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Leaving aside the tax bills, could Rangers go under?

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Leaving aside the tax bills, could Rangers go under?

Post by Mr007 on Tue Nov 15, 2011 4:59 am



It depends on its main creditor being willing to continue that line of credit. And as its main creditor is Craig Whyte, who took over (or so it seemed) the £18m debt previously held by Lloyds Banking Group, that much looks secure for now. He's talking of "restructuring" the company's finances, but told his newspaper chums: "The club is not going to go under."

With that assurance, the club therefore needs revenue to come somewhere close to expenditure. That's become much more difficult without earnings from European competition this season.

The player wage bill has risen since Craig Whyte took over in May, we're told. And at least one of its revenue streams - for catering - has been signed away to another company.

Could Craig Whyte benefit from collapsing the club?

There's some speculation that Craig Whyte could choose to push the club into administration, and as lead creditor, he could expect to buy it back without its other debts.

That would break his promise not to let the club go bust, but it could probably be achieved without fans noticing any difference on the pitch.

It would require the agreement of creditors, among whom Craig Whyte would be dominant. Such a 'pre-pack deal' - the management collapsing the company, while it continues to trade, then buying it back from the administrator minus its debts - has been used repeatedly through this downturn.

But there's evidence in recent months that creditors are challenging such deals in court, so it's not clear that Craig Whyte would get the administrator to sell the club back to him.

He must be aware the football league rules could punish the club by non-financial means, deducting points.

Also, an administrator could take a look at the legal position on the tax tribunal, and decide that it's not worth pursuing - whatever Craig Whyte might think - in which case HMRC becomes the biggest creditor by far.

So collapsing the club's finances does not look like an attractive or even a rational option, unless a much bigger bill comes in, which leads to...

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Mr007

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