Rangers count the cost

By Alex O'Henley

When Rangers FC announced that their debts had risen by almost €9m to €105m last week, it was almost good news for the Glaswegian club.

Major improvement
After all, having announced an increase to their debts of €43m the previous season, it marked a major improvement in the Scottish side's financial situation. And in addition to that, chairman David Murray also announced plans to wipe out all of the club's debts within a year through a share issue.

Difficult times
With their local rivals Celtic FC very much on top in Scotland, Rangers have had some difficult times, and many regarded it as something of a humiliation when former chairman John McClelland presided over a major campaign of cost-cutting in recent years.

Transfer income
However, that policy and sensible management have seen Rangers' finances improve. The sales of captain Barry Ferguson, Lorenzo Amoruso (both to Blackburn Rovers FC) and Neil McCann (Southampton FC) meant that Rangers banked €15m in transfer money last season.

UEFA payments
In addition to that, the club also reaped €14.5m from participating in the UEFA Champions League group stages in 2003/04 - a vast improvement on the €1.5m they picked up in the previous season when they bowed out of the early stages of the UEFA Cup against Czech side FK Viktoria Zizkov.

Cup run
Having lost to PFC CSKA Moskva in the third qualifying round this season, Rangers cannot expect to receive such a payment this season, but should they progress past CS Marítimo in the UEFA Cup, they will be able to elicit some European revenue during the course of the season.

Interest rates
However, as far as the club's board of directors is concerned, Rangers' main challenge is clearing their €83m of debts and overdraft with the Bank of Scotland. With interest on those debts costing €16,000 a day, clearing them could save Rangers millions in the course of a season.

Debt clearance
That is why Murray is launching a share issue, underwritten to the tune of €70m by his own Murray International Holdings company, to pay off what the club owes. "The long-term financial future of Rangers will be secured through our proposed fund raising and together we will bring the good times back to Ibrox," said Murray. "The reduction of the historic debt eliminates negative media attention and removes the significant interest burden."

Sensible budget
The share issue could even leave money for manager Alex McLeish to buy players, but the days of the 1990s when the club were prepared to pay €17.5m for Norwegian forward Tore André Flo are over. "Our past ambition was financed by large capital investment and the promise of media revenues that did not materialise," said Murray. "We must now operate within our budgetary constraints."

Welcome move
The initiative has been welcomed by pressure groups such as the Rangers Supporters Trust and according to David Glen, a financial expert with PriceWaterhouseCoopers, Murray's plan could result in a level financial playing field with Celtic.

Level playing field
"The results can be seen in a positive light as Rangers have taken between £4-5m (€6-7m) off the wage bill and increased turnover because of the Champions League," said Glen. "After the rights issue, both clubs' debt will be about the same and their relative financial success will then depend on how well they do in Europe."