Rangers administration: creditors set to lose 90% of their cash

[craig 5,199]

Administration is a weird thing. You take a company in financial straits and then charge them £1m a month for a few people to run them "better"...

 

The irony is that if they were in charge for that fee without admin, we'd be out of business.

 

Surely something like £200k a month should be way more than enough to get some decent business brains in?

 

By the same token without them we would still have a debt of 55 million. At least by using admin we have a CHANCE to get rid of a very large level of debt an get back on a relatively healthy financial footing.

 

Would you pay 5 million (by the way, the 5.5 million also includes non-D&P expenses including almost 2 million for legal fees) to ferris of 50 millin worth of debt?

 

Some would say that is money well spent IF successful.

[the gunslinger 3,366]

By the same token without them we would still have a debt of 55 million. At least by using admin we have a CHANCE to get rid of a very large level of debt an get back on a relatively healthy financial footing.

 

Would you pay 5 million (by the way, the 5.5 million also includes non-D&P expenses including almost 2 million for legal fees) to ferris of 50 millin worth of debt?

 

Some would say that is money well spent IF successful.

 

money the guy getting a debt free club should be happy to pay himself.

[calscot 0]

By the same token without them we would still have a debt of 55 million. At least by using admin we have a CHANCE to get rid of a very large level of debt an get back on a relatively healthy financial footing.

 

Would you pay 5 million (by the way, the 5.5 million also includes non-D&P expenses including almost 2 million for legal fees) to ferris of 50 millin worth of debt?

 

Some would say that is money well spent IF successful.

 

I don't quite get your first point as my point as you're ignoring the part where there is no logical reason why administrators couldn't do it for a lot less money. What they are earning is NOT value for money. They are NOT doing anything special for their fee to write off the debts, it is the law that doing that. Administrators being paid less could do the exact same job, if not a hell of a lot better.

 

I don't quite get your second point either - the debt will have to be included in the CVA or written off using a newco. Would you pay £8.5m for a collection of classic cars worth £30m from a bankrupt guy, on the condition that all finance on them is written off? That's what's going on here. And we're talking in a scenario where all your future running costs are paid by visitors to your garage while the value appreciates...

[Guest Guardian]

As far as I'm aware D & P are charging a standard rate for this type of work and as such, the bill can be blamed on those who put us into administration.

 

Charles Green didn't put us into admin and is the only one trying to get us out of it.

 

Yes, it's very expensive, but that's how it goes.

 

No point in shooting at the folk trying to save us. It's the ones that put us here that we should be targeting. SDM, the old board and CW all have a hand in this.

[calscot 0]

As far as I'm aware D & P are charging a standard rate for this type of work...

 

Sorry but while that may be correct, it's incredibly hard to believe. What about companies who go into administration with a turnover of less than £12m a year? It just makes the whole system non-viable and pretty stupid looking.

 

How much does it really cost for four of five decent accountants? I can't imagine their wages would be more than say £600k a year and that could be reduced by using some of your normal accountancy staff on normal if highish wages.

[craig 5,199]

I don't quite get your first point as my point as you're ignoring the part where there is no logical reason why administrators couldn't do it for a lot less money. What they are earning is NOT value for money. They are NOT doing anything special for their fee to write off the debts, it is the law that doing that. Administrators being paid less could do the exact same job, if not a hell of a lot better.

 

I don't quite get your second point either - the debt will have to be included in the CVA or written off using a newco. Would you pay £8.5m for a collection of classic cars worth £30m from a bankrupt guy, on the condition that all finance on them is written off? That's what's going on here. And we're talking in a scenario where all your future running costs are paid by visitors to your garage while the value appreciates...

 

Go check the hourly rate for administrators cal and you are likely to find that their rates are relatively similar. KPMG are pretty well known in the administrators realm and I would hazard a guess that their rates are certainly no less than D&P.

 

You say that administrators could do it for far less money - which is of course true. But which firm of administrator's would charge far less than their peers when they know that they will a) get business and b) can charge the same as their peers ? They will charge what they can and, it seems, 600 quid an hour is the going rate.

 

So they arent doing anything special. So I assume that YOU or I could go and do their job ? No, we cant. As far as I can recall, the insolvency practitioner's exams are very difficult and the pass rate is pretty low (at one point I think it was less than 20%). I only studied insolvency for a short period whilst at Uni and it was far from simple. We are simplifying the process because we simply dont know what the process entails. It isnt as easy as it sounds.

