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Sir David Murray effectively owns almost 92% of Rangers

Analysis by Simon Bain

BEHIND the smoke and mirrors of the Rangers financial crisis, who is really

pulling the strings at Ibrox?

It would normally be its owner. Of the 109 million shares issued by Rangers,

almost 100 million are held by two subsidiaries of Murray International

Holdings, where Sir David Murray owns 63% and the Murray family in total 81%. So

Sir David effectively owns almost 92% of Rangers.

Dave King, director and potential buyer, has the only other sizeable stake of

three million shares, held through Metlika Trading, a company registered in the

British Virgin Islands.

advertisementWhen Sir David stepped down as chairman two months ago, it was a

move he had been flagging for three years. But after failing to find a buyer for

his shares, it meant that his successor, Alastair Johnston, though nominally

leading the board in financial and strategic decisions, would inevitably defer

to Sir David or an eventual new major shareholder.

Then, only six weeks after the change, there was a key change in board

personnel. Turnround specialist Donald Muir was appointed to the boards of both

Rangers and the MIH subsidiary Premier Property Group - the business in Sir

David's empire suffering most impact from the downturn.

The appointment must surely be at the behest of Sir David's bankers. Lloyds

Banking Group holds 11.5% of MIH, which by last year had racked up a debt of

over £773m to the bank.

The scope for autonomy in the board, and even for day-to-day operational

decisions made by the chief executive and affecting coach Walter Smith, had been

restricted even further. A bank representative on a board signals a proactive

approach by the bank to reducing debt - which stood at £21m by June last year,

compared with a manageable £5m or so only a few years ago.

Most borrowings are at a fixed rate above the inter-bank lending rate - but the

bank will probably have increased the cost if Rangers has slipped up at all on

the repayment schedule. This is why it is so important to know whether Rangers

have breached their banking covenants - the terms of their borrowing from the


Rangers' last full accounts showed a 50% rise in interest costs to over £1.4m.

Meanwhile, half-year results in March showed Rangers had plunged to a £4m loss,

largely because of a trebling of the wage bill in the successful 2007-08 season

to £30m a year, and an early European exit last season.

In Sir David Murray's empire, the football business contributed less than 10% of

turnover in the equally prosperous year 2007-8, though Rangers' £6.6m pre-tax

profit equated to a third of the £20.6m group profit. The downturn, however,

along with the implosion of Bank of Scotland and its absorption by Lloyds, has

cranked up the pressure on MIH to reduce debt by selling assets, stakes or


The business plan apparently mooted by the bank, and rejected by the board,

calls for a radical sale of player assets at Rangers. It reflects the tightening

squeeze which began last January, when the club effectively put a "for sale"

sign on all first-team players, and continued in March when an audit of the

accounts by PricewaterhouseCoopers prompted the £1m sale of Barry Ferguson and

the removal of 10 fringe players from the wage bill.

Since March, when the broader stock market has climbed by as much as 50%,

Rangers shares were down 11%. However, after Monday's statement that a sale of

Sir David's shares may be in the offing, the mid-market price being quoted

yesterday was up by 25% at 49.5p.

The only alternative to further cuts is new equity investment, to replace some

of the debt, from a new investor. But while the old Bank of Scotland may have

considered injecting some cash, perhaps as part of a property deal, the new

Lloyds is proving no fairy godmother to businesses across Scotland. The merged

bank is itself under pressure from the taxpayer, which owns 43%, to instigate

payback time.

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