSally isnt thick
He’s a fly bassa & he is hoodwinking all thise wonderful bigots that follow
Newclub FC
HELL mend them
Has anyone asked him if he is selling his penny shares to make up for his drop in salary ?.
ACGR
Av goat it!
http://www.youtube.com/watch?v=sTIUikZIZYI
When your washing the dishes, it can sometimes be quite entertaining listening to Snyde in the background. Hurting hunnies calling in to bare their souls to the “Fenian Forum”(!) is is bordering on laughable.
Time for a wee beer! :-)
T4
PS a wummins work is never done!!
T4
….PFayr supports WeeOscar
19:04 on
17 January, 2014
Valentinesday
Turn it off…it’s utter nonsense
“”””””””””””””””””””””””””””””””””””
Turned off pal, I should have know better….btw would you go
with Pukki and Balde tomorrow?
Valentino
I know you put some asterisks in your comment but the word you mean aint one anyone should put down
T4
Doing the dishes would by part of my routine as well, pop them in the dishwasher, surprisingly easy >}
HH
Hamiltontim is praying for Oscar
Sorry If I’ve offended you or anyone else.
Del, dearie me.
pogmathonyahun-i see the new Club badge all over the web articles and around the construction work at CP,i can see the 4 leaf clover getting binned, in favour of the Club Celtic Euro image PL is trying to portray.
hahahaha auldheid would be giving them 100 lines …..no wonder the dark are so stupid when there media fanatics are dumb as S****e ……braw
TET – next house will defo have one of those!! No room in our wee kitchen just now, but looking to move this year!
T4
SSB is a perverted parody of a programme just as Sevco are a perverted parody of a club.
The world would be a far better place without both of them.
Valentines
Good man I think you’ll agree it’s not an appropriate phrase to use.
Hail Hail
Bada b
Can you post the ‘new’ badge?
HT
Why would you care.. your a hun :)
T4
Wonderfull things, we have to pay for our water, they use about 10 lts for a wash, much less than out of the tap. and make a better job than I do.
Good luck with your move.
HH
Bada
You’re havering ….IMHO.
PFayr – Yes i’m well, I had dinner with Mike just before Christmas and he’s doing well. He’s got a new burd who from what he tells me, is way to good for him:)
Not sure if i’ll be home this year, perhaps later in the year if at all. You’ll hear from me if i’m coming. I need a full session on the Guinness with ye.
slainte
tony
TET – cheers mate. How much water do you use in your famous Hoops swimming pool?! :-)
T4
Fridge sends spam emails
A fridge has been discovered sending out spam after a web attack managed to compromise smart gadgets.
hahahahahaha braw ……a fridge that is smarter than the average bear!
Don’t particularly like the new badge but I don’t really see what the fuss is about either.The four leaf clover is still there and two bits of celtic design at the top echoing our Irish heritage.
Of course, if the clover disappears that would be a different matter, but I can’t see it.
TET – Glad to hear you are well hermano. I found a nice Nero D’Avola for about a pearly diver, wonderful stuff.
Enjoying the hun pain and long may it continue:)
slainte
tony
TBJ
I’ve got to maintain the pretence :-)
LOL, catching up with SSN – Kieth Gillespie on, looking like an alcoholic accountant just out of court on a drink-drving charge.
Delaneys Dunky,
I’ll be in the Radnor around half 8 if you are around.
Bloody server on the blink.
Whats goat seven eyes and canny see.
.
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.
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Three blind mice and half a sheep’ heid