If Bill Miller gains control of Rangers, he could be left with a stadium and training ground, but no players.
Senior figures in Scottish football believe the American's plan for the club, which is effectively liquidation by a circuitous route, does not take into account the consequences of the registration embargo imposed by the Scottish Football Association last week.
Miller intends to move the football assets to a new company, while the current Rangers Football Club plc tries to agree a Company Voluntary Arrangement with creditors to come out of administration. The strategy involves the players' registrations being transferred, but that would seem to contravene the ban that an independent judicial panel handed down to the Ibrox club last week.
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Miller's newco would apply for membership of the SFA, but the governing body would demand that the transfer embargo, and £160,000 fine also imposed last week, applies to it. This would then prevent the registrations of the entire playing squad being transferred.
Players can also individually decide they do not want their registration moved: the Transfer of Undertakings and Protection of Employment (TUPE) law allows them to leave the club on a free transfer if a new company seeks to take over their registration.
Miller, who has made an £11.2 million offer for the club, is understood to be aware of the TUPE regulations, but the full potential impact of the registration embargo is only beginning to emerge.
The Blue Knights, supported by all three main Rangers supporters' groups, have bid £5m, and are confident the club's bond holders will take themselves off the creditors list, taking £8m off the current debt, although Miller believes the bond holders will do the same for his offer. The Knights want to agree a CVA and originally made a fully self-funded £10m bid. Their new offer takes into account the club's value being cut by the SFA's registration embargo, and discussions continue.
The Blue Knights, led by former Rangers director Paul Murray, have joined forces with Brian Kennedy, the Sale Sharks owner, and remained in intense discussions throughout yesterday with the club's administrators, Duff and Phelps.
A source close to the consortium questioned why Duff and Phelps once again talked up Miller's bid yesterday against their own, apparently a recurring theme during the sale process, and also dismissed any suggestions emanating from Duff and Phelps that their £5m cash offer was actually only worth £1.5m.
The Blue Knights/Brian Kennedy offer included a claim on the club's debtors, normal practice when buying a firm, its stock and assets. These debts due, including placement payments from the SPL and other monies owed to Rangers from clubs, amount to around £3.5m. This has now been removed.
"The Blue Knights' bid needs to be increased so that it has more value to creditors," said David Whitehouse of Duff and Phelps. "Bill Miller's position is clear. The Blue Knights position is not clear. We are in detailed discussions with the Blue Knights to see if their offer can be increased. We would encourage both bidders to focus on finalising their bids in terms of deliverability rather than seeking to discredit the other.
"We only have two bids and it is important that the removal of one of those does not make liquidation actually more likely. We would encourage the fans' groups, therefore, to embrace both bids at this stage to keep alive the prospects of a successful outcome."
Miller's bid is conditional on agreements from the SFA and the Scottish Premier League that his newco Rangers would not face any further sanctions, as the old company will still be seeking a CVA. But the SPL's investigation into the allegations of former Ibrox director Hugh Adam that there were undisclosed payments to players dating back to 1998, is ongoing and the league would be in no position to guarantee to Miller what the outcome might be.
"It is liquidation while looking like you're trying to get a CVA," says Neil Patey, football finance expert with Ernst and Young, of Miller's bid. "Dare I say it, Duff and Phelps shouldn't really care about that, but the fans won't like it. Duff and Phelps have got to do the best thing by the creditors, but they've already gone beyond the time-frame of gaining a CVA by June 1. It's a minimum of six weeks – two weeks' notice for the creditors' meeting and a 28-day notice period after the CVA vote. Beyond June 1, they're running out of cash. If they don't get the CVA process started pretty quickly, the summer is going to be very difficult."
It is thought Miller may consider pulling out of negotiations as Rangers fans consistently protest against the newco option. Most supporters also prefer the Knights' bid because the consortium plan to launch a share issue that would see ownership of the club spread among the fan-base. The Knights' CVA offer is also likely to include future payments to creditors based on revenue streams.
Duff and Phelps will talk to Rangers' main creditors, HMRC and Ticketus – who remain in regular contact with the Knights, having previously been part of their bid – before deciding on a preferred bidder early this week. "If the successful bidder goes down the stand-alone CVA route they can be in control of the club before the start of next season," said Whitehouse. "If it's a newco with a CVA on the side, then they can take control by May 11."