Deloitte explains the ground rules to RIFC directors

It should now be clear to everyone on Planet Fitba that RIFC/Sevco requires external finance to continue operating.

However they have, so far, experienced difficulty in acquiring that liquidity.

The Laxey/Easdale loan earlier this year was a direct cause of their failure to raise finance in the City in January.

As was reported here the RIFC chaps came up against the wall of the Contingent Liability.

Although it isn’t impossible it is difficult.

Getting finance for a company with contingent liabilities is like getting a mortgage for a house on a 10 year flood plain.

Conservative lenders will shy away, but there is absolutely no restriction on anyone choosing to do some Nostradamus stuff and decide that the benefits outweigh the risks.

The unsuccessful attempts by RIFC to secure funding from the City at the start of the year were pitches to the ‘distressed financing’ providers.

They did not like the fact that the Contingent Liability could not be precisely calculated.

However it was a combination of the possible legal claim and the fact that the business was losing money at such a rate.

There is no shortage of less risk-averse lenders who would extend credit to a profitable firm that had a contingent liability. In the case of RIFC/Sevco, the fact that it cannot repay any loan from its operations means that any lender has to look at the assets more closely than normal i.e. taking control of the secured assets is their way of getting paid.

This is exactly how the Laxey loan was structured, secured against Edmiston House and the legendary Albion Car Park.

Anyone looking into RIFC/Sevco’s financial situation would look at the failed business model that is bleeding cash alongside that pesky contingent liability.

It is both together that mean that makes it highly unlikely that any lenders will lend to them and this is what has come to pass.

For the avoidance of doubt, Craig Whyte and Sevco 5088 cannot stop the sale of any assets.  He might be able to interfere with the process of granting security to someone else, but that would require legal action on Whyte’s part.

I think it is doubtful that that he has the ability or the willingness to spend the resources to do that.  However, the RIFC chaps may judge (or misjudge) the situation differently and would rather eliminate any risk of Whyte taking any action.

If it was Charles Green at the helm of the good ship Sevco then I am sure that he would just ignore Whyte and would come out smiling at the other end.

For the Nth time what we have here is a loss making business with no credit line from a bank.

The cost base far exceeds the company’s ability to generate revenue.

The figures quoted here yesterday for the operation of Murray Park are correct and well sourced.

They include running costs and staff wages.

Some people just seem to have difficulty in getting get their head around the fact that this club/company/celestial body brings in £18 million, but £36.5 million then goes out!

Players costs are £7.5million and other staff cost £10.5million.

The other costs of the operation are £18.5 million.

Murray Park has more employees than the Ibrox operation and is in operation seven days a week.

Hence it is the main drain on the company’s resources.

So far major austerity measures have not been implemented for a number of factors.

This year the lights have been kept on by a shareholder loan and now the major players in the parent company are making moves to raise finance from within their own ranks.

The auditors Deloitte are not happy with the current situation and made that very clear to senior RIFC chaps in the strongest possible terms yesterday.

The auditors reminded them that, as directors of a listed company, they had certain legal responsibilities.

The season ticket strike-and it is a strike-means that the current Ibrox entity have a real challenge in stating to the market that they can operate for the next twelve months.

In the past 18 months or so this club/company celestial entity has had three Chief Executives and is currently on their third NOMAD.

Therefore to lose an auditor at this stage would be rather unfortunate and I’m sure that won’t happen.

However, Deloitte are still rather miffed that the £2.5 million overdraft facility in the RIFC accounts from last year is no longer available to the company.

Moreover it is part of the function of an auditor to remind directors of a publicly listed company about their duties when it comes to accurately reporting the financial situation to shareholders and the market.

They did this in spades yesterday.

RIFC year-end accounts should be signed off on at the end of next month and I understand that it isn’t going well.

These are undoubtedly testing times for the folks in the Blue Room.

Of course much of this was foreseeable and regular readers here will not be surprised at the general picture of a new club in a financial crisis because it pretended to be the dead one.

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