What's Next For Rangers Football Club?

That’s the question fans of Rangers Football Club should be asking this morning after the club’s administrators failed to reach agreement with players about cost savings they say are vital if the club is to complete its remaining fixtures this season. 

There are only 4 means to exit administration:

1.    By returning the club back to its owners

2.    By agreeing a CVA with the company’s creditors

3.    By going into liquidation

4.    By dissolution of the company

Option 1 can only happen if the club is returned to solvency.  It is hard to see that happening any time soon.  Duff and Phelps say the club is losing around £1m per month.  Three weeks after they were appointed, little appears to have been done to stem those losses.

CVA’s depend on the survival of the company.  If creditors are going to agree to write off a portion of their debt (which is what happens in a CVA), they need to be reassured that the company is financially viable going forward.  This means it has to be profitable. 

Duff and Phelps say they are now considering ‘accelerating’ the sale of the club.  But what do they have to sell?  Craig Whyte (or one of his companies) is described as a ‘secured creditor’.  What kind of security does he have?  If he holds a standard security (a mortgage) he cannot be forced to surrender it for less than he is owed.  If it’s a floating charge, which is secured more generally against the Rangers FC plc’s assets, the administrators have a little more freedom to act but they cannot afford to ignore Mr Whyte.

Unless the Ticketus deal can be challenged or reversed – and there’s no sign that it could be – any prospective purchaser is looking a significant depletion of working capital for the next 4 years. 

And then there’s the squad.  An administrator has 14 days to decide whether or not he will adopt contracts, including contracts of employment.  If he adopts the contracts, he assumes personal liability for payment if the company finds itself unable to do so.  Given that Rangers’ wage bill is somewhere around £22m per annum, we presume that the administrators have issued letters of non-adoption to the playing staff at least.  If that’s the case, there are no contracts and the players would be free to walk away.  Duff and Phelps were seeking agreement to some kind of short term variation of employment contracts, but this strategy is now in disarray. 

Finally, there’s still no clarity around the issue of the tax case.

So, what is it that the administrators will be selling?  And what would a purchaser be buying in to?

Rangers’ fans should be asking some hard questions of the club’s administrators.  For appointments of this magnitude and importance, it would be normal for an Insolvency Practitioner to have done his homework before he takes office.  He would have at least the rudiments of a roadmap to guide him through the initial stages of his appointment.   And some idea of how to get out of the process. 

Following Craig Whyte’s take over last year, he was advised by a partner in MCR (formerly Menzies Corporate Recovery).  Duff and Phelps acquired MCR in in late 2011.  Paul Clark, one of the Joint Administrators, has said “MCR was asked to provide consultancy advice to Rangers post the takeover of the club last year……………...This work included assessing cost and staff structure, revenue forecasts, liaising with HMRC and options for the club should an insolvency arise. This included concerns in relation to the first tier tax case.”  So Duff and Phelps was no stranger to Rangers.  Given that they were advising on ‘options’ in the event of insolvency, fans of the club are surely now entitled to ask them to be more specific about how they intend to resolve the club’s current plight

Edinburgh Insolvency Discussion Group

Antonia McIntyre, an MLM Director attended Wednesday evening's talk for the Edinburgh Insolvency Discussion Group, which was presented by Alasdair Baijal of BBM Solicitors,  who discussed the impact of the Bribery Act 2010 on Insolvency Practitioners.  Alisdair provides some useful hints and tips to help IP's avoid falling foul of the legislation! Contact Alasdair at agb@bbmsolicitors.co.uk if you have any questions for him! He loves to be put on the spot!!

Personal insolvency within the Finance, Employment and Sustainable Growth portfolio

Our new, majority, SNP government has been in place for 5 months now.  One of the more interesting allocations – well, interesting to the insolvency community at least – is that while Mr Fergus Ewing retained responsibility for the development of policy and law in personal insolvency, this is now being developed under the umbrella of Mr Swinney’s Finance, Employment and Sustainable Growth Portfolio.  Mr Ewing is responsible for Energy, Enterprise and Tourism.

Perhaps strangely, in shifting responsibility from the Justice portfolio to Sustainable Growth, the new SNP government paralleled the position in the Westminster parliament, where responsibility for all aspects of insolvency lies with the Department for Business, Enterprise and Skills. Perhaps this is a sign of a maturing Scottish Government, a government not afraid to acknowledge where Westminster has actually got things right.  But has it?

The positioning of Bankruptcy within the Enterprise portfolio in England and Wales is a bit of a hangover from  Mr Mandelson’s love affair with all things American in the insolvency arena. The reforms he put in place, actualised in the provisions of the Enterprise Act 2003, were based on the premise that entrepreneurism could only thrive if it were supported by a ‘friendly’ or ‘soft’ insolvency regime (amongst other things of course).  However, our colleagues south of the border recognised very quickly that personal insolvency has very little association with entrepreneurism or even self employment.  It is all about consumerism.

So, would it not be more mature of the Scottish Government to recognise the error of Westminster’s ways and move Personal Insolvency back into the Justice portfolio and concentrate on developing a fully internally coherent regime for Scotland’s consumer debtors?  Or, if our government genuinely believes that Personal Insolvency belongs in Mr Ewing’s Enterprise portfolio, why not spend some time developing a workable insolvency solution for all our hard working joiners, electricians, publicans and so on – a Scottish version of the English Individual Voluntary Arrangement (IVA), rather than waste time on further watering down the rights of creditors in the existing regime?

Rebranding MLM

MLM is tired of the bad press that insolvency practitioners often get. We didn’t want to be seen as ‘corporate undertakers’ or, even worse, vultures!  We really believe that the insolvency profession can add value both to the economy at national level and to individual businesses facing difficulties – and, let’s face it, there’s quite a lot of them about just now.

So we thought about how we could tell people that we are truly committed to finding practical and workable solutions for owner managed businesses. We started by rebranding ourselves as MLM Solutions. And then we started putting together a network of strategic partners who all know what it’s like to run a business.  We didn’t want partners who had skills they learned in books.  We wanted people who had actual experience of running businesses.  People like us who know what it’s like to manage cash flow and find new work.  People we like working with and people we know have the same commitment to their customers as we do.  So now we have partners who can provide Financial Directors or interim financial managers to manage your through a sticky spot.  We can put you in touch with someone who can help you re negotiate the terms of your commercial lease.  For development sites, we’re working with a project manager who has worked on major infrastructure projects in Qatar as well as commercial property developments in Scotland.  We can even help find funding for a business which may have some issues just now but which has real potential for growth.  We’re really excited about these developments and would love to get your feedback.