Scottish Government justify their £3.2m interest free Ibrox bail-out

With Dave King due to have a £5m loan repaid this month The Herald has published a lengthy piece of the interest-free loans given to football clubs by the Scottish Government.

To the cynical eye the £3.2m sent to Ibrox could be used to pay off their former chairman.

In January the Scottish Government made £20m available to Premiership clubs with £1.818m wired through to Ibrox. In March a further £5m was handed to football with £1.282m sent to Ibrox with Season Ticket renewals not starting till May.

A number of Terms and Conditions came with the 20 year repayment plans which exclude executive bonuses, Celtic were the only Premiership club not to take advantage of the offer from the Scottish Government.

Covering the issue, The Herald reports:

Ministers said: “The pandemic created unprecedented challenges for all sectors, including Scottish sport.

“Restrictions on supporters attending events were put in place in March 2020, causing severe financial problems across a number of high profile sports. Sports clubs across the country are at the heart of communities and, without urgent financial support, many may not have survived. Football in particular in Scotland is extremely dependent on supporter income, with the highest per capita attendance in Europe with gate receipts accounting for 43% of revenue – almost three times higher than the European average.

“The Scottish Government launched the Emergency Scottish sport rescue fund which focussed on ensuring sustainability and survival in the short to medium term across all sports. Football was awarded £30m which was utilised to cover the entire Scottish Professional Football League structure and to support women’s football.

“The Scottish Government agreed in February 2021 to provide The Rangers Football Club Limited with a credit facility of £1.818 million. This was funded from the initial £20 million Premiership Division Support Fund, part of the £55 million emergency sports funding package put in place by the Scottish Government to tackle lost ticket revenue during the pandemic.

The Scottish Government increased the Premiership Division Support Fund by £5 million in March 2021 and the Rangers Football Club Limited’s credit facility was subsequently increased to £3.2 million.

“The Premiership Division Support Fund was initially allocated on the basis that no applicant could receive more than the estimated total amount of income it would have lost and the additional expenditure it would have incurred by the end of season 2020/21 as a result of compliance with Covid-19 public health rules.

“The Scottish Government took into consideration lost income and additional costs relating to season 2019/20 as well as season 2020/21 in assessing applications. The initial £20 million was allocated on the basis that no club would initially receive more than £20 million divided by the number of applicants.

“The Scottish Government decided that the loans would be interest free and repayable over a period of 20 years beginning in September 2022. The Scottish Government provided credit facilities to Scottish Premiership football clubs on the same terms and conditions. The terms and conditions were communicated to all potential applicants.”

It is understood that amongst the terms and conditions was a rule that club directors cannot pay themselves bonuses or above-inflation pay rises until the cash is paid back.

Quarterly financial reports are being issued to ministers by the clubs, and any “threatened change in the financial position” is expected to be reported to Scottish ministers immediately.

In the event of any club with a loan going into administration, the unpaid money is expected to be paid back with interest.

When Rugby Clubs were given similar funds repayment was due if loans were repaid to Directors.

The Herald specifically avoids that scenario with Dave King due to have a £5m loan repaid by the end of this month, that loan was mentioned in the recent share prospectus where the Ibrox club was hoping to raise £6.5m.

Only £4.5m was raised by supporters before costs are deducted. If the club goes into administration it looks like the Scottish Government will be one of the most significant creditors with questions asked about the Quarterly Reports to keep Holyrood upto speed over cash flow.

In the year to 30 June 2020 the Ibrox club recorded losses of £15.9m on turnover of £59m, their accounts for the year to 30 June 2021 are expected to show losses in the region of £30m with a traditional Friday evening publication.