The Bank, Rangers and Walter's 'spending spree'

Last updated : 07 January 2011 By Deep Thinker

I have read on a number of occasions over the last few weeks and months about Walter Smith and suggestions that he's not quite as transparent as he should be and even read suggestions he's been complicit in misleading people.


Let's clear this one up once and for all.  Walter Smith has fought almost single handedly to protect the Club we love. 


What about him spending over £4m on two strikers?  I can hear that retort already?  Really?  Is this what we as a club have become?  That we're delighted by a couple of signings and let it mask reality?  Season 2010/2011 started very differently from 2009/2010.  Our squad no longer included Pedro Mendes, Demarcus Beasley, Kris Boyd, Kevin Thomson, Steven Smith, Nacho Novo or Danny Wilson.  I'd suggest their combined salaries amounted to anywhere between £3m and £4m and that's me being conservative.  Mendes £1m, £2m between Beasley, Thomson and Boyd with the other 3 being on less.  Now take the transfer fees received.  Did we give Mendes away or was there a fee?  Thomson and Wilson are reported to have brought in close to £4m.


Our squad was hit in terms of numbers but we brought in Beattie, Jelavic and Weiss and I'm led to believe we did not net spend.  Certainly we didn't touch our Champions League money like we were promised.  Maybe some assertions that it would be ring-fenced have actually proven correct.  Our outgoing wages are likely to be a similar level to the players who left if I'm being generous but I'd be inclined to suggest there is no way the three who came in will take home over £3m between them.


So, in a year where we've won the league and qualified for Champions League we're led to believe by some that our manager has "been given money".  Wrong.  He got to spend what he brought in but reduced the wage bill at the same time. 


The squad is now as tight in numbers as it's ever been.


A spending spree that's actually reduced our outgoings - no wonder our manager is concerned.  He's fought a losing battle as the squad has been reduced and reduced.  This is during a relative good period with the Club winning the league and competing in the Champions League which is vital to our finances.  How can we hope to improve our squad next year when the budget has reduced in successful years?


Yes there's been a lot of talk that's not come to fruition that players would be sold.  Has it ever occurred to anyone that the reason players were not sold was because of the pressure applied by the fans on the back of the inflammatory (quite deliberate in my opinion) comments from the manager?


Davis was offered to Birmingham - it was openly discussed amongst that club's Scottish contingent following Donald Muir visiting his friend Alex McLeish at the training ground.  I believe MFDM even challenged him on this at the AGM of 2009.  Perhaps once the cat was out the bag with that one it made it more difficult for the sale to progress?  Boyd knocked back moves and let his contract run out.  Thomson was sold despite publicly saying he'd like to stay.  We've perhaps been lucky that we didn't lose more players than we did.  But can we honestly expect that to continue especially without automatic entry into the Champions League for us if we win the League?


Let's make no mistake; the squad has been dramatically reduced.  I hesitate to use his name such is the level of cynicism directed to him on FF but Darrell King claimed that the squad would be hit and the numbers would be made up of youths.  Well, already this season we've had Kyle Hutton, Darren Cole, Jamie Ness and Greig Wylde all feature for the first team.  You could add John Fleck to that list.  Then we've seen Ross Perry, Rory Loy, Kal Naismith and others involved in the match day squad.  Who could actually argue with that particular journo's assertion that the squad would be made up of youngsters?


Let's be blunt; people say the doom and gloom being predicted a year ago or whenever hasn't materialised.  It's not, because we're winning.  If we were struggling in the league people would be paying much more attention to what was going on.  The reality is that we have downsized.


The squad is reduced; our ambition is reduced.


Whilst the banners that were commissioned to replace/cover the screens are fitting and capture the mood of the support let's remember they're there because the Bank (as confirmed at 2009 AGM) refused to sanction the capital expenditure request for new screens.  The FF messageboard is full of discussion about the lack of proper upkeep of our stadium.  I'm not even wanting to fully discuss it because frankly the condition of our stadium is shameful and anyone who comes in to takeover the Club will have to make a serious investment in improving fundamentals within the stadium (such as TV's etc).


This is what happens when banks are involved so heavily in any business.  They're not prepared to speculate to accumulate.  They look at a playing squad and see assets.  Two strikers earning different amounts of money.  A banker's logic is keep the cheap one and lose the expensive one.  Reduce all costs wherever you can.  They make short term decisions based on what's right for that and what will get them their money.


Also, many people allude to us repaying our debt annually and "we've got an agreement - there's nothing the bank can do".  Rubbish.  On a term loan the bank cannot touch us if we're repaying at the agreed rate provided we're not breaching our covenants.  We could be repaying at the agreed rate but if we breach a covenant then they're entitled to call in their loan.  A covenant might be how much profit we make annually.  Also, a long term loan is much different from an overdraft facility.  As many businesses have found in recent years an overdraft can be withdrawn without any real notice at the expiration of it (usually annually) or the terms might change.  The interest rate may go up.  The limit may go down.  Make no mistake; a bank can make life extremely difficult for any business. 


It may be worth noting that when MIH's accounts were last published it was noted that some of MIH's covenants with the bank had indeed been breached so the scenario painted above is not unrealistic.


If the activity of today has done anything it's perhaps served to make people stop and think once again.  If you take anything from this article please stop and think.  Think of where the club was a year ago in terms of playing squad and facilities and can you honestly say there's not been an impact of downsizing?  The Club has to live within its means but it needs fresh ownership to push it forward, run it more effectively with less of a debt burden.  It remains to be seen if Andrew Ellis and Craig Whyte can achieve that.  In fact, I'd find it highly unlikely which means it's worrying times for our Club.


This Bear would just like to finish by thanking Walter Smith for fighting for our Club the way we'd all like to if in his shoes.