Rangers: what next chapter holds

Duff and Phelps will be in possession of final bids for the Rangers tomorrow and soon thereafter will formally select a preferred bidder.  Liquidation, what you have known to be inevitable for many months, has now formally been acknowledged as a possibility by each bidder.

Duff and Phelps have enough cash to keep the club operating until the verdict of the big tax case, which is expected this month.  If Rangers achieve a substantial victory from the First Tier Tribunal they have a fighting chance of survival.  If they incur a substantial loss, The Rangers Football Club established in 1893 and incorporated as a limited company in 1899, will almost certainly cease to exist soon thereafter.  All shareholders will lose their rights and notional value.  Unsecured creditors will take an enormous bath and the secured creditor will acquire Ibrox and Murray Park.

Craig Whyte is, of course, secured creditor and majority shareholder in Rangers, so although some creditors and shareholders face wipe-out, he will emerge with the stadium, giving him an excellent opportunity to form a new football club.

He also has the burden of a liability to Ticketus, to whom he has underwritten payment for the tickets they purchased last year.  So any new club to emerge from this debacle has to be designed by Whyte and Ticketus or acknowledge the rights of both.  I am ignoring reports today that Whyte may hand over his shares in Rangers for nothing if it was in the best interests of the club.

With fresh investment capital likely to be at a premium, a deal which excludes ownership of the stadium is likely to generate most for the unsecured creditors.  Whyte could retain ownership of the stadium and offer Newco a 99 year lease.  This would enable him to receive a suitable return for his year’s work and ensure he has the ability to accommodate Ticketus.  It would also allow Duff and Phelps to offer HMRC and other creditors the bulk of whatever cash is on offer from the organisation bidding to run Newco.

It will be interesting to see what the preferred bid looks like but leaving Ibrox with Whyte has an irresistible look to it.

Newco will play in blue jerseys but the differences between it and Rangers will soon become apparent.  Income for years ahead will not enable them to employ footballers on the kind of money Rangers have employed for the last 20 years.  Even if they are able to acquire Rangers player registrations those on premium money will have to be sold, generating an early cash bonus for the new entity.

If the Blue Knights gain control I expect a reasonably cash neutral forward plan but if an outside investor concludes a deal with Whyte and Ticketus, in particular one who advertise themselves as a joint venture between investment capitalists and a merchant bank, you can expect an onerous return on capital to be extracted from Newco in sunshine or in shadow.

There will be many shadows.

Arguments about which league Newco will play in and an appropriate penalty for any transfer of player registrations, how the SFA punish an insolvent Rangers for Lord Nimmo Smith’s findings, what they do if Duff and Phelps acknowledge void player registrations over many years, or what the SPL do about the same issue remain to be resolved.

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