 

The debt will be included in the CVA but it certainly wont be paid 1:1 - I am not understanding what you are saying here. Green will be paying 5.5 million in fees to eradicate about 55 million of debt (OK, 52 million when 3 million of debt is covered by the CVA after admin and other legal costs). I really am struggling to get what you are saying. My 2nd point is simply that the administrators have added value in that IF they procure a successful CVA then Green gets 50 mill of debt written off for a payment of 3 million plus administrators fees. That, IMO, suggests that the administrators HAVE added value. We can argue all we want about whether they have been as efficient as they should have been but I struggle to see how you could suggest they dont add value if they manage to get the debt cleared for 10% of the actual liability (a lower %age if the EBT case goes against us). The 5 million I am suggesting is NOT the payment being made by Green (the loan) but the fees of the administrators. Perhaps that is where the confusion lies.

 

Is the point you are making this : That given the financial aspects then a LOT of people would be interested in buying the club ? If so... that should be correct... but how did they get the 30 mill of classic cars for 8.5 million ? Because of the administrator. And not just anyone can act as administrator.

 

My whole post is about the value added by D&P, nothing to do with Green's financing of the club.

[craig 5,199]

Sorry but while that may be correct, it's incredibly hard to believe. What about companies who go into administration with a turnover of less than £12m a year? It just makes the whole system non-viable and pretty stupid looking.

 

How much does it really cost for four of five decent accountants? I can't imagine their wages would be more than say £600k a year and that could be reduced by using some of your normal accountancy staff on normal if highish wages.

 

It IS correct.

 

KPMG are pretty well known in the administration realm and I would hazard a guess that they are charging similar sums for administrators.

 

Administrators are a specialised profession and it is not an easy task, much as though some of us think we could have done it in half the time the reality is that we couldnt.

 

I havent been in public practice in the UK for about 12 years but when I was last there wages accounted for just 20-25% of the hourly charge out rate - perhaps BD, boss or Dragon Trumpeter could provide updated numbers ? The rest goes to admin, running the business and, yes, partnership profits.

 

600 quid an hour may be an abomination to the average Joe but it really is the going rate for a senior administrator.

 

To give an illustration. In 2010 our company had an entity which we put into voluntary liquidation (it had been in run off since 2006 so it was, effectively, a shell company). Nothing contentious, no creditors, no interest in anyone buying it, a privately held company and voluntary.... yet the liquidation took far longer than we anticipated and it also cost us $200k. And it isnt even a dot compared to the RFC administration.

 

I know where you are coming from as the capitalist nature doesnt appeal to you.

 

But IF the administrators manage to get a successful CVA, eradicate 50 million of debt and it has cost the new owners a fee to D&P of 4 million, would you not consider that "added value" ? I would. To wipe 50 million off the balance sheet for a cost of 4 million.... I would think that is money well spent.

[craig 5,199]

PS : I hate the iPad's auto-correct function for spelling - makes me look like I was pissed whilst posting, which sadly isnt the case.

[calscot 0]

Go check the hourly rate for administrators cal and you are likely to find that their rates are relatively similar. KPMG are pretty well known in the administrators realm and I would hazard a guess that their rates are certainly no less than D&P.

 

I'll take your word for it but my point is that although the rates are normal, it doesn't make them value for money. To me it seems like they have a closed shop and a lack of competitive practices - and from what I've seen, I can't help but think they are grossly overcharging for what they actually do.

 

You say that administrators could do it for far less money - which is of course true. But which firm of administrator's would charge far less than their peers when they know that they will a) get business and b) can charge the same as their peers ? They will charge what they can and, it seems, 600 quid an hour is the going rate.

 

I think there should be some mechanism where the court tenders for the contract and takes the best offer - not solely based on fee. £600 an hour may be normal, but to me it seems in this case to be infeasible and is certainly not in the best interests of the creditors.

 

So they arent doing anything special.

 

Let me deal with this first. What I meant is that they are not special in themselves in the powers they have. The powers they use are given to them by the court and the insolvency process. It might take skill to fly a plane but that does not mean the pilot is special enough in that he can fly himself without the plane.

