The Cost Of Doing Business

clock-tickingAs most who know me are aware, I am a keen student of history, and military and political history at that. The more you read about that stuff the more you are struck by the use of language in the upper echelons of those who make decisions.

There is a useful euphemism for every occasion, it seems. If there is an action that carries significant risks they call those risks “acceptable losses”.

Whether it’s in terms of military hardware, money or even lives, there is usually a set figure up until which no-one in a position of authority sheds many tears or does much worrying.

Those losses are “factored in.”

When the action itself is potentially destructive, and there is a risk of harm to innocent parties they call that “collateral damage”; the unintentional harming of property or persons peripheral to the actual target.

There is a phrase in economics, which segues nicely into both politics and war called “externality.” It is the impact of an action or series of actions on another party or series of parties. Think about an air stack creating pollution, which in turn has negative health consequences for people as well as unknown effects on the environment.

I think perhaps my most favourite piece of jargon comes from the intelligence community, and I do enjoy reading about those guys. It is used when an intelligence operation backfires. A good example would be the United States’ arming of the Mujahedeen during the Soviet occupation of Afghanistan, which gave rise to the birth of the Taliban and Al-Qaeda, which in turn led to 9/11 and other calamitous events.

They call those consequences “blowback”.

All these nice little phrases were created to hide what lies beneath them. Death, destruction, carnage and chaos. They exist to give us distance between those unpalatable events and the world in which we live. Reading them, over and over again, makes one slightly mistrustful of language.

Some in the military and politics have an all-encompassing phrase which takes in all of the above, and a whole slew of other euphemisms without which they’d have to do a Hell of a lot more plain speaking, and we might not like everything we hear.

They call it “the cost of doing business.”

Which brings me to Sevco Rangers and the announcement that the club has sold a mere 17,000 season tickets for their adventures in the Scottish Championship.

Earlier, I read a quite incredible statement from the Union of Fans, the pressure group which seems destined to go down in history as the one which sped up the arrival of The Second Death at Ibrox.

The Second Death is a euphemism of my own. It’s code for the NewCo following the OldCo into the grave and all the consequences which follow, from the dumping of debts and the obliteration of the shares to those which impact on the wider game.

“Oh, so all those fans who bought shares will lose the value of them? Acceptable losses. That’s been factored in. What’s that you say? Scottish football will be plunged into chaos again, with sponsors running for the hills, TV companies wanting to renegotiate deals and credibility shot to Hell? Nothing more than collateral damage, I’m afraid … a little bit of externality, right in your face.”

These people are quite mad, so I do not expect them to care about either their fellow supporters or the wider game in this country. What they should care about, what should be keeping some of them awake at night, is the potential for blowback.

They are now in a position where they are threatening the very thing they claim to love. If they deprive the club of money, what impact do they think that will have on the present shareholders? Those people have already sunk millions into Sevco. They are carrying debts, at the moment, which are hovering at or near the £16 million mark. That is a hard number, and it’s right there in the accounts for all to see.

One of the myriad Sevco companies, The Rangers Football Club Ltd (TRFCL), owes that sum to the Rangers International Football Club Plc (RIFC). The sum is not secured, because it does not have to be. The second company owns the first. It does not accrue interest. Why would it? But it is, as it says in the accounts, “repayable on demand.”

Who do they think carries that debt day-to-day? It’s the people they’re accusing of leeching the life out of the club. For reasons known only to themselves, those people are keeping Sevco alive. The Union of Fans are threatening the people who have their hands on the life support switch, the folk who are only reason The Second Death has not come already.

Those people are operating on their own timeline, with their own plan, and so far all the risks they’ve taken and the hits they have sustained falls under the rubric of “acceptable losses.” In other words, they’re carrying a level of debt they know they’ll be able to recoup if things end up in the grubber … which is exactly where things are headed.

How is the Union of Fans missing this? How is the press missing it? What part of this are they failing to comprehend?

Sevco Rangers is already holed below the waterline. Surviving the coming season is not simply going to boil down to what happens when the current wedge of cash runs out. What the club just took in won’t even fill half of the hole which already exists. To all intents and purposes, this is an organisation that ran out of money a year ago or more.

