Both debts to be paid by club

[chris71]

Stand by for old trafford like ticket price hikes and half a dozen new shirts every season. Rafa will have to start doing the lotto every weekend if he wants cash to spend on players. WE ARE SCREWED!

[Rashid]

Huge interest payments will cripple Reds

Posted on January 29th, 2008 by Jim Boardman

Tom Hicks got his PR firm to confirm last night what we’ve known all along - Liverpool Football Club will be paying the interest on the loan he took out to make himself richer.

Hicks, alongside his long-lost partner George Gillett, persuaded Liverpool’s then chairman David Moores to sell his shares a year ago, and persuaded him to recommend the rest of the shareholders do the same. Moores, with the help of chief executive Rick Parry, convinced shareholders and supporters that these two guys from America were what we’d scoured the globe looking for: the investors that would get us back on par with Manchester United in terms of financial muscle, which was the key to getting us back in contention for league titles after a long barren period in the wilderness.

The new investors we were looking for would ensure that we could build a new stadium without having to reduce our transfer budget during the development period. In fact we were looking for investors with the financial capabilities to increase our transfer budget from the off, a long-term plan that would see us ultimately become self-sufficient, but in the early stages would see us working from that initial injection of capital.

Unfortunately the two people who bought our club were financially incapable of doing that. They had to borrow heavily to buy the shares from the previous holder, and despite their boasts of clearing Liverpool’s debt, which was around £45m before their involvement, all they’d done was shuffled it into a different place. They borrowed nearly £300m when they took the club over, and that’s now increased to £350m.

Their argument is that most of it isn’t secured on the club. £105m of it is now owed by the club. Their trumpeted removal of the debt was all well and good - but it only got put into a different pocket for a year, and has now been put firmly back into the club’s pocket. And in that year it’s more than doubled from that £45m at the start of last year, to the £105m figure we see now.

They talk about the remainder of the debt being at the “holding company level”. That’s all well and good, but the holding company only has one asset - Liverpool Football Club. The owners, Hicks and Gillett, technically don’t own Liverpool FC. They own the holding company, which in turn owns Liverpool FC. The £245m debt the holding company now has is secured on the owners and their assets, but that security would only be required if the holding company was incapable of making the payments on the loan. So who will the holding company be getting its money from?

Well Hicks got his PR company to own up for him. A spokesman from Financial Dynamics, said on his behalf: “The holding company debt is supported by the assets it acquired and should there ever be any shortfall in cash flow at the club or anywhere else in Kop in any given year, Kop’s ownership, under the terms of the financing package, is prepared to fund whatever is required. The debt is being handled exactly as it is handled at the vast majority of professional sports teams.”

Think about this carefully. Liverpool FC will need to find approximately £9m a year in interest payments to keep on top of the £105m it is now in debt by.

The holding company will need to find approximately £21m a year in interest to keep on top of its £245m debt. The holding company (known as Kop) does not have any other means with which to generate income than that which it is paid by Liverpool Football Club. So it is expecting Liverpool Football club, as well as finding its own £9m interest, to also find another £21m interest to pay for the “Kop” loan. That’s £30m in all that the club has to find each year the debt is at this level. And let’s face it, the debt’s not going to decrease in any short space of time.

If, for some reason, there was no way on earth that Liverpool Football Club could pay the £21m interest to the holding company, the statement says that “Kop’s ownership (Hicks and Gillett) …is prepared to fund whatever is required.”

Now when you read a statement like that at face value you would be forgiven for assuming that the owners are prepared to see the club through any future difficulties. Say, for example, Liverpool failed to qualify for the Champions League next season, and could only afford, for example, £4m of that £21m interest needed by the holding company, that the owners would happily dig deep and stump up the other £17m. Well think again.

In that example, the owners have three choices. Firstly, stump up the £17m from out of their own funds. Secondly, allow the banks to use the security the owners put down against this loan to recover the money they required. Finally, use the assets the club has in order to find that £17m.

They aren’t going to go for either of the first two options.

So faced with a shortfall in the holding company’s requirements, the owners would seek to use the club’s assets to pay that interest. They may consider selling a stake in the club to another investor, although if the club’s in such a precarious financial position most investors would steer clear for the sort of price the owners would be asking. There’s very little else that can be sold - except players.

