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Thoughts on Bill Miller buying Rangers and Newco, Oldco conundrum

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Bill Miller’s plan for Rangers involves hiving off the assets to a “NewCo” whilst the “OldCo” (Rangers Football Club) attempts to agree a CVA. Once a CVA is agreed, Miller then wishes to merge the NewCo with the OldCo and Rangers will emerge debt free and with all their current assets. On paper it looks good and if successful would indeed avoid liquidation. The outcome would be satisfactory to all Rangers fans, although fans of other SPL teams and the current Rangers creditors may be less than happy with the plan. However, Miller’s plan for Rangers contains many flaws and it’s success is predicated on its ability to overcome several hurdles which I do not believe that it is able to.

Once Miller has agreed a fee with Duff & Phelps for the assets of Rangers Football Club, he will pay approximately £11.2m and in return he will receive Ibrox, Murray Park and all other assets of Rangers (Excluding the players).

So now you have two companies. The OldCo has the current Rangers staff, Miller’s £11.2m which will be reduced to £8m once Duff & Phelps take their adminstrator’s fee and Close, a secured creditor is paid off and all their debt. (Currently £55m with the potential to rise to £134m if the Big Tax Case goes against them).

The NewCo has the assets they bought from Rangers (Ibrox, Murray Park etc.) and they will claim Rangers’ history all the way back to 1872. Whether or not the NewCo will own the Rangers share in the SPL will depend on the SPL board sanctioning the transfer of that share.

So now the OldCo has to agree a CVA of approximately 15p in the pound. (£8m to pay off £55m debt). Should the BTC go against Rangers then the value of the CVA would drop to a measly 6p in the pound. (£8m to pay off £134m debt) Regardless of either sum, HMRC will not do a CVA for either amount. It is their policy not to agree a CVA with companies that have undertaken tax avoidance schemes (which Rangers stand accused of with their Discounted Options Scheme and use of Employee Benefits Trusts) Furthermore HMRC also refuse to agree CVAs with companies that have used PAYE and VAT as working capital, something which Rangers are guilty of doing.

So in the absence of them agreeing CVA you are left with the OldCo which has approx. £8m cash, the current Rangers staff and £134m debt (assuming the BTC goes against Rangers which the vast majority of legal and tax experts think will happen). What happens then? Well this is where I have to disagree with Duff & Phelps earlier statement that the bid “avoids the need for liquidation”. In the absence of a CVA, with mounting debt and the current playing staff soon to go back to earning full wages on 1st June, there is only one path left for the OldCo, liquidation.

This means that Rangers Football Club ceases to exist. The NewCo might claim their history but the Rangers Football Club that was founded in 1872 would no longer exist. If this were to occur then only the NewCo would be left. However, the NewCo would not have a single footballer player on their books and their place in the SPL would be dependent on the SPL board sanctioning the transfer of that share to the NewCo.

In the event of the OldCo going into liquidation then the current Rangers playing staff all become free agents and are eligible to sign for any football team they wish. The NewCo can offer them contracts but they are under no obligation to agree to join the NewCo. Furthermore, as the players would be free agents, they would attract a lot of attention and subsequently their wage demands would increase as teams would not have to pay a transfer fee to obtain them.

In this event, the NewCo starts up with a stadium, training ground and other infrastructure necessary for a football team with one glaring omission, no football players to actually play for them which we can all agree is a rather large problem.

Now the OldCo cannot transfer player ownership to the NewCo, in a similar way that your employer cannot transfer your contract of employment to a different company and tell you to start working for them instead. The contracts that the Rangers players have will be void when the OldCo goes into liquidation. If the NewCo wishes to sign the current Rangers staff then they would need to agree contracts with them. So unless Ticketus and HMRC agree a very low pence-in-the-pound CVA then NewCo Rangers begin next season with no players. This leaves the NewCo with the huge start-up cost of buying/signing a whole squad of players. I find it very doubtful that the NewCo could afford the wages of McGregor, Davis, Naismith, Lafferty etc. who will likely attract huge interest from Premiership teams.

The NewCo wants to claim Rangers history but then there is the question of the transfer embargo. Would that apply to a NewCo? Well if the SPL was to acknowledge that the NewCo has Rangers’ history then it’s only logical that their historical punishment transfers to the NewCo as well.

Of course that is predicated on the OldCo not being able to agree a CVA. Let’s assume they manage to agree a CVA (which is a very big assumption). The OldCo comes out of administration debt free with a playing squad & the share to play in the SPL but no stadium or training ground. The NewCo has a stadium and training ground but no players or share to play in the SPL. Bill Miller’s plan would be to merge the OldCo and NewCo together, thus retaining Rangers history and starting debt free. The insurmountable obstacle to that plan comes in the form of Craig Whyte, the owner of the OldCo who has demanded £30m for his ownership. Miller’s plan has no way to obtain ownership of the OldCo and despite Duff & Phelps early posturing that Whyte was irrelevant they seem to have no solution as to how to obtain his shares either. There is no legal mechanism to force Whyte to sell his shares to Bill Miller.

In either situation, next season will be very messy for Rangers (either in OldCo or NewCo form) and I cannot see a happy ending for them on the horizon. There are too many obstacles to overcome for Miller’s plan to be successful and it all hinges on co-operation from Ticketus, HMRC, the SPL board and Craig Whyte. All of whom have legitimate objections to his plan. The Rangers saga is far from over and the ending looks no brighter for Rangers fans that when it started.

Written by Daniel Brown

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