Earlier in the week, a story broke which alleged that Sevco was on the brink of administration. Today their websites and fans are in full-scale denial mode, and although days have passed, the club has not issued its own statement refuting the stories. Instead, the media is spinning on their behalf.
Rumours like this are highly damaging.
They impact on the commercial viability of the club, and when one considers that they are just weeks away from negotiating next year’s sponsorship and manufacturing contracts they can ill afford a rash of stories which cast down on their ability to survive into the future.
If Sevco was listed on an exchange, as their board says they plan to be – a prerequisite for raising money in a share issue – these stories would have “market moving” potential. That’s why the club’s failure to issue an immediate denial is so suspicious.
Look, the stories about the club being on the brink are not new.
If you’ve followed these events you will know that Phil has filed numerous articles in the past month or so which claim they have sought invoice financing and even sounded out administration specialists. This is more than speculation; Phil actually has the names of the companies involved.
You can choose to believe him or not – and he deserves the benefit of the doubt at the very least as he has broken the biggest stories around Ibrox in the past six or seven years – but his stories are not the only indicators of something seriously wrong there.
Here we’re going to take a look at some of the others.
Sevco’s Own Published Accounts Show A Club In Serious Peril
Sevco’s published accounts since the Dave King takeover are a mess, revealing a club seriously leaking money and who’s business plan is an unfeasible one based on fantasy instead of reality.
Its projections are wholly unrealistic, paying no heed to even the concept of fiscal sanity and largely depend on the club reaching the Group Stages of European competitions three times in the next five years, which looks highly unlikely at best.
Until then, even in the best case scenario, the club will continue to accumulate debts and record losses until UEFA steps in and imposes FFP restrictions on them, which might even result in a European football ban.
Sevco’s accounts show millions in losses, annually.
They have been in existence for seven years and never once broke even.
There is no sign that they ever will, which means that someone has to keep on carrying the water and paying their bills when the money runs out. They need millions in external funding just to get through the rest of this campaign and those accounts admit that they will need millions more to get through the next one.
This is not Celtic bloggers making up facts; this is right there, in black and white, in their own published annual numbers. They can ignore us as they like … but how the Hell can Sevco fans ignore that?
The Jamie Murphy Transfer Mess Shows Just How Skint They Are.
Think for a moment about being Sevco’s director of football.
Your club has made a pigs ear of appointing a manager in spite of a six week “global search.” Your fans are so disillusioned they celebrated a 0-0 draw at Celtic Park as if it was a fantastic win in a close title race. Your club is the subject of ridicule and scorn. You need to pull off a transfer coup, something to get the punters onside and show that you have some grasp on what you are doing.
So you line up Jamie Murphy.
At first you’re told to get the deal done; when you ask what money is available you are told that it will be found. You do what you think is right, and you put together an offer which you believe will be acceptable. Then, when the player is already on his way to Glasgow someone on the board tells you the terms have changed.
I am not speculating.
This is what happened.
Someone on the Sevco board changed the terms of what was on offer to Brighton after the English club had allowed the player to come here for a medical.
Brighton’s reaction was to block the permanent deal. If Sevco finds the money – all of it – in the summer, then the deal can go ahead. If not he goes back to England.
The media has lied about what happened here, but they are only following orders.
Their attempts at spin on behalf of the Ibrox club are obvious, and pathetic, but the facts of the Murphy deal – the club has basically told the EPL side that they are skint and begged them for an agreement which allows them to pay with season ticket cash – are known to clubs down south, and that will have knock on effects that I’ll explore in another part of this article.
But the Murphy deal was shambolic and embarrassing and revealed the club at its very worst; an amateurish organisation leaking money and unable to conduct transfer business in anything like a professional fashion. Boardroom politics is now hampering the simplest tasks and a lack of finance is making team building absolutely impossible.
Yet still their fans believe the worst kind of nonsense, with one website this week describing the structure of the deal as “an Mbeppe type” arrangement.
