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Monday, February 13, 2012
Updated: February 14, 12:33 PM ET
Are Rangers too big to fail?


In these days of Financial Fair Play, we're accustomed to reading about the threat of administration for small, struggling clubs such as Portsmouth -- the one Harry Redknapp, your future king of England football, left in financial disrepair. (It's been so bad at Fratton Park that Pompey is set to go into administration for the second time in the past two years.) Then there are those institutions you reckon are "too big to fail," immune to the basic economic laws of revenue and expenditure. Yet one of the most legendary teams in the world, Rangers Football Club, has gone into financial administration -- the British form of bankruptcy -- triggering a 10-point deduction that will leave rival Celtic 14 points ahead in the Scottish Premier League title race.

One half of the "Old Firm," with Celtic, Rangers are the most successful club in Scotland, with a record 54 titles. Now they teeter on the brink.

According to most experts and, indeed, Rangers supporters, this doesn't come as a surprise. Chairman Craig Whyte bought the club from then-chairman and owner David Murray for one pound in 2011, a telltale sign if ever there was one that all is not right in Glasgow. If anything, it suggests there's something very rotten at the core. Irony of ironies, the Old Firm -- a backhanded term that suggests two teams reaping the profits of their rivalry -- is close to being one-half bankrupt.

On Monday, we chatted with our resident expert on the Scottish Premier League, Derek Rae, who announces SPL matches for ESPN in the U.K., to get his views on what this all means for Rangers, the Old Firm and the health of the league overall. Here's what he had to say.

What's your overall take on Rangers' financial debacle?

Derek Rae: It's not a massive surprise because when Craig Whyte moved into the ownership position at the start of the season, he moved in under difficult circumstances. Heavily in debt, and with this tax case hanging over the club -- it's been hanging over them for a while -- it's a legacy of payments made to players done back over a number of years and the way these players were paid, using offshore entities. So Rangers have been waiting for a verdict in this case. We reckon that ruling will be any day now. It could be that Rangers got wind of what the tax tribunal will say and have decided this is the time to go into administration.

There are many people who feel that this was Whyte's plan all along -- that upon buying the club, he thought going into administration was inevitable. He's not said this publically, but he's not denied it, either. It's going to be a tense few days.

The interesting thing is, once you go into administration, there is a moratorium on the debt to give the club a chance to continue. So, I'll give you an example: Dundee United, who played Rangers in the Scottish Cup last week, have come out and said they are owed 100,000 pounds by Rangers as part of their fee that the visiting team gets in the Scottish Cup. And they're probably not going to get that because there would be a moratorium on the debt.

So it's up to the administrator at that point to sort out, "Right, here's what you can afford and here's what you can't afford." Players might be asked to take a cut in wages. Some might be offered a settlement to leave. All these options are open to the administrator, but it's very uncertain what will happen when a team goes into administration.

Rangers could re-form under a different name potentially.

DR: We've seen it before. Some teams will re-emerge under a different guise. At the moment, Rangers Football Club is the name of the team. But there's no official team called Glasgow Rangers Football Club, so theoretically they could go into administration, come out of it -- the old entity of Rangers Football Club would cease to exist -- and could re-form. And it would be up to the SPL and Scottish Football Association in this case to decide if they could move into the old Rangers' place with a 10-point penalty and try to operate on that basis. Obviously, they would be a very different entity, and there are all sorts of ramifications in terms of European football as well. If they were to get into Europe, which would still be a possibility with a 10-point deduction, the question of the license to get into European football would need to be sorted. It's not simple.

How does this potentially affect the Old Firm?

DR: The old argument has always been that the one needs the other -- that Celtic need Rangers. And while they are rivals, in a sense one has lifted the other. What really happened, if you go back a few years when David Murray was the chairman at Rangers, he famously said that "for every five pounds Celtic spend, I'll spend 10." That's really what got Rangers into this financial mess. If you go back 10, 11 years, they were paying players the sort of money that really ought to get you to the quarterfinal or semifinals of the Champions League.

"

Without Rangers, what are Celtic going to do? Win the league by 40 points every year? Their fans might enjoy that, but I'm not sure that would be a formula for success.

" -- Derek Rae

In terms of SPL, obviously Rangers and Celtic are the big selling points. And Celtic supporters might think, "Well, it would be nice to say goodbye to Rangers." But if they think it through, they'll realize that in many respects, their identity changes if they don't have Rangers around. You've got to go back to 1985 for the last time a non-Old Firm team won the top flight in Scotland. Losing Rangers would have profound ramifications for the Scottish game.