And this is where the club starts to decline further and further. Even if we qualify for the Champions League, we’re already using up £30m of our annual income on interest payments to cover the owners’ own investment. That’s before we start borrowing the £300m+ required for the new stadium. We’ll simply be unable to afford high-quality player purchases by the time we’ve paid off that year’s debt interest. The teams above and below us will have the funds to buy, and their squads will improve accordingly. Ours will at best stagnate, until the year comes where we do drop out of the Champions League places.

And if we are out of the Champions League places, we lose a potential £25m. The holding company finds that after we’ve paid our wage bill, paid instalments on past transfers and spent what we need to spend for the day-to-day running of the club, we can’t pay them their interest. And to the holding company there’s only one way to achieve that. Goodbye Fernando Torres, goodbye Pepe Reina, Xabi Alonso, Javier Mascherano, Steven Gerrard - it doesn’t matter, who. Just as long as that interest payment is made.

And now, not only have we failed to get our squad up to the standards of our rivals, not only have we failed to at least keep the gap between us and our rivals the same, not only have we failed to at least keep our own squad as strong as it was, we’ve actually had to weaken our squad.

Under these owners the club is in a mess, the future of the club is on a tightrope.

We’re gambling on Champions League qualification, and even then on relative success in the Champions League. Without it, we are in serious danger of following the same path Leeds followed. And don’t for one moment think “it can’t happen to us”, because it can.

And the chances are that Hicks and Gillett will have ridden off into the sunset long before it gets to the Leeds stage - they’ll transfer the debt onto the club’s assets, pay off their own loans and disappear. Their gamble is weighted in such a way that if they win, they get rich, but if they lose, they just don’t get any richer. They don’t lose. The only losers are Liverpool Football Club and its supporters.

Dubai International Capital are said to still be in negotiations with Hicks and Gillett to get the club out of their hands. Even though the finance deal went through, it doesn’t mean DIC won’t buy. And there’s no saying that DIC will still please Liverpool supporters all the time. But it’s almost impossible that they could be any worse.

We’ve got to get behind the players and the manager; they need us now more than ever. Those dissenting voices on phone-ins and message-boards who think we’re going to be alright under Hicks after all need to sit back and think about what’s really going on.

The owners will bail out as soon as they see a threat to their existing assets - we’ve got to do all we can to bring that threat forward.

[Section_31]

Originally Posted by Brownie It isn't new news as such, but it's also not good news. I think Barrett has released this to increase awareness amongst the fans who didn't already know about it. There's loads of fans who don't know anything about it because their life doesn't revolve around websites etc, so it's a good thing to do to make sure all of the fans are fully aware of what's really happening. That meeting on Thursday should be interesting and hopefully a plan of action will be designed so that we can try to do something about all of this. We've gone down the fucking pan in the last twelve months really and it's only going to get worse if they stay in charge.

Top post Brownie and agree with all of that.

[HJohal]

yep, need to bring things to a head and boycot a few games to make the point forcefully.

[zigackly]

Originally Posted by Havant&Wart can i just ask what kind of investment you were looking for, as what they're doing is pretty standard stuff? you look at arsenal who went into huge debt to build the emirates, and they're now reaping the benefits, despite still having to pay a healthy interest charge.

The stated aim in seeking investment was to allow increased investment in the playing squad and helping to fund a new stadium. It was to be hoped that we would find an equity investor looking for dividend payments, or investment partners after increasing the value of the club, or an investor who could negotiate favourable repayment terms which would allow both objectives to be met. Said investor should also be capable of running the club with at least a modicum of competence, and have a desire to preserve the Liverpool way.

Instead we appear to have lying, incompetent twats who are obsessed with turning the club into a laughing stock and have got us in hock to the point we will likely find it difficult to compete in the transfer market in the short term, and in the worst case could end up in a Leeds scenario in eighteen months time.

[Havant and Wart]

aren't you still buying players, though?

torres, babel, lucas, benayoun, skirtle and now mascherano. not exactly chicken feed is it?

the klinsman thing was a bit mad, mind.

[BROCK]

I've just noticed the offal internet shop has been revamped... and they actually HAVE MOST sizes in all the clothing items! There's hope yet....

One step at a time, ey?

