Is Sir David Murray planning to sell Rangers?

[ian1964 10,416]

There have been a lot of stories, a lot of speculation and even worse - downright scare-mongering going on this summer when it comes to Rangers and it's finances.

 

First off, let me state that I know full well we are not exactly in the optimum of financial health, I know that we are at the peak of our borrowing facility and I know that we are still having major issues with cash-flow at the moment.

 

It still doesn't quite justify entirely the stealth cost-cutting and debt reduction exercises being carried out at Ibrox this summer to be honest.

 

We have the same debt as Hearts yet they continue to recruit players, Kilmarnock have around �£15m worth of debt but operate with a turnover which is just a fraction of ours. Hamilton were even declared insolvent during a recent court case with former assistant manager John McCormack recently.

 

Which begs the question: What is the motivation behind cost-cutting? Is it to reduce the debt? Definitely.

 

Are there other reasons? Again, definitely....In my opinion at least.

 

David Murray wants out of Ibrox and has done for a number of years now. There have been strong rumours that businessman Douglas Park has been interested in taking over from Murray, and Northern Ireland MP David Burnside has been credited with interest as well.

 

But it is rumoured that when the due-dillgence procedure has taken place at the club - which has occured a couple of times supposedly - The debt levels and income streams simply don't justify the level of expenditure each party would require to make.

 

So a Rangers side with a minimal wage-bill, serviceable even without Champions League football, and zero or reduced debt would surely be much more appealing.

 

I genuinely think there is a strong possibility that the club will change hands within the next 12 months.

 

David Murray's tenure has been very mixed - The last decade in particular has been dominated by a catalogue of off-field disasters - which has subsequently lead to a few of the on-field variety as well. Gambles that never paid off - Not spending cash when we should have - Spending cash when we shouldn't have....I could go on.

 

It's pretty clear to me that whatever side of the fence you're on, fresh-thinking, new ideas and a new approach are required in the board-room at Ibrox.

 

As our current chairman has struggled badly in an era when the club can't afford to spend it's way out of trouble.

 

http://www.rangers.vitalfootball.co.uk/article.asp?a=515705

[Super_Ally 0]

Interesting article.

 

Hard to argue with his conclusion (that something other than debt reduction is occuring) when viewed against the activities of other clubs with similar debts and a much reduced income.

 

Unless I am overlooking something obvious that BD or someone else can explain?

[maineflyer 0]

Of course it could just be that the bank is actually dictating what happens at Rangers. Personally, I think that would be better than leaving it to our hapless owner.

 

Is he selling? Not yet seen even one reason to believe so. Believe me, I've been looking.

[craig 5,199]

Not to detract from what is a very fine article but the comparison to Hearts is not necessarily appropriate, if I am correct in my thoughts.

 

The debt Hearts have is owed to Ukio Bankas, right ? Who owns that bank ? Vladimir Romanov, Hearts owner. It is a far easier banking relationship when both club and bank are owned by the same individual.

 

Either way though, a good article and I, too, suspect that much of the cost-cutting is so he can sell us. Hopefully sooner rather than later.

 

S_A - Killie's debt is half the size of ours. I bet their wage bill is significantly less than ours. You need to look at debt, expenses, income streams. At the end of the day if Killie have 10 mill in income but 6 mill in expenses they make 4 mill profit. They have to service 15 mill debt.

 

Rangers... for example, have 30 mill debt, income of 50 mill (so 5 times Killie), but 45 mill in expenses - they only have 5 mill profit. They have to service twice the debt on 25% more profit. That can be restrictive.

 

You also need to consider cashflows too but rather than get all technical from an accounting perspective I tried to just keep it simple.

 

More than happy to explain further though.

[Super_Ally 0]

Not to detract from what is a very fine article but the comparison to Hearts is not necessarily appropriate, if I am correct in my thoughts.

 

The debt Hearts have is owed to Ukio Bankas, right ? Who owns that bank ? Vladimir Romanov, Hearts owner. It is a far easier banking relationship when both club and bank are owned by the same individual.

 

Either way though, a good article and I, too, suspect that much of the cost-cutting is so he can sell us. Hopefully sooner rather than later.

 

S_A - Killie's debt is half the size of ours. I bet their wage bill is significantly less than ours. You need to look at debt, expenses, income streams. At the end of the day if Killie have 10 mill in income but 6 mill in expenses they make 4 mill profit. They have to service 15 mill debt.

 

Rangers... for example, have 30 mill debt, income of 50 mill (so 5 times Killie), but 45 mill in expenses - they only have 5 mill profit. They have to service twice the debt on 25% more profit. That can be restrictive.

 

You also need to consider cashflows too but rather than get all technical from an accounting perspective I tried to just keep it simple.

 

More than happy to explain further though.

 

My error was in the part in red. I know you have just used rough figures, but I assumed Killie's income would be so tiny in comparison to ours and their profit less so that they were trying to service half the debt but on less than half the profit (if indeed if either team are turning a profit??).

 

Dunno how much I would follow if you got more technical. Feel free to, though.

[craig 5,199]

My error was in the part in red. I know you have just used rough figures, but I assumed Killie's income would be so tiny in comparison to ours and their profit less so that they were trying to service half the debt but on less than half the profit (if indeed if either team are turning a profit??).

 

Dunno how much I would follow if you got more technical. Feel free to, though.

 

The income isnt indicative of the ability to service debt. That is probably the easiest way to look at it.

 

A company with 2 mill in turnover could very well be a much more sound proposition than a company with 200 mill in turnover (look at RBS or AIG of HUGE companies where everything went pear-shaped).