Both Celtic and Rangers need to address the competition element within the SPL. Not necessarily to the point of empowering teams that can actually beat them in the SPL, but I think without Rangers, what are Celtic going to do? Win the league by 40 points every year? Their fans might enjoy that, but I'm not sure that would be a formula for success.

Is this case a reflection of a deeper problem in the SPL?

DR: If you look at what's happened south of the border and the silly money that's floating around in English football, the SPL suffers in comparison. It's not that these EPL football clubs are inherently better or financially superior or better-run. There was an active decision made 20 years ago to invest money in English football, with television companies bankrolling the game, and the same thing didn't quite happen north of the border even though Rangers and Celtic as football clubs are as big as the biggest clubs in England. There's no doubt about that.

And the other thing I'd say about the Scottish game is that, again, it has been a two-team league historically, but if you look at the percentage of the population that goes to matches, then more people in Scotland go to watch football than just about any country in Europe, and that includes England by the way. So it's not like the people are turning their backs on Scottish football. I think the SPL have made quite positive moves in the past few years, great strides in terms of bringing young players through the ranks and trying to win back some of the supporters.

And we're also not just talking about any run-of-the-mill club.

DR: Rangers are more than a football club. This is a cultural thing for Scotland as well, if the worst were to happen. Rangers are the embodiment of a section of Scottish society, and Celtic the same. It would have serious ramification for Scottish society as a whole, and what I'd say personally is we have to keep our fingers crossed that Rangers remain in existence because they have a very proud history. They hold the record for number of domestic titles won, and I don't think Celtic would be quite the same without Rangers.

There's a saying in the U.S. about some institutions being "too big to fail." Is that the case for Rangers, or are they really looking into the abyss?

DR: Well, I think the second scenario is not impossible … I don't think they are too big to fail -- though you'd like to think that is the case. There are vast swaths of Rangers supporters in Australia, New Zealand, Canada and the U.S. as well. So it's a difficult one. I think everyone connected with the club and with Scottish football has to hope that Whyte made all the right calculations when he moved into the chairman's position.

And there are various other distractions. For example: A Swedish team, GAIS, who sold a player [Mervan Celik] to Rangers two or three weeks ago are now saying there's a dispute over compensation. The goalposts are moving all the time.

Something of a tangent here, but we read about Rangers and Celtic yearning to play in the English Premier League. If Rangers see this tax case through, will there be renewed calls for the Old Firm to join the EPL?

Bocanegra
Carlos Bocanegra joined Rangers in 2011.

DR: Well, I think that this always comes up every year or so, and inevitably someone knocks it down. The big problem is that, if you are the vast majority of English clubs, you have to ask yourself, "Why would you want Rangers or Celtic?" Because they'd become rivals for you in what is the richest football league in the world. There's no question that, hypothetically, if a team like Celtic were playing in the Premier League [it would do well]. They already have crowds that are up there among the biggest in Britain. And they would then get Premier League money. It stands to reason that it would not take them long to be competing for the Premier League title. I think that's just logic.

But -- and it's a big "but" -- they are a Scottish team, and Scotland is an independent country within UEFA and FIFA. And the problem for Scottish football is that if Celtic and Rangers hypothetically played their football in England, all the media interest would follow them and it would have the effect of, well, not rendering the SPL irrelevant but certainly diminishing its importance. So the idea tends to flounder when people look at it. There's not enough interested parties apart from the teams themselves, and maybe the biggest teams in England, because it might bring more riches as they'll never be too fearful of losing their position in the Premier League. But the Wigans, Stokes and Blackburns wouldn't touch this idea with a barge pole.

And another problem with this idea: If all of a sudden permission was given for Celtic to play in England, then the floodgates would be open. Ajax might want to play in the Bundesliga. You might have Portuguese teams saying they should get to play in La Liga. It would become a nightmare for UEFA.

And in some ways, Scottish football is trying to get its financial house in order.

The irony is that in the last few years, financial prudence has taken over in the SPL. This isn't happening because of things that occurred a year or two ago. It's a legacy of a decade ago and the daft spending. But most Scottish teams are living very well within their means, and young players are coming through. I actually think better times are just around the corner. I think teams have realized that the future is with their youth. Like MLS, it doesn't want to be known as a league of young players, but I've always argued that is one of MLS' great strengths -- that it has been a fantastic league for the production of American talent, like Carlos Bocanegra, who plays at Rangers. And the SPL shouldn't be ashamed to be that.

For now, it's too early to say whether Rangers will go out of business. It's a time for cool heads and sharp minds, and with a bit of luck, they can get themselves out of this.