There are no words for how deluded that is.
There Are Numerous Outstanding Issues Pending Which Need To Be Resolved
Phil has reported that there are outstanding debts to suppliers.
It makes sense that a club would put off paying those as long as possible if it was in trouble.
It makes even more sense that they would contest any payment that they had the slightest chance of casting doubt on. This is why I still believe there are outstanding issues involving Pedro Caixinha and what the club owes him to pay off the remaining term of his contract.
Our hacks have lied about that too, making up the worst kind of nonsense about how Caixinha would have been unable to start work at a new club whilst that issue was outstanding; it’s nonsense.
He was sacked by the club, he didn’t resign.
From the moment they fired him he was free to pursue his career at any club in any country that he chose. It does not mean that his contract terms have been paid up by the Ibrox club.
On top of that, I know for sure that the Warburton issue is still unresolved.
He has not been paid a penny.
The club is sticking to the line that he resigned and he continues to dispute it. One person has suggested that this matter is resolved – Dave King. There is no documentary evidence that he is being truthful; in face, take everything King says with a pinch of salt.
This club owes large sums of money to people and the legal costs of contesting some of that might even dwarf some of the amounts owed.
This is a simple negotiating tactic actually; many people and organisations don’t have the stomach or the deep pockets to seek legal redress; it’s how many legitimate debts disappear.
Sevco is counting on that.
In many cases their hopes will be in vain. Warburton will certainly pursue his claim all the way, particularly as the club libeled him and his coaches in the aftermath. Caixinha too has been treated disgracefully. He is in no mood to do them any favours.
Sevco’s Transfer Activity Shows They Are Desperate For Cheap Deals Funded By Sales
Carlos Pena might look like a favour to Sevco, but in fact it’s simply part of Pedro Caixinha’s revenge. He has captured a Mexican international for no fee and minimal wages.
I don’t think he can get anything out of the player, but Sevco certainly won’t and the costs of that particular deal just mount up and up.
The majority of the transfer fee is yet to be paid for a start … so the club is still shovelling money at his former club although they now acknowledge that the player will not accomplish anything at Ibrox.
Today the Cruz Azul sporting director has slammed media reports here that suggested they were paying the full wages for the player. Those reports were transparent nonsense; such a deal was never in the offing.
This signing will be leeching them for years.
The same applies to their other summer signings, not one of whom is generating interest anywhere in spite of Sevco offering them everywhere.
They badly need these guys off the wage bill and nobody is biting.
Herrera and Pena will cost the club the better part of £8 million before the terms of their contracts are complete; neither will justify a fraction of that.
Attempts to get a transfer tug of war going over the hapless Josh Windass have ended in failure; the numbers involved are paltry.
Sevco would accept, gladly, an offer in the region of £600,000.
They are highly unlikely to get it.
Media reports of interest from Sunderland, Preston, Hull and other clubs have come to exactly nothing. Talk on the Sevco sites of them “holding out” for a fee in the millions are among the most ridiculous ever published.
The same applies to James Tavernier who they would let go in two seconds if a club showed the slightest interest; he signed a contract extension in 2016 but it expires next year.
They want him off the wage bill quickly before he gets to the point where he can talk to other clubs; they know his value – which was never high to begin with – reduces every day. They are desperate to sell him whilst they can. They would accept £500,000. They will not get it.
Part of the problem is that clubs know they are skint and desperate. Word about the Murphy deal has gone round the other clubs. Brighton themselves were momentarily interested in Windass; how does Sevco expect to get a decent fee for him, from them, now the club knows they are running on fumes?
Any half decent offer they might have had for a player would have halved the moment that farce ended in a loan deal on the shadiest terms imaginable. Sevco has no credibility south of the border. Clubs know they are doing business with a board desperate for every penny.
Forget “holding out.” They are simply unable to.
Even if their players were worth the ludicrous elevated sums their websites seem to believe there is zero chance of them getting anything close to their value … it’s a bust.
