Only yesterday we noticed a couple of websites (naming no names) who still publish some wildly erroneous information relating to Liverpool’s finances.
They really should know better. So to clarify, and to clear up some issues for fans who may have become confused by the disinformation, here we provide a brief analysis of how Hicks and Gillett and the board who have overseen it, have got Liverpool in to such a mess.
Just to recap.
Liverpool were ‘bought’ by the present owners in early 2007 for £175M + the existing £40M of debt. Approximately £215M.
Of course they didn’t buy us. They borrowed the money from various banks.
As the interest began to rise uncontrollably and increase the debt, and they wasted money on their architect friends to design expensive plans for a stadium they were not going to build etc, the debt ballooned up to around £350M.
But the RBS/Wachovia banks who lent the money began to grow wary and decided they needed to reduce this loan if they wanted an extension.
Over the period of two refinances, the RBS loan was eventually brought down to around £230M. But where did the money come from?
That’s right another ‘loan’ – from some offshore Cayman Island Hicks and Gillett investment unit. But this time the owners were lending the club money and charging us a whopping 10% per year.
Just consider that for a second.
Fees and interest have led to the situation we are currently in. (We estimate RBS has creamed about £120M in interest and charges out of Liverpool FC, if not much more).
We now owe RBS approximately £270M, and Hicks and Gillett are owed approx. £150M (about £30M of which is the nice interest they have been charging us and banging on top of their loan).
Which makes our approximate figure of debt, and the one correctly reported by the BBC today, as £420M.
More number crunching
If Hicks and Gillett get around £390M for the club (they will break pretty much even).
If they get £420M they will make their £30M profit from the interest.
If the bank call in the loan and the owners cannot refinance, RBS/Wachovia will obviously want as much as their money back as possible and will likely step in to take over the sale. If the club is sold for £270M then the bank get their full loan back and can lie back and enjoy the £120M+ they have made out of LFC in interest. Hicks and Gillett would lose approximately £120M from their ownership of Liverpool FC.
It is hard to see how the present owners have added value to Liverpool FC. They have caused huge disruption behind the scenes, they have divided fans across the world, their ownership reign has not been a success on the pitch, and their asset-stripping of players and effect on morale has contributed to the club sliding down the league table. Improved sponsorship deals have been signed, although they are heavily dependant on performances, and as such currently are not pulling in as much as they could be. With each passing day they remain, more fans are becoming disenfranchised from the club, and it’s value slips.
Tom Hicks was rumoured to want £800M for Liverpool FC. He’s living in fantasy land. The club, at present, is probably worth little over £250M.
So it would be an exceptionally foolish bank who lent him more money to repay RBS. With fans threatening increased action if a refinance goes through, it is almost certain that the bank who did so would never see it’s money again.
Liverpool’s long term future depends on the immediate forced removal of the current owners by RBS. If the club can be taken over without administration and we don’t get a 9 point penalty all the better, but if we must take a 9 point penalty then so be it. In years to come it will have been a light price to pay.
Liverpool will not go bust. Debt-free it is a highly solvent business. But the urgent removal of the present owners, hopefully having had a hole burned in their pocket, is the most pressing concern for all fans who care passionately about Liverpool Football Club.
Only when they leave will we once again be able to see the golden sky on the horizon.
By October we should know who has either stood with us, or who has stood in the way of our bright future.