The four million pound question

These are difficult days for the people driving the bus at Ibrox.

Only yesterday there was a rather tetchy ConCall.

All of the main players were on the line although I understand that the Blue Pitch and Margarita chaps were unavailable.

The upshot of it all was that they currently do not have anyone who is willing to underwrite the £4 million share issue.

This piece from the BBC seems quite familiar and I could not take issue with much of the content.

Except this statement:

“Should the full amount be raised, it will likely provide Rangers with enough financial support to reach the end of the year.”


The end of the year?

My sources inform me that £ 4 million, i.e. the full amount, would get RIFC and their loss making subsidiary The Rangers Football Club (TRFC) to the end of October.

Let’s look at what the £4Million would have to take care of:

(1)    The Letham Loan.

(2)    The Easdale Loan (which is securitized against Edmiston House and the iconic Albion car park).

(3)    Staff bonuses due from last season.

(4)    Unpaid bills from suppliers.

(5)    A Signing On Fee for at least one player.

Auditors Deloitte are very clear that the Season Ticket money (just over £5 million) should not be touched while there is a question mark of being able to trade for the duration of the season.

The loyal fans who bought their Season Tickets and backed the club have, in a commercial sense, bought futures in football matches at Ibrox stadium.

There is also VAT due on those Season Tickets.

In October/November that share issue, I am told, would need to raise between £12 million to £20 million.

This arithmetic was explained to the doubters during the ConCall yesterday in some detail.

Moreover the assessment was that it was more than likely that RIFC would need to raise a figure closer to the greater amount (£20Million).

The two problems that are subverting their plans are:

(1)    The Season Ticket Strike.

(2)    The Stockbridge Effect.

It probably needs no further explanation, but (1) is a disastrous turn of events for the new club. Any business pans would have had a reasonable expectation that the fans would remain, well, loyal to the Ibrox brand.

In fairness many of them have.

Of course, others have refused to renew their Season Tickets. The game by game revenue is a help, but ask any football club Chief Executive what they would rather have.

It would be Season Ticket revenue every time.

During the ConCall the Easdale Brothers were asked to clarify what proxy votes they had on top of their own shareholding and they were happy to clarify the situation.

The main item on the agenda was that TRFC (formerly Sevco Scotland Limited) has a crippling cost base.

Moreover, it has proved much more…err…onerous to bring this down than had previously been anticipated.

The BBC piece is correct in that this current entity that is operating the Ibrox franchise desperately needs external financing.

Regular readers will know that Graham Wallace has been pounding the Square Mile recently trying to attract fresh investment.

A question repeatedly put to him in the City recently was what exact percentage of RIFC would be owned if a certain sum was invested and, due to the Stockbridge Effect, that interrogative is in West Lothian territory.

He simply couldn’t answer it because, like the West Lothian Question, it can’t be answered.

While Wallace has been the City much of the day to day operational decisions have been devolved to Philip Nash.

While the Chief Executive is trying to raise finance the Chief Financial Officer is in effective control of RIFC/TRFC.

However his daily burden is heavy because he cannot touch the Block Grant of Season Ticket monies.

At the start of this year both Graham Wallace and Philip Nash tried to raise extra finance in the Square Mile, but they came up against the obstacle of the Sevco 5088 Contingent Liability.

This was put in the RIFC inaugural accounts at the insistence of Deloitte much the Chagrin of Charlie.

This meant that finance could not be secured against the assets of Ibrox and Murray Park.

They were asked to put a figure on that Contingent Liability and they couldn’t.

So no deal.

The fact that, despite their protestations at everything was ok (at the start of February) they then had to arrange Shareholder Finance from both the Easdales and Laxey Partners showed that the reporting of the Sevco story on here was accurate.

It is no coincidence that those loans were secured against assets owned by RIFC that were not subject of any Contingent Liability (Edmiston Hose and the world renowned Albion car park).

Should one of the current shareholders step forward and underwrite the £ 4million share issue then that will kick the crisis down the road until the end of October.

Then a decision would have to be taken at the AGM to go to the City for a much larger share issue.

That would require a Prospectus which would have to lay it all out there for the market to decide.

This would entail the publicly listed company (RIFC) taking a huge reputational hit, but hey they need the money.

The current situation is hardly ideal, the only saving grace in all of this is that there are two top class professionals driving the bus and they definitely do not want the death of Sevco on their resumes.

They will do all that they can to save this shambles, but it won’t be easy.

They are struggling against a series of  ‘onerous contracts’ that were put in place before they got there.

Indeed it is even enough to make you a bit tetchy.

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