There is a tendency in all of us to look at this situation as if the ordinary dynamics and laws don’t apply here. They do though. When your bank account is empty, you go into the overdraft. When the overdraft is exhausted you can start hitting the credit card. When that’s used up you can head into the bank and see about a loan. If you’re refused a loan you can go to friends and family and borrow the cash you need. If you don’t get it from them there are payday lenders who will gladly give it to you, in exchange for pieces of your soul. When that option is exhausted or tapped out, then you actually will find yourself in very dire straits. In those circumstances there is charity. There is the kindness of strangers. There are food-banks and things.

Let me tell you, there are no food-banks for football clubs.

Remember all those months we were encouraged to wait for the “payroll day” at Ibrox? How were they going to pay, we wondered? Then, when payroll day came, somehow the club got over the line. Somehow they made it. Did they magic money out of nothing? Of course not.

Sevco Rangers probably ran out of their own money midway through last season. They had no bank willing to float them a line of credit. They had no loan facilities and no overdraft. They didn’t flog the family silver, as there was nothing there to sell. For months, the club had only a fractional amount of income and was losing £1 million every time the calendar changed.

Who was sanctioning the spending? Who was making sure the payroll was met and bills were being paid? Someone had to be. Players did still get their salaries, and that doesn’t happen when there’s no money in the bank. Someone at Ibrox was writing someone else cheques in exchange for IOU’s, and those cheques were keeping things afloat.

That £16 million is not an abstract number. It exists in the real world. That is not some phantom figure without meaning, some inconsequential notation on a piece of paper, something that can be hidden or made disappear with a little creative accounting. This is not a debt being underwritten by a bank or a financial institution. It is, quite literally, a hole in somebody’s pocket.

That somebody, or group of somebody’s, is the only reason Sevco Rangers is alive and the Union of Fans is sticking a gun in that metaphorical face and they are issuing threats and they are making demands. They are not simply biting the hand that feeds them as they appear determined to chop that hand off at the wrist.

What do they think happens once they’ve done that? Those people will turn off the taps. There will be no prospect of a quick in and out administration. These people will control the whole process from start to finish. The blowback will be tremendous, and will have exactly the consequences the Union of Fans are allegedly trying to prevent.

Sevco Rangers fans insistence on the club being separate from the company is the noose these people have wrapped around their necks.The irony of this delights me when I consider all of its implications.

They can sell the “club” to Dave King or whoever wants it; license, history, colours, 25 point penalty and all the cultural baggage that goes with them. They don’t have to enter liquidation this time. The club is already in its own wee separate box, all ready to go.

The assets though … well it will not be hard to find a buyer for a football stadium which comes with a ready-made tenant who you can charge exorbitant rent. If I had a spare £20 million lying around I could do worse than buy Ibrox and stick a £3 million per annum rental fee on it. In ten years I would be a very happy man, and in twenty my grandkids would still be laughing every day. It’s too good a deal to miss out on, and even if no-one was willing to take it up, Blue Pitch and Margarita Holdings could simply form their own company and take the asset themselves.

In a very real sense they already own it. Right now, it’s part of the “Rangers Group of Companies.”

If their hand is forced … well it doesn’t have to be for much longer.

People inside, and outside, Ibrox are talking, right now, about the possibility that existing shareholders will agree to a brand new non-public offering to “raise £8 million” in working capital for the club. What possible gain would there be for anyone in doing such a thing? The only people who might want to do it are those who’re currently owed the £16 million, and then only to give them even more control over events. It seems a costly way to get what they could have simply by refusing to fund the madness beyond the season ticket money in the bank.

I have doubts – big doubts – that we’ll see another share issue at Ibrox before the current situation runs its brutal, and bloody, course. After all, when do you get to the point where all you’re doing is throwing good money after bad? What possible hope still lies in turning Sevco Rangers into a profitable organisation? I would suggest it’s little to none.

There’s a phrase which is sometimes used in the States, in connection with the euphemism of “acceptable losses.” It is a journalistic term, used to gauge the level of support the American public has for military action.