[Barry Wom]

Originally Posted by Havant&Wart aren't you still buying players, though? torres, babel, lucas, benayoun, skirtle and now mascherano. not exactly chicken feed is it? the klinsman thing was a bit mad, mind.

and we've also sold quite a few to help fund it, sissoko, garcia, bellamy, cisse and others who slip my mind now. The cost of the players signed have gone straight onto this loan - we could have done that with or without the americans buying the club.

[bobhorse]

Originally Posted by dave u The problem is a lot of people are taken in by the way things are spun. All this "oh well only £100m is on the club so its not so bad" The bottom line is a £350m loan has been taken out, and interest has to be paid on it. Only £100m is in the club's name, but does anyone seriously think the owners will be making the interest payments on the loans in their name?

Why do people need to be told by the Echo that all the Debt is on the club our people really that fucking stupid that they can't grasp that

The company was set up when these two took over to register the business its only asset is the football club no matter how much money is borrowed in its name it is the Club that will have to repay it

As i understand this though (and im no expert) they wont have to pay Tax so the money that normally goes to the Government will go towards these payments thus again robbing the less well of people of this area and country

So it is not as bad as the 30m from the pot would be without the Tax windfall but them payments only maintain the debt they don’t repay it we will always be in debt to the tune of 500m

[BROCK]

Originally Posted by Havant&Wart aren't you still buying players, though? torres, babel, lucas, benayoun, skirtle and now mascherano. not exactly chicken feed is it? the klinsman thing was a bit mad, mind.

Yer you're right. We all shouldn't be arsed about being crippled with debt for ever and the very likely possibility of becoming bankrupt and getting lied to all the time.

Is this seriously what outsiders are thinking? The long-term future is not bright at all

[BROCK]

Originally Posted by bobhorse As i understand this though (and im no expert) they wont have to pay Tax so the money that normally goes to the Government will go towards these payments thus again robbing the less well of people of this area and country So it is not as bad as the 30m from the pot would be without the Tax windfall but them payments only maintain the debt they don’t repay it we will always be in debt to the tune of 500m

You only pay tax if you make a profit... we won't be doing that!

You normally get tax relief from interest payments anyway I think as it is deducted at the Profit and Loss stage of a company's accounts?

[Unrighteous]

Originally Posted by BROCK I've just noticed the offal internet shop has been revamped... and they actually HAVE MOST sizes in all the clothing items! There's hope yet.... One step at a time, ey?

Hopefully they don't move a single one... Only a fucking knob would purchase official products from these two cuntfaces.

[hamstrung]

Originally Posted by Alias75 Did anyone seriously think the club wouldnt be paying off both loans? this will happen whether its G+H or DIC. Once the stadium is up and running that will bring in an extra 25,000 paying fans each home game, plus possible naming rights. That increase in revenue should cover the interest payments on the stadium. I don't think most fans expected G+H to buy the club a brand new 71,000 stadium out of their own money - did they? The problem is obviously the 2-3 years that the stadiums being built where we have the interest payments but not the increased revenue. Part of that can be covered by the new TV deal which will bring in approx 20 million more than we had last year but the obvious conclusion is that it will impinge on transfers. It probably means Rafa will have to work with a slightly smaller squad and rely on players coming through the reserves and U18s for the time the stadiums being built but once the stadium is open it will more than pay for itself.

You've completely missed the point.

Read the article Rashid posted.

[zigackly]

Originally Posted by Havant&Wart aren't you still buying players, though? torres, babel, lucas, benayoun, skirtle and now mascherano. not exactly chicken feed is it?

We've spent a bit more than we normally would in a season. Mind you, part of the fucking huge debt which could easily fuck us up and means we will have no money for transfers in the next four years unless we borrow more, has gone towards the extra we've spent. In short the only money the owners have put into the club is effectively the deposit on Friday's loan, which they have made repayable to them by the club as a personal loan.

[paulie walnuts]

I maintain that the only way to get shut of these fuckers is by a mass boycott of the games,picket lines,etc.I know that this is unfair on fans travelling to the game but its got to be done, even if the bizzies have to get involved, get it on the news.We need to make ownership of our club ans unattractive as possible.I know that in the short term it won't help the team, but if we don't do something drastic there won't be a club in the long term.

Come the revolution those 2 greedy Yank fuckers will be first against the wall.

Fan apathy will kill this club!

[bobhorse]

Originally Posted by BROCK