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A brief note on LFC debt

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.

Current Situation

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.

Value

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.

  • Russell

    On the basis of these figures it seems the target of our ire should be RBS who stand to make 120 million in usurious interest and penalties, rather than Hicks and Gillet who would be lucky to break even.

    In fact, as I agree with the OP that H&G are likely to lose some money on the eventual deal, I almost, and I really do mean almost, feel sorry for them.

  • Colyn

    THe bit I’m not sure about is the £120m that’s owed to Kop Kaymen. While they are effectively owned by H&G they are owed money.

    Can RBS just take owenership with Kop Kaymen not having any say in it whatsoever? I’d be grateful if someone could clear that up for me.

  • Rizal

    This is Anfield…and I know we will never walk alone…..
    yes 9 points is a light price to pay for the long term future of the club we love so dearly….

  • Phinster

    I do not know of a process in which ownership of the club can be changed without H and G accepting an offer or the club being placed into administration.

  • Frankie

    Greedy Yank Pig Pirates………Its absolutely disgusting what they have done and they even have the nerve to attend games…….I pray the right result comes our way and thats leaving these two filthy pigs with nothing because thats what their ownership has brought!!!

  • JohnChesterWilliams

    Great article that explains the financial situation in a very clear context.The fact is that these two cowboys have deceived everybody with their false promises and dont seem to show any interest in wht the fans want.They only ever attend the big games and are never seen trying to defend their actions.I think that by October the club could be in a far more positive situation and we can all look forwars to a brighter and glorious future under new ownership.

  • Benihill

    Superb article. Clear and factual. Gives clear context to the current situation.
    Put this together with:
    1) The bbc articles explaining how all potential buyers are waiting for the club to be forcibly sold by RBS on the cheap.
    2) The Purslow LFC.tv interview which reveals that the three non-owning Directors are ‘colluding’ with RBS to ensure that the club is not refinanced with crippling levels debt.
    All points to Hicks and Gillette being forced out with significant losses.

  • Sue

    Liverpool FC is over as we know it. Tthe club will not recover from the Moores/Parry apathy when rival clubs developed their businesses when a lot of money came into the game. Better facilities, bigger grounds, improved commercial efforts etc. The new owners had the right ideas, but had no money and got caught in the global financial meltdown. Had it not been for that, we would be looking at a new stadium in progress, rather than today’s situation of it never happening.

    • Benihill

      Sue
      Read the article again and don’t be so despondent. We’re on the cusp of probably the best possible solution. H&G out with very little to show for it, new owners buying the club on the cheap with stipulations not to saddle debt on the club.
      This means more money to be invested in the club. The financial gap will potentially be closed in a very short period of time. Contrast this sharply with United who will continue to be saddled with parasitic owners and crippling debt.

  • maikel

    another romour goes on tha the R.B.S. willing to give H & G more time to sell

  • Andy T

    Hicks and Gillett are just a couple of business men making a buck. You can’t complain if you get into bed with a hooker and end up with an itch. The problem and fault lies totally at the feet of the idiots that profited by selling to them in the first place.

  • dave

    Provided you are correct, this was a good article. All fans should understand the situation so they can make the most impact. If their is any poetic justice, H&G will be lose their proverbial hats and be forced to sell the Big Issue outside the Anfield gates.

  • Dave Kennedy

    What Hicks and Gillett have done is a disgrace, they never had any regard for our club or football. Just a pair of greedy b*****s out to make a quick buck.

    • imran

      tom and george have taken us as far as they can
      i think the rbs loan will be extended
      i fear the club will be in decline