Ibrox black and blue

It's been a hectic, rollercoaster week for Rangers football club. Watching the tweets from true blue fans, they're tired and emotional - cheered up, at week's end, by the decision of their on-park heroes to do the heroic thing and take pay cuts of up to 75%.

As a result, a million quid per month is a lot of conspicuous spending power that's getting sliced out the Glasgow economy. High-end car dealerships may feel the pain, and with WAGs' spending power curtailed, there are shops and clubs in the city that could feel the pinch. Watch out for a bulging bargain rail at Cruise designer label emporium.

There are many other businesses that want to see Rangers thrive and survive, as it generates a lot of money for suppliers and the hospitality industry.

So what are they, and we, to make of the breakneck speed of developments in recent days?

Of course, there was nothing breakneck about the speed at which players decided to take that pay cut. But, as administrators Duff and Phelps spelled out on their behalf, it was a tricky decision. Taking a pay cut for a few months is all very well, but if your contract were being re-negotiated down the barrel of an administrator's gun, wouldn't you want to have a break clause written in for the summer transfer season? The starting point for pay may seem ludicrous, but the market says (and their agents remind them) there are other clubs willing to pay it.

Slash costs

The bind in which administrators found themselves was that their instinct to slash costs clashed with their requirement to maximise asset value. By sacking players, they would have been getting rid of a key asset, without which the sell-on value of the club would be diminished.

The sudden shift of tone on Wednesday looked like an attempt to put pressure either on potential buyers to come forward, or on players to accept the pay cuts. In retrospect, it looks more like the latter.

With the pay deal done, that tone quickly returned to reassurance that liquidation can be avoided. The £1m per month savings have been found. Rangers can complete the season. It's bought some vital time.

And now, we have bidders coming forward. While other ex-directors fall out, ex-director Paul Murray is leading a "blue knights" consortium, backed by Rangers supporter organisations and also including Ticketus.

That's the football finance company that provides short-term funding to even out finances, in exchange for a right to season ticket sales. Craig Whyte's deal with Ticketus was unusual, to say the least, not only in being longer-term, but in being the means by which he bought the club's debt.

I am Ticketus

As I've written before, Ticketus must be alarmed at their exposure to loss of more than £20m of advanced cash. They say it wasn't a loan, and they don't claim to be secured creditors. Instead, they say they own future season tickets.

I'm told lawyers have looked closely at the firm's position, and it's claimed that it is legally secure, even in the event of Rangers assets being taken on by a new company. Now, I'm no legal expert, but I find it hard to believe that a new owner would recognise such a contract, particularly when the ticket revenue stream is of such significance to the club's recovery.

It's just one of the areas open to legal dispute, which could leave Rangers taking even longer to get out from under the large cloud now looming over Ibrox.

The other big area where the courts beckon is the creditor status of Craig Whyte, the majority shareholder. Duff and Phelps seemed to argue on Thursday that because it wasn't his money being used to buy £18m of Lloyds Banking Group debt last May, then they don't think he's got a right to that bank's secured creditor status. If he doesn't have that, he doesn't have first claim on the club's assets.

Well, at least it's looking good for the lawyers. Which is nice.

Messy collapse

But back to Ticketus. You have to assume they're aligned with the Blue Knights consortium as a means to protect their funding and their reputation. After all, the financial firm has its own investors' interests to protect, and this episode doesn't make it look all that clever.

According to Craig Whyte, he signed personal and corporate guarantees totalling £27.5m for that Ticketus money, none of it against Rangers assets. But given the way his other business interests are going (in Bournemouth, Pritchard Stockbrokers, of which he was company secretary and a leading shareholder, collapsed very messily in the past few days), Ticketus is probably looking closely at those guarantees.

Ticketus can offer the so-called Blue Knights a deal on that revenue stream over three seasons that it claims it owns, in exchange for an absence of legal tussling. That means it wouldn't necessarily want or need to take an equity stake in Rangers' ownership.

But the puzzling question is why anyone would buy Rangers when that debt cloud hangs over it. I'm not the first to point out that Paul Murray was the one asking why Craig Whyte would want to take over Rangers under these circumstances last year, yet he's up for doing so now, when the debt cloud remains.

I offer two possible explanations. The obvious one, which you can read in the Blue Knight's statement, is that any purchase would follow a company voluntary agreement (CVA). That is, the creditors would agree to take what they can salvage, as a percentage of what they're owed. That sum depends on what administrators think they can raise for the value of the assets, what's offered, and how much competition there is.

They need to agree on the sum being offered, before they can take that to creditors - including HM Revenue and Customs. The creditors then have to decide if they'll voluntarily accept that (and by implication, if they think it's better than the alternative value they might extract from liquidation). You can presume the offer would be conditional on a limited amount of indebtedness remaining.

Big tax

The other complication is that the £49m in dispute in a tax tribunal is still unresolved. If you're facing legal disputes on several fronts, and unhappy creditors, how do you get a CVA on the basis of the two outcomes to that tribunal? I'm not going to pretend I know, but the administrators seem confident enough that it won't necessarily be a blockage.

If Craig Whyte is any guide, he said ahead of administration that HMRC would respond to a judgement in Rangers' favour by appealing and appealing again, and so it might be as well to assume that the £49m "big tax bill" is either going to stand or to fester, and it's not clear which is worse for the Ibrox club.

Around all this, there's plenty of speculation that HMRC has its own agenda on this, pursuing Rangers as an example to other football clubs, and those in other tax-avoiding sectors. But it's just speculation for now.


The other explanation of the Blue Knights' strategy is that they are simply putting themselves into the best position to be ready to pick up the assets from liquidation. If they have Ticketus and the supporters organisations on side, they have already put other potential bidders at a disadvantage.

But then, it's in the interests of the creditors and administrators to get some competition for future ownership of Rangers.

As I've said from the start, if the club gets debt under control, and does the same with its cost base, all those Rangers fans willing to buy tickets, replica strips and pies ought to make for a sound commercial proposition.

But the journey back to that situation is proving a lot more eventful, surprising and painful than I think anyone had guessed.