Re: Ownership and twists : Wed Feb 19, 2014 10:21 pm  

Slugger McBatt wrote:

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.

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.

Re: Ownership and twists : Wed Feb 19, 2014 10:30 pm  

the inquisitor wrote:

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

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

Re: Ownership and twists : Wed Feb 19, 2014 11:13 pm  

Adeybull wrote:

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.

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.

Re: Ownership and twists : Wed Feb 19, 2014 11:23 pm  

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.

Re: Ownership and twists : Thu Feb 20, 2014 12:06 am  

Slugger McBatt wrote:

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.

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.

Re: Ownership and twists : Thu Feb 20, 2014 2:55 am  

Sorry mate....but you have been undone!

Adeybull wrote:

Derision again? The last refuge of the incompetant.

Sorry......but it's just too beautiful to not re-post!

Re: Ownership and twists : Thu Feb 20, 2014 7:23 am  

Adeybull, on the point of not punishing current owners - surely you accept that the current owners have to accept some of the blame for the liabilities to HMRC which have gone unpaid for months during their stewardship ? This in itself is a serious breach of the Operational Rules which can bring a misconduct charge from the RFL. To say they should be completely absolved is a little disingenuous - they are at least partly responsible for those non-payments.

Re: Ownership and twists : Thu Feb 20, 2014 8:15 am  

By "previous owners", Bulls fans want us to think only of Khan.

The 3 current directors were there prior to the latest crash and were responsible for the running of the club.

Re: Ownership and twists : Thu Feb 20, 2014 8:19 am  

dboy wrote:

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

How did Keith Mason get in on this thread?

Re: Ownership and twists : Thu Feb 20, 2014 8:27 am  

Derwent wrote:

Adeybull, on the point of not punishing current owners - surely you accept that the current owners have to accept some of the blame for the liabilities to HMRC which have gone unpaid for months during their stewardship ? This in itself is a serious breach of the Operational Rules which can bring a misconduct charge from the RFL. To say they should be completely absolved is a little disingenuous - they are at least partly responsible for those non-payments.

Partly responsible but I'd question how they were supposed to pay for them? Given that once they got access to the books they realised the level of shortfall, announced this to the fans, started making cuts, stated that players could leave (but none did) and made people redundant. If there is no or little cash the choice is then to either not pay wages or put their own money into a business they didn't and might never have owned.