They call it the Dover Test. It’s named for Dover Air Force Base in Delaware, the place where US servicemen who die abroad are returned to the United States for burial.

Every conflict the American military has ever been involved in has been brought to an end based on the number of coffins that passes through Dover. There comes a point when that number gets to be too high, when the “acceptable losses” become unacceptable, when “the cost of doing business” gets to be too steep, and the public says “no more.” Yet the Dover Test is an abstract thing. It is based more on emotion than on reason.

Last week, the Sevco Rangers board held a number of meetings about the future. At some point during those meetings the man who writes the cheques will have told the rest of the room what he and his colleagues regarded “acceptable losses” to be.

Beyond that figure there will be no more money. There will be no more time. There will be no more meetings.

How close we are to that moment, only a handful of people inside Ibrox knows for sure.

But it can no longer be prevented. Only delayed.

Think about a power-card meter with the credits running out.

You hear that? That’s a clock tick-tick-ticking. Counting down.  

It really is going to be a long, hot summer.

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Comments on The Cost Of Doing Business

  • Big Mike

    You can wright some fantastic stuff, will they come true? Doubtful! I think der Hun will be around and challenging us for a long time to come.

    Hope your version comes true but!

  • John young

    Best oxymoron is.
    Military intelligence.

  • Tony B

    Der hun challenging us for a long time to come?

    I don’t see how. They’re certainly not doing it now and let’s face it their second birthday is almost upon us and it’s looking increasingly likely they won’t see three.

    Even if they do return in whatever incarnation and form, as a major force in Scottish football they’re vershtupped!

    Those days are past now and in the past they must remain, to paraphrase a song.

  • ewanbhoy

    Brilliantly written and I think you are spot on.
    All the stuff that’s going on there doesn’t make any sense and you have highlighted the downfalls well and as you say they (newco club not company)are in £16M debt and don’t own any assets at all, it’s the”company” that owns them and they could pull the plug at any time and sell off the assets to the highest bidder which could be a housing company for Murray park and a supermarket for the decaying ibrox which would indeed be the ultimate death of anything related or resembles an entity called rangers.

  • james

    Fascinating read! I would like to investigate a little more about the organizational structure and registration as there appears to be a large and significant grey area around this. Likewise, more around the internal debts.

    I do believe, asking those whom have made significant loses to invest more, and subsequent loses, will be a tough ask.

    if the tick tock becomes background noise at ipox, they d day never comes, the mismanagement will ensure rangers never reach their once famous hights.

    dominance for many a decade lays in wait for the hoops. But as an economist I know that due to market powers, Celtic will soon weaken as the market within Scotland stabilizes.

    Celtic should take this time to ensure European nights and competing on the pitch and financially is sustainable. Fans should warm to selling on our prized assets and bleeding promising European youth players. Gone (until inflation meets) are the days of £6mil on a striker.

    no matter what happens next door or at the jones’ we must watch our own house. Fans, I cry to you to purchase you season tickets not just this year but for as long as your domestic financies will allow you.

    hail hail

  • Dr Bhoogie

    Re. your ‘Second Death’ euphemism, it’s in the Good Book, Revelations 2:11; ‘and the second death shall be worse than the first’.

    Hail Hail

  • Dr Bhoogie

    PS
    in the California Penal Code, 211 represents an Armed Robbery. Can we get Grissom to ‘follow the evidence’
    & give an opinion as to the status of the entity formerly known as ….

    Hail Hail

  • http://None Jimmy Mac

    James good blog hope you are accurate.Events at Mordor are fever pitch it just seems that the tribute act manage to get over the line!
    Question for you: In your own opinion will there be an insolvency event?

    BTW read ur piece on Independance,an emotional great read ….and its a yes from me to

    YNWA

  • joe dimagio

    an excellent read,clear and precise,very enjoyable…if only some decent bears could read and understand it

  • ek bj

    9/11 was an inside job. so was sevco 5088, scotland and RIFC.

    Just like rumsfeld announced the massive amount of missing money on 10th sept 01 RFC had the missing ticketus money before the self sabotage of witholding tax.

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