 

At the end of the day cash is king. If you have positive cashflow you can at least service the debt - seeing as the debt needs to be paid in cash.

 

Us accountants have various ways of making things look better, or worse, than they actually are. Often known as creative accounting or window dressing. In fact, I am of the belief that much of AIG's problems were as a result of the accounting profession. They had paper losses which COULD have recovered - but because they had to take the loss due to accounting standards it created mass panic in the market place.

[Bluedell 5,329]

There have been a lot of stories, a lot of speculation and even worse - downright scare-mongering going on this summer when it comes to Rangers and it's finances.

 

I don't believe that there has been scaremongering. We were very close to having major problems and if we hadn't won the league, I'd imagine that Bougerra, Mendes and Davis (and more) would no longer be here

 

 

First off, let me state that I know full well we are not exactly in the optimum of financial health, I know that we are at the peak of our borrowing facility and I know that we are still having major issues with cash-flow at the moment.

 

It still doesn't quite justify entirely the stealth cost-cutting and debt reduction exercises being carried out at Ibrox this summer to be honest.

 

I don't get why he comes to his conclusion in the second paragraph. I believe that he is correct when he said we were at the peak of our borrowing facility (if not over it) prior to the season ticket cash being received. if that was the case then that totally justifies the cost cutting and debt reduction.

 

We probably made a loss in excess of �£10m last season, and although we are getting in cash for transfers and the CL and reducing our cost base, we need to take stes now to ensure we don't have serious problems (ie selling half our first team) if we don't quqalify for the CL next season.

 

 

We have the same debt as Hearts yet they continue to recruit players, Kilmarnock have around �£15m worth of debt but operate with a turnover which is just a fraction of ours. Hamilton were even declared insolvent during a recent court case with former assistant manager John McCormack recently.

 

Hearts have their finance provided by their owner, as Craig has pointed out. They have little chance of repaying it, hence the rumours that Gorgie Road is going to be sold. If Romanov walks tomorrow and demands repyment, Hearts will likely fold.

 

Killie have severe financial problems. They are going into this season with a first team squad with ten less players than last year. they are no a good example of how other clubs survive.

 

I'm not sure what the point of including the Hamilton example is.

 

 

Which begs the question: What is the motivation behind cost-cutting? Is it to reduce the debt? Definitely.

 

Agreed.

 

 

Are there other reasons? Again, definitely....In my opinion at least.

There will be other benefits and advantages from reducing the debt, including making us more sellable, but I believe that the club have now realised that they have to reduce the debt to ensure the continued competitiveness of the club.

 

 

David Murray wants out of Ibrox and has done for a number of years now. There have been strong rumours that businessman Douglas Park has been interested in taking over from Murray, and Northern Ireland MP David Burnside has been credited with interest as well.

Burnside showed interest for one day just before an election, and that is it. there may be some truth to the other rumour.

 

 

But it is rumoured that when the due-dillgence procedure has taken place at the club - which has occured a couple of times supposedly - The debt levels and income streams simply don't justify the level of expenditure each party would require to make.

I've yet to see any rumours of due diligence taking place coming from credible sources. I really can't imagine that due diligence will reveal anything that would be a deal breaker. A review of the accounts would reveal most of what is required. Will due diligence reveal income streams or lack of them that aren't already know.? I don't think so.

 

 

So a Rangers side with a minimal wage-bill, serviceable even without Champions League football, and zero or reduced debt would surely be much more appealing.

Agreed, but I don't see us being in a position whereby we can break-even without CL football any time soon.

 

 

I genuinely think there is a strong possibility that the club will change hands within the next 12 months.

 

Not sure what he bases this on.

 

David Murray's tenure has been very mixed - The last decade in particular has been dominated by a catalogue of off-field disasters - which has subsequently lead to a few of the on-field variety as well. Gambles that never paid off - Not spending cash when we should have - Spending cash when we shouldn't have....I could go on.

 

It's pretty clear to me that whatever side of the fence you're on, fresh-thinking, new ideas and a new approach are required in the board-room at Ibrox.

 

As our current chairman has struggled badly in an era when the club can't afford to spend it's way out of trouble.

 

Agreed.

[pete 2,499]

I am no financial wizard but it certainly looks like something is going on. Would the assets Rangers have not allow for a bigger cash flow. Murray park and Ibrox must have an over value( don't know if that is the right term) than the mortgages Rangers are paying.Surely they would long cover 30 mill debt?

 

I think Murray is teeing up to bow out.

[Bluedell 5,329]

I am no financial wizard but it certainly looks like something is going on. Would the assets Rangers have not allow for a bigger cash flow. Murray park and Ibrox must have an over value( don't know if that is the right term) than the mortgages Rangers are paying.Surely they would long cover 30 mill debt?

 

I think Murray is teeing up to bow out.

 

Is a bank ever going to call on Rangers to sell ibrox to repay its loans?

 

We have a loan of around �£20m and a facility for another �£15m. the bank are unlikely to lend us more given we have have not shown any aptitude for making profits over a long period of time, and will be unwilling to increase their exposure in the current environment.

[pete 2,499]

Is a bank ever going to call on Rangers to sell ibrox to repay its loans?

 

We have a loan of around �£20m and a facility for another �£15m. the bank are unlikely to lend us more given we have have not shown any aptitude for making profits over a long period of time, and will be unwilling to increase their exposure in the current environment.

 

i was thinking on collateral against the debt. surely our revenue + assets should allow more than 15 mill facility. Not that i would want to go any higher in debt than we are now. I am just trying to lose the point of the bank being in charge.