Part of the “business plan” involves buying players and selling them at a profit … yet in this window they’ve seen young Lewis Morgan sign for Celtic and Jamie Walker sign for Wigan, two players of enormous potential just starting out in their careers.
They’ve “secured” a loan move for a 28 year old who in the summer will cost them three times what those other two would have; indeed for the Murphy fee they could have had both, comfortably.
They were unable to afford the £300,000 that would have got either.
A club that does business like this is heading for the rocks.
The McInnes Snub Could Only Have Happened To An Amateurish Club In Dire Straits.
Before a ball is even kicked next season, the Sevco fans season ticket money has to finalise the signing of Jamie Murphy. On top of that, there’s barely anyone who doesn’t think they will be under real pressure to appoint a halfway decent manager. I don’t expect Murty to last the season.
If he goes in the next month or so that club is in a dire place.
As the Derek McInnes fiasco proved they are no longer a big draw and they can no longer afford to just go out and hire a top boss. Had McInnes actually agreed to an Ibrox switch you would have seen a stand-off with Aberdeen every bit as ridiculous as the one they just came out of with Brighton, except it would have been even more humiliating.
If Sevco fans are not convinced by the Murphy saga, then the McInnes one ought to keeping them up at night in a cold sweat. The appointment of their reserve boss after he had lost two crucial matches on the bounce was lunacy and a demolition job to the hopes of those who had expected a big name.
That some on their board had wanted the cheap option in Murty all along should be a terrifying thought. He is an austerity manager for a club about to undergo a radical downsizing, administration or not.
Sevco were so quick to try and spin McInnes’ decision as one motivated by fear and a lack of real ambition that you just know there was something more to it.
If online reports are true – in the blogs, not the media – he was unimpressed by the unprofessional way the club operates and very concerned by what he was told (or rather not told) about his likely budget. He knew he would have to sell before he could buy.
He knew he’d have to oversee cost cutting.
Sevco fans have been so easily fobbed off with excuses on that one, but the whole McInnes mess was a symptom of a club bleeding out. Credibility has gone already. Administration could not heap more shame on them than they already deal with daily.
The Deadly Takeover Panel Verdict
And this is where we start getting into truly dark territory for the Sevco fans; everything that’s come before is highly suggestive of a club that’s run out of money, but it’s much worse than any of that makes it look because the real damage was done in a court room last month.
At the Sevco AGM the club admitted that it has no money.
I am astounded that the media continues to pretend that this didn’t happen. To focus on that is to focus, fully, on what the TP verdict actually means.
Because the AGM admission came with a guarantee that the money needed to get through the season and then the summer had been guaranteed by NOAL.
NOAL is the “Dave King family trust” who’s £7 million “guarantee” was the only reason the club’s auditors were able to sign off on the accounts.
Yet even whilst the AGM was happening, the Court of Session had a document in its hands saying King was penniless and that NOAL did not have significant funds nor would be willing to release them to his use.
King lied many times to the court, as he has lied over and over again to Sevco’s fans.
I believe he has also lied to the directors of his own board and made the £7 million promise under pressure from those who had already given the club tens of millions from their own pockets.
It is my firm belief that he made that promise knowing full well the Takeover Panel would compel him to make a share offer, and remove his ability to fulfill that pledge.
Whether that’s close to the mark or not, the £7 million shortfall will not now come from Dave King. He has been taken out of the equation. If NOAL finds the money to keep the club alive the courts and the City will conclude that King’s deposition was a base lie.
Does NOAL even have the money to satisfy that requirement and King’s required £11 million? Doubtful.
If they don’t produce the money for the club – and they can’t without exposing him to even deeper legal peril, both here and in South Africa – then it has to come from somewhere else.
Aaaah Sevco fans will say, but it will simply come from the other directors.
And that’s where the roof falls in.
The Share Issue Is A Bust. The City Regulators Are Watching.
Sevco’s current directors have already sunk millions into the club by way of “soft loans”.
Sevco fans refuse to consider these real debts.
