Who?

15p in the pound is considered closer to the mark in such cases.

Everyone?

For the benefit of those of us not 'in the know' please elucidate....

I wish folk would appreciate that this debacle is NOT a straightforward "company gone bust" situation. It was not bust at the end of September, and would not have been bust had OK not abruptly stepped down for (genuine) health reasons at short order. He was continuing to feed cash in monthly. It has gone bust because he stopped fdeeding cash in once he (believed he) no longer owned the business, and because new prospective owners would and could not do a lot until THEY owned it. Impasse.

I suspect there WOULD have been a day of reckoning in the not too distant future, but it would not have been now.

This situation has arisen because of the deadlock in transferring the shares. That was stated pretty clearly the day the administrator was appointed. And because bloody Whitcu*t tried to sell the club to a moneylender and gave that moneylender a debenture, seemingly without anyone knowing what he was doing.

Administration has broken the deadlock. Indeed, that is one of the other, albeit far less common, purposes of administration.

The proof of all thius will be in the extent to which the next owners settle with the creditors. Almost always in an insolvent situation, the settlement is zero. Glover at Wakey settled a small proportion of their creditors (and not the £3/4m debt to HMRC...). That was a "normal" administration. Salford by contrast settled with all their creditors, using a CVA. But there was no owenership deadlock to break there.

If the Bulls' new owner/s settle with all the third party creditors, then this will be TOTALLY DIFFERENT to ANY OTHER ADMINISTRATION WE HAVE EVER SEEN IN RL. It will be more akin to what happened at Salford, where as we all know there were no penalties. And there will be NO JUSTIFICATION for any penalties here.

If the Bulls new owner/s settle at best only part of the third party creditors, then it will be more akin to what happened at Wakey. Although I reckon Glover may have repaid at best 20% of their creditors, and probably considerably less.

The proof of all this wil be in their actions. But please, people, recognise that this is actually a very different situation to what happened at Wakey, or indeed what happened here before.

Incidentally, very few companies actually exit administration. In almost all cases, the assets are transferred to a new company, the liabilities remain in the old to be settled to the extent possible, and the company is then liquidated.

Aye.

You just bought a second hand car.

Its previous owner ran up a shedload of parking fines and speeding tickets which he did not pay. And, when the HP company finally repossessed it, he owed loads to the garage for servicing too, as well as a petrol account at the gas station.

You go to buy the car, and get told you have to settle all these debts run up by the previous owner, or you can't run the car on public roads.

Would you buy that car?

But at least the rules mean that darned car will get the punishment it deserves. Just a shame that, not being a human but an artifical construct, it will never actually know anything about it. Unlike its prospective new owner and driver, who cannot understand for the life of him why he is being punished for what the previous muppet driver did.

So he walks away, the car never gets sold, the HP company does not get a penny asnd neither does anyone else, when it gets sent tpo the scrapyard.

But, at least everyone can have the satisfaction of seeing the car get the punishment it so throughly deserves.

Haha Adeybull has finally flipped

What are you on about?

Bulls is a business with employees and creditors, suppliers and customers.

Is the analogy about an old banger, good for nothing but the scrap yard?

Where did dboy say he wanted to buy a car?

Looking at it very simplistically, this is why I presume the sanctions apply.

Let's say there are 1.2m of debts and liabilities owed to creditors, including OK. Let's say the new owner is willing to put 1.2m into the club. The options are probably:

Pay 20p in the pound to creditors and be left with a £960K fighting fund to buy players and invest generally - 6 points
Pay 50p in the pound and be left with 600K fighting fund - 4 pts
Pay 50p in the pound but make full ex gratia payments to small business creditors and HMRC and have around 300K fighting fund - 2 points
Pay everyone fully - nil points

I know the reality will be somewhat different but that is how I see it simplistically. The buyer has to decide strategically which to play it, with less sanction for more repayment.

Or he could get the whole business for the 20p in the pound, for example, and in which case the new owner has benefited by buying it from administration, and thus has a greater advantage over competing clubs who have to pay creditors in full and budgeted accordingly.

I presume that is something like the rationale.

Certainly won't be buying one from Adeybull.

Not risking the parking fines and speeding tickets!

Once again you should be reminded that Salford did not go into administration.
There was an enforced transfer embargo at some stage prior to the refusal of a further loan from the council - which was reported as a takeover in the local press -[url=http://www.salfordonline.com/localnews_page/39633-salford_administration_rumours_'complete_rubbish',_say_club.htmlStory[/url

Will the next owner be obtaining the lease to Odsal as was a putative requisite of the RFL before OK took the club from the administrator?

