Administrators prepare final act of sorry tale

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They are calling a creditors meeting for Friday, April 20 at Ibrox, when they will present their proposals for taking Rangers out of administration. This will involve two possible scenarios: exiting via a Company Voluntary Arrangement, or the assets being sold to a newco. The creditors will, effectively, be voting for which of the two outcomes suits them best, but by then the likely future of the club will have been determined.

 

As administrators, Duff & Phelps have three priorities, in order: first, to try to rescue the company as a going concern; second, to achieve a better result for the creditors than winding the company up; then lastly, selling assets to raise funds to be distributed to the secured or preferred creditors. In their proposal, Duff & Phelps must explain any reasons why they would consider either or both of the first two objectives to be impossible to meet.

 

The three remaining interested parties â?? the Blue Knights consortium, Club 9 Sports and a Singapore-based consortium â?? must submit their best and final offers by tomorrow, with proof of funding. Duff & Phelps will then decide upon their preferred bidder. They can offer a period of exclusivity, during which the administrators cannot enter in negotiations with any other potential buyers, in return for a non-refundable fee, thought to be in the region of £1m.

 

The deposit acts as further proof of intention, and provides an element of security for the winning offer. It also establishes how much money Duff & Phelps can utilise in a CVA, allowing them to then begin negotiations between the dominant creditors and their preferred bidder. The likelihood or otherwise of a CVA will have, in effect, been determined before the creditors meeting is held, since Her Majesty's Revenue and Customs already represent a large percentage of Rangers' debt.

 

For a CVA to be passed, creditors holding 75% or more of the debt must vote in favour, and if the first tier tax tribunal finds in HMRC's favour â?? landing Rangers with another tax bill of up to £50m â?? they alone could determine the outcome of the CVA. The votes of the other creditors would then essentially be irrelevant.

 

Yet it seems unlikely that any of the interested parties other than the Blue Knights could pull together a workable CVA. Paul Murray's move to bring Ticketus â?? the company that lent Craig Whyte £24.4m in return for future season ticket sales â?? into his consortium means that if the Knights are successful in their bid to buy the club, Ticketus will not be among the creditors.

 

Murray, the former Rangers director, is also thought to have negotiated better repayment terms and conditions from Ticketus, freeing up more revenue in the short-term and allowing the club to re-stabilise more quickly. Ticketus would also effectively act as the club's bank, providing a bridging loan for working capital until a share issue is held, with the proceeds being split between CVA payments â?? HMRC often agree to CVAs that involve a lump sum payment then further installments form future revenue â?? and investment.

 

Under the Knights' plans, the rest of the creditors would receive more money from the CVA, and their deal with Ticketus also avoids further legal battles. In a court judgment last week, Lord Hodge declared that Ticketus's claim on future season ticket sales cannot be enforced â?? because it is not recognised in Scots Law â?? but they do have a contractual entitlement.

 

"Although Lord Hodge's decision has, if you like, got rid of the Ticketus rights to future income, Ticketus will almost certainly have an unsecured claim against the football club," says Maureen Leslie of MLM Solutions, the insolvency practitioners. "Lord Hodge left it open just a tiny bit by not precluding Ticketus taking their case to a higher court. If you're going to have months of horrendous litigation, that's going to prevent you from taking a CVA forward within a realistic time frame. You need to get that litigation out of the way."

 

Club 9 Sports, the Chicago-based investment fund, are believed to have made the highest indicative offer for the club â?? around £25m â?? but this is thought to contain several clauses that could see it reduced to become closer to the other bids. Herald Sport has also received a firm denial from the owners of the New York Yankees that they are among the backers. Club 9 Sports are also not thought to have carried out due diligence on Rangers, even though Duff & Phelps set up a website with secured access to a data vault of all the relevant financial and legal information.

 

"One of the reasons you do diligence is to understand the obligations you're taking on," says Neil Patey, a partner with Ernst and Young. "That all disappears if you're just buying the assets. The other part is understanding the revenue generation of what you're buying, the wage structure, what the historical expenses are. But in a distressed scenario you're just buying the assets so there's less diligence done.

 

"Why go down the liquidation route? It is cleaner. A CVA is about preserving history. You could see why a Paul Murray consortium would be much more aligned to the history than an American investor."

 

Duff & Phelps are duty bound to accept the highest offer, but they must also be certain the bidders can deliver. Liquidation and starting the club under a newco is the simplest route out of administration â?? so still the most likely â?? while a CVA requires the new owners to submit business plans, cost and future revenue projections for creditors to scrutinise. Yet the Blue Knights' bid has been constructed in such a way as to make it favourable for both the club and the prospects of gaining a CVA.

 

With Duff & Phelps planning to name their preferred bidder on Thursday, the coming days will be critical to the shape of Rangers' future.

 

http://www.heraldscotland.com/sport/football/administrators-prepare-final-act-of-sorry-tale.17208582

[caseyjones 0]

Duff & Phelps, administrators of Rangers Football Club, issued the following statement today.

 

Paul Clark, Joint Administrator, said: "As administrators we are obliged, as part of our statutory duties, to put forward our initial report and statement of proposals to creditors by April 5. The report will be uploaded to the Rangers Football Club website from that date.

 

All creditors will have the opportunity to vote on the proposals. In essence, the proposals consist of a set of legal and technical resolutions which relate to routine housekeeping matters, for which the Joint

Administrators are required to seek creditors' approval. The proposals if approved, will allow the Joint Administrators to continue the administration process until an appropriate exit from administration can be found.

 

 

 

Advertisements will be placed in relevant newspapers tomorrow, giving notice of a meeting of creditors. This will not be a physical meeting of creditors. The meeting is to be held solely by correspondence in accordance with Rule 2.28 of the Insolvency (Scotland) Rules 1986. Voting forms and statutory notices along with the Joint Administrators' statutory proposals will be available from 5 April 2012 from the website.

 

Votes by correspondence must be submitted by 12pm on April 20 and the process is part of standard administration procedure. For clarification this is not a creditors' meeting at which a Company Voluntary Arrangement will be proposed, nor will any other form of exit from administration be determined at this juncture. Such matters will be formally considered once the sale process has reached a conclusion."

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