Why doesn't every club just go in to Administration?

[MB62]

What Whyte is trying to do with the sons of darkness is basically wind them up as a club, leaving all the debt clear, start again from fresh with a new name, rangers 2012 or whatever, and the club has saved £75m in one easy action.
According to the BBC website, the HMRC (us) will get nothing and the new rangers will be debt free, can it be that simple and if so, why is every club in the country not doing the same thing, in particular the pinkos from over the road?

From what I can gather, our debt is running at about £20m, although a lot of that is mortgaged and manageable, but shirley if what Whyte is trying to do is that simple we should maybe consider it too.


Somebody please tell me it's not that easy (or that we are not in £20m debt) :greengrin

[Part/Time Supporter]

Hibs are not in £20M of debt. Nearer £7M, made up of two mortgages on the West Stand.

Administration is a dangerous process because an outside party (the administrator) takes control of the club. He can get rid of anyone he likes in order to balance cash inflows against outflows, because he can't borrow any money. This would have an obvious effect on a business like football where you have inconsistent cash flows (ie big inflows during the spring/summer, but losing money the rest of the time).

The second factor is that in order to exit administration you need to have an agreement with creditors (CVA). The CVA only works if the creditors agree to it. If (say) Hibs wanted to go into administration to shed the West Stand debt, then the holder of that debt (HBOS / Lloyds, I think) would have an effective veto on any CVA, because they hold well over 25% of Hibs' debt. As Hibs have significant assets (Easter Road, East Mains) then the creditors would not look favourably on any attempt to make them take pennies in the pound.


As for Hearts, the vast majority of their debt is held by Romanov (either through UBIG or UKIO Bankas). Administration would work for Hearts if Romanov agreed to write off that debt, but his other businesses would also lose a massive asset on their balance sheets. It wouldn't make Romanov any better off overall, as he owes the money to himself, and would cause problems mentioned above.

Administration only really works if a) you have a sweetheart creditor who is prepared to write off most or all of the money owed to him/them (eg John Boyle / Motherwell) or b) you have a mix of creditors where nobody has that effective veto over a CVA (eg Dundee).