Liverpool FC Forum

by **red37** » Thu Sep 06, 2007 3:49 am

Just been reading this on the Telegraph site. While it all appears to be under control on the face of it...is there any real cause for concern yet at this stage?

LIVERPOOL'S PROPOSED DEBTS MAY SPARK ALARM
By David Bond - 06/09/2007

When Tom Hicks and George Gillett Jr bought Liverpool in a £174 million deal in February, contrasts were immediately drawn with the Glazer family's takeover almost two years earlier at Manchester United.

Here was another of English football's most revered institutions falling into the hands of American raiders. But unlike the Glazers, there was no campaign to try to stop Hicks and Gillett from acquiring Anfield. Instead, they were welcomed with open arms, as saviours of an underperforming club, who despite winning the Champions League in 2005, were desperate for new investment to help them win the Premiership. However, the differences with the Glazers may be more difficult to spot in the future. Hicks and Gillett are now seeking to borrow at least £500 million to refinance the original loan used to buy the club, and to pay for the move to a new 76,000-seat stadium at Stanley Park.

When the Glazers borrowed a similar amount to purchase United - much of it from punitive hedge funds - the level of debt was used against them by their critics. But the initial £298 million borrowing by Hicks and Gillett, split imto £185 million to buy Liverpool and £113 million as working capital, passed without too much comment.

"We have purchased the club with no debt on the club, so I think in that regard it is different [to Manchester United]," Gillett said when asked about comparisons with the Glazers following the takeover.

The original loan from the Royal Bank of Scotland, which was personally guaranteed by the Americans, has to be repaid in Feb 2009 and currently attracts a hefty £21.5 million in annual interest. Liverpool's owners now want to refinance those borrowings over a much longer term - secured, crucially, against the club's assets - and to roll that debt into the loans being used to pay for the stadium.

Given their ambitious business plans for the new ground and English football's booming television rights values, raising the money should have posed few difficulties. But that was before the global credit crunch started to bite, forcing banks to pull in their horns. Liverpool, guided by their financial adviser Robert Tilliss from New York-based Inner Circle Sports, were close to approving a proposal from Goldman Sachs.

However, it is understood that in the last month Goldmans reviewed their offer, asking Hicks and Gillett to put in much more of their own money, thought to be around £100 million. And although Goldmans have not yet been ruled out, a re-think is now under way, with Tilliss in talks with a number of other financial institutions including Wachovia, Citigroup, Morgan Stanley and RBS. In an attempt to calm any fears over the club's long-term business plans, Hicks told Inside Sport yesterday that the refinancing remained on track. But it is understood that Liverpool must provide assurances on the funding for their new stadium before plans go before Liverpool City Council on Oct 18.

Failure to do so could mean the project, which is due to start in the New Year and is supposed to be finished in 2010, is delayed. Hicks said: "The lead on this is being handled by Inner Circle Sports. Through them we have been talking with a number of financial institutions including Goldman Sachs on the stadium financing.

"We have not reached any definitive conclusions yet but we are looking at a number of alternatives. "The time-line for obtaining the final stadium finance package and our ability to commence construction, following approval by Liverpool City Council, calls for us to get started by early next year.Everything will be finalised long before then."

Tilliss said the club were considering long-term loans secured against future ticket revenue as well as shorter deals designed simply to pay for the construction of the new stadium. "The primary objective is the stadium planning," Tilliss said. "But we are also looking to put the acquisition debt on a more permanent footing. We are looking for the most innovative and flexible proposal." With the clock ticking, Hicks, who owns Dallas Stars ice hockey team and is the financial muscle in the partnership with Gillett, must make a decision in the next 30 days.

A lot will depend on just how much he is prepared to put into the Liverpool project. But even if he does eventually agree to put in a large chunk of his own considerable fortune, Liverpool supporters are likely to react with alarm at the levels of debt now being piled onto their club. A £500 million loan is 16 times Liverpool's operating profits for 2007, which are expected to reach the £30 million mark, thanks to their run to last season's Champions League final. In comparison, Manchester United's borrowings are eight times their operating profits, while Arsenal's are four times.

"Even by football's debt levels that is a heady figure," said one City analyst. Tilliss dismissed those calculations, saying the borrowings must be placed in the context of the revenues and operating profits that will be generated by the new stadium.

But, inevitably, Liverpool fans will begin to wonder whether Hicks and Gillett may have to bow to financial pressure and reverse their pledge not to copy the most hated Glazer innovation of them all - massive hikes in ticket prices.

by **Sarge** » Thu Sep 06, 2007 3:53 am

go read

"Mergers & Acquisitions for Dummies"

- USE OTHER PEOPLE'S MONEY -

by **kunilson** » Thu Sep 06, 2007 9:06 am

so at first they borrowed money for the takeover, standard loan no problem........and now that they need more money they will put the debt on the club's shoulders aswell as their own. that right yeah?

don't see much to comment on, with this amount of money there's always likely to be problems along the way, if hicks and gillette are the businessmen that they pimp themselves to be then they can handle this situation. as long as they dont put the club itself under too much pressure. they do that and the long welcoming arms will turn into fists, but this could also be a little bit of hype for a story from the telegraph?

by **MightyLFC** » Thu Sep 06, 2007 12:31 pm

Go to loan buster

by **ivor_the_injun** » Thu Sep 06, 2007 12:36 pm

Not worried. The line about ticket price hikes was purely speculation on the part of the author, and other than that there's nothing remotely unusual in there.

by **stmichael** » Thu Sep 06, 2007 12:48 pm

Football club in the red shocker.

by **Reg** » Thu Sep 06, 2007 3:40 pm

I agree with Ivor, there´s nothing in that articel of even remotely interesting or untowards. All companies review and reschedule debt to obtain best value for money and for cashflow reasons. We should look at the Dallas Cowboys operation more closely, are they cash starved as a result of Hicks financial management etc.. My Dallas colleagues have no such complaints about their local team.

by **NiftyNeil** » Thu Sep 06, 2007 5:09 pm

I'm not concerned. I think the difference when the Glazers took over Manure is that Manure were a very stable, profitable club with no debts - all of a sudden they became c£450m in the red.

by **7_Kewell** » Thu Sep 06, 2007 6:26 pm

as far as i understand it, the money Hicks and Gillett borrowed is not secured on anything LFC related. It is their loan to which they pay it back and not LFC directly.

by **Owzat** » Fri Sep 07, 2007 8:48 am

Were we underperforming? We weren't winning league titles, but only because the mancs had been buying the Premiership for the past decade and then Abramovich did the same but bigger. Our trophy haul was pretty good before we were taken over

by **mighty mo** » Fri Sep 07, 2007 5:10 pm

Reg wrote:I agree with Ivor, there´s nothing in that articel of even remotely interesting or untowards. All companies review and reschedule debt to obtain best value for money and for cashflow reasons. We should look at the Dallas Cowboys operation more closely, are they cash starved as a result of Hicks financial management etc.. My Dallas colleagues have no such complaints about their local team.

hicks does not own the dallas cowboys (NFL) franchise, he owns dallas stars (NHL) and texas rangers (MLB) teams.

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