LONDON (Alliance News) - Rangers International Football Club PLC Tuesday said it has entered into an agreement with Sports Direct International PLC under which the retailer will provide the company with a credit facility of up to GBP10 million, a deal that means Sports Direct founder Mike Ashley will no longer have a direct loan to the club.
Rangers said the directors of the club have considered a number of options to secure its funding, but said the deal with SportsDirect.com Retail Ltd represents the "optimum combination of quantum and duration of funding, allowing the company time to arrange permanent capital which can be used for strengthening the playing squad."
The facility will be split into two tranches, Rangers said, with GBP5 million to be made available immediately to cover working capital and to repay the loans provided by MASH Holdings Ltd, Ashley's investment vehicle, in October.
Under the first tranche, the club will transfer 26% of the share capital of its Rangers Retail Ltd business, a joint venture with Sports Direct, to the retailer for the duration of the facility, to be transferred back once all outstanding sums under the loan are repaid. Rangers Retail was incorporated in September, with Ashley named amongst the three directors.
Sports Direct will also be given the right to nominate two directors to the board of Rangers during the duration of the facility. Ashley has already used the influence he gained as the club by providing the GBP3 million in loans in October to appoint Derek Llambias, a long-time associate of Ashley, as chief executive and Barry Leach, former Sports Direct finance chief, as chief financial officer.
Ashley is interested in acquiring the struggling Scottish football club, but has so far been prevented from doing so due to Scottish Football Association rules that preclude any existing owner of a football club being involved in the administration of another. Ashley is already owner of Newcastle United FC.
The second GBP5 million tranche will be used by the club, if required, for working capital purposes and is subject to due diligence by Sports Direct before any drawdown can be made.
Rangers said the first tranche of funding has been secured by a floating charge over the club's assets and fixed charges on its Murray Park training ground, Edmiston House, Albion Car Park sites and its registered trademarks. The club noted none of the security for the loan covers Ibrox Stadium. Prior to the deal being announced, Rangers had said it would have to consider using Ibrox as security, despite having pledged not to do so in the past. That sparked a backlash from fans which appears now to have swayed the club away from using the stadium as part of the loan deal.
Rangers has also agreed that for the duration of the loan facility, any future shirt sponsorship proceeds will go to Rangers Retail.
Rangers Retail will also issue a GBP1.6 million dividend prior to the transfer of the stake to Sports Direct, the proceeds of which will be used to repay the sums owed to the sports retailer in respect of the cessation of leases on unprofitable stores entered into by a previous Rangers management team.
"The board has sought for some time to establish a long term funding solution for the company in order to create a platform of stability to build for the future. This facility begins this process and we very much hope that it will be augmented with further permanent capital in due course," said David Somers, Chairman of Rangers.
Rangers shares were up 11% to 31.00 pence on Tuesday morning, one of the best performers in the AIM All-Share index.
The deal with Sports Direct has been chosen over an alternative proposal understood to have been tabled by the Three Bears consortium, a group of investors in the club who hold a combined stake of around 20%. The three, comprising shareholders Douglas Park, George Taylor and George Letham, were understood to have agreed to match the funding offered by Sports Direct and were seeking two seats on the Rangers board.
The rival funding deals emerged last week when Rangers also disclosed that Dave King, who holds a 14.6% stake in the club, had issued a notice calling for a general meeting of the club to vote on the removal of the club's entire board. King is calling for the removal of Somers, Llambias, Leach and Non-Executive Director James Easdale.
Llambias and Leach are both associates of Ashley, while Somers and Easdale are both considered sympathetic to his cause.
King, a former club director, proposed he, Paul Murray, another former director, and John Gilligan, the former managing director of brewer Tennent's and a former vice-chairman of the Rangers Supporters Trust, be appointed to the board to replace the incumbents.
King's proposal could face some regulatory hurdles as both he and Murray do not pass the Scottish FA's fit and proper person test for a club director. Both were on the board of Rangers when it collapsed into administration in February 2012, contravening a clause precluding anyone who has been on the board of a club which has been placed into administration in the last five years from being appointed a club director.
King also fails to pass the test on a second count, namely his guilty plea entered in South Africa in 2013 on 41 counts of tax fraud. The SFA rules preclude anyone who has been convicted of fraud in the last ten years from being appointed to a club board.
Ashley also fails the SFA test due to its rule that no person involved in the administration of one club can also be involved in the administration of another, but by completing the loan deal through Sports Direct and repaying the loans he forwarded via his MASH Holdings Ltd investment vehicle, Ashley may be able to sidestep that rule. He is due to face a disciplinary convened by the SFA today regarding alleged breaches of dual ownership.
By Sam Unsted; samunsted@alliancenews.com; @SamUAtAlliance
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