He will already have paid for the assets, and the administrator will have been obliged to ensure that price was fair and as good as couyld be obtained in the circumstances. In taking over the business, he will also have taken on responsibility for the very substantial employent and contractual liabilities of players and (probably) other staff, as well as the impaired reputation and standing of the business both of which will reflect in the price paid for the assets.

If he paid a fair price for the assets, anything further he feels able to put into the business will be to take the business forward. Not to settle debts run up by the previous owners (beyond maybe the smaller, local ones to rebuild goodwill and local relationships).

I very much doubt he got to be wealthy enough to be able to contemplate buying a club and putting money into it, by going round paying off bills that someone else ran up. If he wanted to do that, he'd go and buy a club as a going concern, with none of the waknerage about points deduction and none of the massive baggage that comes with buying a business out of administration.

It would not happen in any other situation where a businessman buys a business out of administration, so why should it happen in RL?

In reality, of course, the price paid for the assets would be expected to reflect a likely future penalty or required commitment to repay creditors. Which would mena a lower price for the assets, and therefore less dividend for creditors. In the case of a club with few tangible assets - like Bradford or Wakefield - that would render the assets probably worthless. So the creditors would not benefit anyway. And it may render the assets - the business unsaleable - so it, and its staff, take a one-way trip to oblivion.

As I keep sayimng, punishing the new owners is illogical and counterproductive. It does not happen in any other situation where a business is bought out of insolvency, so why should it in RL? You have to have a means of punishing the EXISTING owners if they do not comply with their financial obligations. It may not satisfy peoples' thirst for blood in quite the same way. But it would serve as a powerful deterrent not to screw up financially in the first place, rather than a powerful deterrent to trying to rescue a business that has already been screwed up financially.

Glasgow Rangers might disagree with you.

They work for the club.

I have never, ever, anywhere, said that Salford went into adminsitration. Of course they did not. They DID commit an Act of Insolvency, as defined in the RFL bye-laws, by entering into an arrangement with their creditors. And that was resolved by settlement of the creditors, hence - and totally rightly - no penalties or sanctions. Salford did it right, and were treated accordingly and quite right too. I was using the Salford situation to highlight one extreme of the wider insolvency arena, just as Bradford last time (and to a slightly lesser extent Wakefield in their second insolvency) represented the other extreme.

If my wording was not clear, I am happy to be able to clarify.

As for the next Bulls owner getting the Odsal lease back, I'm sure the RFL would be receptive to offers. If he or they can front up with at least the £1.2m RFL paid for it, plus some? Given they will instead be operating on half the Sky money as other clubs, and maybe labouring under further penalties, I suspect that far from bying stadia, the priority for the foreseeable will be being able to pay the £78k p.a. rent to the RFL.

Totally different circumstances, and totally different situation.

But it has to be conceded that the new owner is a financially better position than other clubs by buying it from administration rather than buying it as a going concern with all the liabilities due in full. If a club had debts of a similar level but were able to service them, those debts would be part of the business plan for that year. By settling the debts at a lower rate in the pound, the new owner has secured an advantage by having lower liabilities.

Of course, by taking on the liabilities at a higher rate, the sanction is reduced, as it balances out the unfairness to other clubs.

They might be peddling DUFF info because their info stream realise's that Richard Lamb might find out he's useless.

But I only paid £1 for the car and £1999 in debts, where as an identical vehicle was in autotrader for £2000. ....lol

Hearing new owner might equal new coach too. That would really be the icing on the cake.

Not so, though.

If you buy a going concern, you have a fraction of the issues you have if you buy a business out of insolvency. And a business that has just fallen over is almost certainbly going to require far more cash - and your time - ongoing to get it sorted than a going concern that is, say, breaking even.

If you bought a going concern business with net assets of say £1,1m and net liabilities of say £1m, its net worth would be £100k. All things being equal, you might pay that for the business. If you instead bought the assets off an adminmistrator, all tinbgs being equal you will pay £1.1m for those assets - a lot more.

In practice, you won't buy the books debts and certain other assets, and you take on a load of employment liabilities that are never reflected in the valuation of a going concern business since the crystalise only on insolvency. And you'll pay less anyway because of the extra work and hassle to start up again rather than just carry on. And maybe because assets are worth more anyway as part of a going concern. In most cases anyway, the going concern will not ever be for sale except at a premium, so the opportiunity to buy a going concern on comparable terms is unlikley to arise.

