Rangers in Administration

So, the announcement that has shocked everyone and no-one- Rangers have lodged their intention to go into administration. What does this mean, I hear you ask?

Firstly, the club, assuming administration (i.e the size of their liabilities (debts) exceed the value of their assets) is entered within the next 10 days, will incur an automatic 10 point penalty from the SPL (which, in the current table, would leave them still in 2nd place, 5 points ahead of Motherwell but 14 behind Celtic) along with a player registration embargo (better get Daniel Cousin's paperwork signed off quickly, lads). The club will then be placed in the control of an administrator (most likely appointed by either HMRC or their bank), whose task will be to return the club to a position where it can trade normally. This would be achieved by a combination of cost-cutting, sale of assets and negoitating more lenient terms with creditors- this is known as a Company Voluntary Agreement.

A Company Voluntary Agreement (CVA) is where the club would agree with the creditor to write off the debt in return for paying off an agreed percentage of the debt. However, any CVA would require HMRC to approve, as a CVA can only be passed if approved by 75% or more of the creditors by value. A recent example of a CVA being approved would be Dundee FC, who managed to obtain a CVA paying just 6p in the pound- again, the major creditor was HMRC. That's not to say that a CVA will even be proposed, never mind accepted. In order for a CVA to be accepted, all concerned (the directors, administrator and creditors) need to be convinced that the business can be made viable and that the mistakes that led the business to insolvency have been learned, and will not be repeated.

While an agreement with creditors will be rigorously pursued, firstly over the next 10 days by the existing directors, then potentially by an administrator, there will no doubt be considerable emphasis placed on cost-cutting and the potential sale of assets. Expect to see a significant reduction in wage costs at Ibrox, with many non-playing personnel either being made redundant (with possibly an informal understanfing that, should the club return to a financially stable position, they be rehired) or asked to take a pay cut. The sale of players is a more complicated matter, with the transfer window now being shut for most European clubs- Sweden, Norway and Russia being the exceptions, and any prospect of raising significant transfer fees from there deemed slim (big-spending Anzhi Machachkala shop at more luxury boutiques), likewise the Americas. In any case, Rangers have a relatively small squad, containing few players who could be expected to command a transfer fee sizeable enough to make a real difference to the financial position.

One possible idea could be to arrange for the sales of players to go through at the end of the season when the transfer window reopens with Rangers receiving the money upfront while keeping the player until the summer. However, looking again at the recent example of Dundee being in a similar position, and trying to do the same thing when selling Leigh Griffiths to Wolves, the SPL and SFA are unlikely to be too keen on the club doing this- it could be seen to give the club an unfair advantage by having both the player and the monies for his transfer at the same time.

As for the rest of Scottish football, while there will no doubt be much Schadenfreude from the supporters (some of it understandable), this is not necessarily a good day for Scottish football. For instance, Dundee United (their share of the gate receipts from their recent Scottish Cup win at Ibrox) and Hearts (the final instalment of the Lee Wallace transfer fee) are both owed sums in the region of £100,000 by Rangers. What also should be concerning is that they are unable to afford to sign the cream of the talent from the rest of the SPL, with English Championship clubs now able to outbid them in terms of transfer fees and wages, therefore denying the players the possibility of Champions League (or, more likely, Europa League) football, and denying Celtic any real competition domestically. One also has to wonder about the commercial appeal of an SPL deprived of a competitive Rangers team, although none of these reasons should in any way prevent the relevant authorities (HMRC, SPL, SFA, administrators and other creditors) for seeking a favourable resolution, whatever the consequences. Contrary to the adverts, tax appears to be taxing in this case