But those directors are not running a charity; they expect a return on that money and the plan has long been to convert those loans into shares.
When the club does a share issue those shares would then be converted into cold hard cash. Essentially, fans and “institutional investors” would see they got their money back.
The trouble with this is that King’s behavior has drawn the attention of City regulators and they are now not only watching him but NOAL and the club itself.
They have already established that the so-called Three Bears acted in a “concert party” with King in which he was the clear leader. That’s why responsibility for making an offer to the other 60% plus of shareholders falls on him. But there’s a sting in the tail.
Should a debt-for-equity swap happen as it was supposed to, it is highly probable that the Three Bears themselves would cross the 30% threshold … and because the regulators already recognise them as “working in concert” that would compel them to make a share offer for the rest of the company’s shares.
And it gets worse, because in order for their “loans” to be realized in full, the shares in their hands would probably be valued far higher than the standard trading price; any offer they were compelled to make would be at that higher rate. Far from seeing their own money return to them, they might actually be compelled to spend even more.
I think in those circumstances King himself could take advantage of the situation to bail out by selling his own shares to them. They have to be aware of that risk.
The likelihood of these people ever seeing their money back from Sevco is roughly zero.
There is no clear path through the thicket in front of them.
The Takeover Panel verdict, which Robertson and others in the club claims “will have no impact” on them is actually a catastrophe. It impairs their ability to raise money from city sources – not that any were interested – it places their current directors in jeopardy of King’s “cold shouldering” and it wrecks their chances of doing a debt-to-equity swap along the lines originally envisioned.
This is the situation propelling them towards administration.
They’ve Probably Seen The Last Of The Shareholder Loans
The club exists right now on the basis of shareholder loans.
Without those they would have been in administration shortly after the takeover. It is commendable that the Real Rangers Men have kept their club alive with their own cash, but it was never a state of affairs that was going to stretch on much further. As a strategy it’s now at an end.
Sevco’s directors know that from this point forward any money they give to the club to pay bills is money they will never see again.
This is why the quest to cut costs has become desperate.
But the club is nowhere near the point of fiscal sanity, and so annual losses are probably inevitable and especially without access to European group stage football.
With high levels of debt – albeit in the form of directors loans – it is a matter of time before the club falls under UEFA scrutiny for violation of FFP.
They will enforce measures on the club to reduce costs; these are likely to be highly detrimental to the football team and its ability to “compete.” If they are unsuccessful or if the club simply ignores them then a European ban is inevitable. The one thing that would have held this at bay – the debt to equity swap – is now, as we’ve seen, probably off the table. UEFA will almost certainly intervene this year.
Sevco needs millions just to get through the current campaign, and that’s without their club being hit by one off costs or some “bolt from the blue” event which puts them under even greater pressure.
King was only forced to agree to the £7 million in loans over the next 12 months because the other directors are no longer willing to meet those costs.
With King off the table, the onus is on them.
I do not believe they will pour more money into the club knowing that they will never see it again. That leaves one option; to cut costs dramatically.
Unfortunately, outside of a transfer window there’s only one sure way to do it.
Administration Is Coming Sooner Or Later And Here’s Why.
For the first 14 days of an administration, anything goes.
Those brought in to stabilise the business have the legal authority to tear up contracts, sell off assets, re-negotiate contracts and even bundle the whole thing up and sell it to any interested party who’s fee allowed them to give the creditors a return – that would be the current board.
The attractions of it are obvious.
The perils of it are equally plain.
But those who are looking for a certain level of debt – who believe, erroneously, that such has to exist before administration becomes inevitable – are looking in the wrong place.
Administration happens when a club cannot meet its running costs and pay its bills as they come due.
Sevco could – and will – enter administration without significant levels of debt.
It will happen because those who have kept the club afloat can no longer, or will no longer, do so.
The author and architect of the mess is the man their fans cheered through the doors, David Cunningham King, the “glib and shameless liar”, a man we warned them about well in advance.