 

So I assume that YOU or I could go and do their job ? No, we cant.

 

I don't find that a good argument - I doubt they can do mine. Without being vain, I doubt a lot of people could even acquire the ability to do my job (and I assume even less for yours) but that doesn't mean they should be paid a hell of a lot less than me.

 

As far as I can recall, the insolvency practitioner's exams are very difficult and the pass rate is pretty low (at one point I think it was less than 20%). I only studied insolvency for a short period whilst at Uni and it was far from simple. We are simplifying the process because we simply dont know what the process entails. It isnt as easy as it sounds.

 

Again, my masters in physics was hardly a breeze but that doesn't justify me having huge wage demands - in fact I get paid a lot less than people with less tough qualifications. (I can see you saying that I would if I could but that is a different argument).

 

The debt will be included in the CVA but it certainly wont be paid 1:1 - I am not understanding what you are saying here.

 

Well you are agreeing with me. I'm saying that after the CVA there will be no £55m debt to pay.

 

Green will be paying 5.5 million in fees to eradicate about 55 million of debt (OK, 52 million when 3 million of debt is covered by the CVA after admin and other legal costs). I really am struggling to get what you are saying.

 

Your getting back to my plane analogy. Did the plane get you there or the pilot? Here's another analogy: imagine it is compulsory to use an estate agent to sell your house - are they justified in inflating their fees to 35%? Are they worth it if they make you some money?

 

To be honest in the administration I can't see where they are adding value as like entropy, the total value to everyone outside the accountants is lower. The creditors don't gain £55m, they lose more than that.

 

But here's another one, you couldn't have gotten your job without the administrator who processed your degree, but should they get 10% of your wage? They added a lot of value to you...

 

Should we pay 10% of the value of our car for an MOT?

 

Should a customs person who saves the government £10m get paid £1m? Actually if that was the case we'd have been off the hook ages ago and given an sustainably affordable bill over a period of time.

 

Basically you are saying they do a difficult job and add value. My point is that most of the value is added by the process rather than them, and a difficult job does not justify a far higher fee per person than say the President of the US? You can get him for $400k a year.

 

My 2nd point is simply that the administrators have added value in that IF they procure a successful CVA then Green gets 50 mill of debt written off for a payment of 3 million plus administrators fees. That, IMO, suggests that the administrators HAVE added value. We can argue all we want about whether they have been as efficient as they should have been but I struggle to see how you could suggest they dont add value if they manage to get the debt cleared for 10% of the actual liability (a lower %age if the EBT case goes against us). The 5 million I am suggesting is NOT the payment being made by Green (the loan) but the fees of the administrators. Perhaps that is where the confusion lies.

 

I'm not saying they don't add value, I'm saying I can't see £3m worth of value for the work they did. Especially as their competence has been called into question from many quarters.

 

My point is that in this kind of instance you should be paying someone for a job. Just because fixing a leaking roof massively improves the value of your house, doesn't mean the roofer should be paid more.

 

My main point is that if there was a proper open market - we're talking proper capitalism too, would the job have been done cheaper? Or in a less capitalist point of view, could we have employed say 10 people earning between 30k and 200k per annum have done about as good a job for a tenth of the price using the same administrative powers?

 

In football terms it's like we're paying Advocaat's Rangers team wages for finishing just above the relegation place in the SPL when we could have done better with the Motherwell team and their wage bill at a fraction of the price.

 

Is the point you are making this : That given the financial aspects then a LOT of people would be interested in buying the club ? If so... that should be correct... but how did they get the 30 mill of classic cars for 8.5 million ? Because of the administrator. And not just anyone can act as administrator.

 

My whole post is about the value added by D&P, nothing to do with Green's financing of the club.

 

You might go to a liquidation auction and by a collection of classic cars for £8.5M, writing off all the finance and owning something much more valuable. But how much do you pay the auctioneer? You couldn't do it without him. How much value did he add? In fact a BAD auctioneer raises less money for the seller and therefore saves the buyer money.

 

In this case what looks like a bad auctioneer is being paid a commission of about 35%. You can't have the auction without him and he's saved the buyer a lot of money, but I can't see how he's earned 35%.

Edited May 30, 2012 by calscot

[caseyjones 0]

Whoaaa!