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Bid proposals unlikely to deliver CVA, say analysts

PUTTING aside issues of SPL membership and transfer embargoes, Bill Miller's prospective takeover and rehabilitation of Rangers still faces numerous hurdles, according to experts.

The first could come when the American entrepreneur completes the exclusivity period granted by Duff & Phelps and formally proceeds with his £11.2m bid. At that point, the administrators would have to apply in court to sell the assets of Rangers to the new incubator company Miller plans to form.

Professor David Hillier, vice dean at Strathclyde University Business School, believes Craig Whyte could mount a legal challenge at that point. He said: "Given that Craig Whyte is a floating charge holder, he may apply to block that asset sale if he feels the newco has been harmful or unfair to his interests. It is a grey area as much of Scots law is set by precedent.

"Paragraph 68 of the Insolvency Act states when an administrator sells assets covered by a floating charge effectively they can do it as if there is no floating charge. But paragraph 74 states if it is felt this sale is detrimental the floating charge holders can apply to the court to block it."

If the new company is formed, Miller's cash bid will be the only remaining asset in the old company. Even before considering the position of HMRC and the outcome of the first tier tax tribunal, any plan to propose a company voluntary arrangement (CVA) to creditors within the old company appears doomed.

It would take a minimum of six weeks to complete a CVA, during which time Duff & Phelps would continue to pick up hefty fees, which would eat into the sum available to creditors. Professor Hillier said: "In that situation, liquidation is better for the creditors."

However, even if the CVA is able to clean up the balance sheet of the old company, the process of merging it with the new Rangers is difficult. Shareholders of the new and old companies could agree to dilute their shareholdings. Alternatively, the new company could offer to buy the shares from the old company. In both scenarios, Craig Whyte would have to co-operate and could receive some form of pay off.

One insolvency expert said Miller's plan makes little business sense. "Why have this convoluted structure? If you are going to do a newco and transfer the assets, why bother with the CVA?

"I understand he wants to preserve what he sees as the history and traditions, but I think people are making too much of that. The reality is if you transfer the assets, the Rangers brand name and everything else, to another company and that company trades within the SPL, what does it matter if it is a different trading entity?"

According to data from the Nasdaq stock exchange, Miller has significantly reduced his personal holding in Miller Industries from 679,619 shares to 305,401 in the past year. He owns less than 3% of the issued share capital.

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