But...don't forget, this is all on the assumption that creditors are not settled with.




If we go around penalising anyone who rescues a failed business, no one will rescue businesses. The whole point of administration is to provide a better opportunity to save more businesses that the previous receivership/liquidation model.

Excellent news. If there is one thing the club needs, it more disruption and upheaval.

This is slightly different to that scenario though, because the Bulls were not a going concern in that sense (I assume).

I can only go off Wakefield's administration, but for example we were reckoned to need 500K to keep going. The other liabilities listed were, I assume, part of normal running liabilities but ended up as creditors because of the administration. So you have the liabilities against income, but the extra 500K was perhaps over and above that.

By waiting for administration, Glover gained, I presume, extra capital to spend on players, because he didn't have to pay as much for the business. If he had approached Ted Richardson in the autumn of 2010, he would have paid a lot more, because he would have had to pay all the liabilities.

So yes, it is better to buy a going concern. But if a club is in administration, it isn't arguably that, and the purchase price is cheaper, thus making more capital available for players.

I know that each case is different, but I presume the rules are there as a simplistic blunt instrument. For example, if the penalty wasn't there, Ted Richardson could have put the club into administration, come to the arrangements with creditors, come out of administration, and lo and behold, more cash to spend on players.

Solly Blake statement 1st February:

Blake Solly, the RFL’s director of licensing and standards, confirmed the change of ownership would not affect the central money allocated to the Bulls and that the club would again receive only half of the usual amount for the second successive year.

Not half the amount the other clubs receive, but half the usual (= annual). amount.

Or 48.17% of the other clubs.

The going concern was almost certainly worth far LESS than what he would pay for the assets out of administration. BECAUSE of the liabilities. The old company was worthless - worse than worthless, in fact, since its liabilities exceeded its assets. It is likely he would have paid a notional £1 for it, and THAT wouyld have been a premium over its bok value, meaning a significant value would have had to be attributed to goodwill and other intangible assets like player contracts.

And, whilst it would not be him personally paying off creditors if he bought the going concern, he would have had to have put cash into the business to enable the creditors to all be paid. So the all-up cost to him would be quite a lot more than the £1 he paid for the shares.

In buying the assets only off the administrator, he would only buy certain assets anyway. Debtors stay with the administrator. In this scenario, there is unlikely to be much in the way of payment for goodwill, although the payment would reflect a value for intangible assets that he can obtain benefit from. He loses the book liabilities, but inherits the contingent employment liabilities. He also inherits a shedload of operation problems which take time and money to sort out. And of course, income streams like sponsors, season tickets and merchandise may well be gone depending on the time of year, and you have to start everything completely from scratch again. Cash is always very tight to start with.

Usually, on the face of it it appears that he is getting the assets cheaper than if he bought the going concern. And, on the face of it, that IS usually the case. But once you take account of the employment liabilities and contractual obligations TUPEd over, the likleihood that you will get little trade credit, and all the additional time and hassle and costs in rebuilding the business and re-establishing all the relationships with suppliers, partners, sponsors, staff, everybody really, that all gets reflected in the price. So, all things being equal, the price reflects what is involved in each scenario.

Both alternatives have their upsides and downsides. In my experience, any financial benefit you get out of buying a business out of administration rather than as a going concern is often more illusory than real. And its bloody hard work, especially when the business has to be kept running regardless

As for stopping e.g. Richardson putting the business into administration, buying the assets off the administrator through a phoenix company and just carrying on, having dumped the debt: whilst its not quite that simple, that sort of nonsense happens a lot across business generally. All too often. Most of us will know people who have done it. SOme are genuine, but all to many have simply scammed theoir creditors. There are various legal provisions to limit the scope for it, and to limit the more blatant abuses, but they are not as effective as they need to be. One reason for that is that the law has to strike a balance between not stifling genuine rescues and restarts, and not allowing phoenix company abuses owned by the same bandit.

But you'd not need to worry in RL. It seems pretty clear that the RFL would not admit a new company to membership of the RFL, nor grant it approval to take part in competition, if it was just a phoenix owned by the same crowd. Not least because this would almost certainly get it red-carded when it come to being eligible for public sector money (the RFL got into very deep water over Crusaders, I believe?) and also of course because the other clubs would not wear it. I believe - at least from observation - that we saw precisely this in the previous Bradford insolvency, where it seems pretty clear to me at least that the RFL had no intention of allowing any successor owned by former shareholders.