Posted on April 12th, 2008 by Jim Boardman
Anfield Road » The alternative side to the LFC ownership mess
The ownership crisis at Anfield is still some way short of being resolved, with conflicting claims continuing to muddy waters that haven’t been clear in a long time. And I’ve been asked repeatedly to explain why my stance has shifted from that of the masses. I’ll try.
The mud has been thick these past few weeks, from when George Gillett went on the radio in Montreal to declare his intention never to sell to Tom Hicks, until this morning when a David Moores interview in the Echo will no doubt stir things further. And that’s before tomorrow’s Sundays get onto it.
Taking a step back for a moment and trying to think calmly can be difficult. It’s an emotional subject. Whether you’re a season ticket holder or a fan thousands of miles away with no choice other than watching on TV, Liverpool Football Club is something that becomes part of you, and you part of it.
Earlier in the season, Liverpool supporters holding up banners saying “One DIC is better than two” and singing “Liverpool Football Club is in the wrong hands” were reacting to the news that Tom Hicks had admitted both owners had spoken to Jurgen Klinsmann about Rafa’s job, and fears that the club’s future was on a knife’s edge because of fears over the impact of £350m debt.
What happened to Hicks was that numerous claims and denials he’d made on various issues were put in doubt because he’d admitted the Klinsmann story. To cut a long story short, claims in November were that the owners had been set to sack Rafa, and his Champions League progressions was all that saved him. A private meeting in December saw a statement released that Rafa and the owners had sorted out their differences. An interview soon after saw Hicks say the papers had made up the story they were about to sack Rafa. The admission by Hicks that they had met Klinsmann saw him shown as having lied. How could he claim the papers made it up when he was now admitting the replacement was being lined up?
The admission angered George Gillett and that anger never went away. Gillett felt it would blow over if nothing was said, even though the German FA and Bayern Munich both had senior officials saying Klinsmann had turned Liverpool down. Gillett was also said to be angry at Hicks’ decision to release details of the refinancing.
Go back over the past few months and far more has been said about the situation from unnamed sources and “I believe” type claims than in any official statements or direct quotes.
And because of the hatred that stems back to that Klinsmann incident, and everything else that it brought with it, everything negative said about Hicks is taken as fact by the majority of Liverpool supporters.
And anyone daring to suggest that an opinion different to ‘Hicks must go, Gillett was bullied, Parry is trying to help’ is jumped upon by the angry mob. It’s understandable. I’ve been much the same myself until fairly recently.
Why I am no longer in the camp of believing everything said against Hicks, or in favour of others, is hard to explain. I’ve tried countless times but every time I am accused of being “on Hicks’ payroll” and other such ludicrous shouts. But again it’s understandable.
People won’t like me using this example, but it’s one I’ve used on myself in the past when spending sleepless nights trying to make head or tail of this mess.
Get 100 Everton supporters in a room and ask them what they know about Steven Gerrard’s personal life. You know what they’ll say. Maybe not all of them, but the vast majority will probably sing a certain song, before explaining why they have that song. They’ve no proof of it - because it’s untrue anyway - but that’s of no importance. They hate Liverpool, some hate Liverpool in a quite unhealthy way. After all it’s our fault that (insert any Everton misfortune here) happened. So a story about Gerrard based on rumours started by his enemies is believed without question.
They’ll tell you more tales that a large number of them will at the very least say must be possible, Daniel Agger’s had some unfounded nonsense spread about him recently; much like Robbie Fowler did a few years back culminating in his touchline-sniffing goal celebration that was overreacted to by the FA.
They hate Liverpool, so it’s no problem at all to believe the stories they hear. And for many of them there would never be a change of stance, unless they personally became victims of similar made-up rumours. Some of the more sensible ones might hear ludicrous claims about one of their own players and realise that believing a story just because it fits in with your own feelings towards that person or who that person represents is dangerous.
That’s pretty much how my own feelings started to change.
It hit me really for the first time around the time of the much-hyped meeting in Dubai. I remember seeing the email from Hicks to al-Ansari and Hicks’ angry response to it having been leaked. He blamed it on Amanda Staveley, saying: “She should also know better than to release actual copies of my private correspondence to the press.” At the time I remember thinking that Hicks could have been wrong about who leaked it. It could have been a less senior figure involved in talks, it could have been Rick Parry - who was in meetings with Staveley in the days prior to the leak - or it could even have been someone in his own organisation. I was angry that just at the beginning of the first face-to-face talks between the Hicks organisation and DIC Hicks was throwing angry accusations at DIC’s senior negotiator.
Still, we waited for news. Talks were underway on the Monday, Hicks himself wasn’t there but his sons and others from the Hicks organisation were. DIC had promised that taking a 49% share was ok with them on certain conditions; finally it looked like an end was in site. When they broke down I was devastated. I clearly remember my disappointment.
But then came that claim in the Echo. It was in retaliation to the Hicks statement saying that DIC wanted the club run by committee. I know without any shadow of a doubt that DIC’s representatives had made the claim. The talks had supposedly broken down after the Hicks people were unwilling to consider placing a supporter representative on the board, with voting rights. It was a ludicrous claim in its own right. It suggested that somebody put forward by SoS members (for example) would get to vote on major decisions, to impact on how money might be spent, to influence where pre-season games might be played. Millions of pounds worth of decisions hanging on the views of a supporter neither owner would have any say in the appointment of. On top of that I had an extra reason to disbelieve the claim, based on talks I’d had myself a short time before this incident, which made it clear to me where this idea had come from.
What that did was open my eyes.
That’s all. I just stopped. I turned off the mp3 of anti-Hicks songs and thought about things.
DIC had basically used a reporter to put out a statement designed to make them sound like the fan-friendly organisation we wanted, Hicks to sound like the control freak who had all kinds of evil plans waiting to take shape just as soon as he had the reins.
We had been lied to, by the people we thought we could trust. Our emotions had been played with.
I’d also been in contact with various people. I’m talking about those involved in this ownership wrangle, and others too. I also hear things from people who have their own contacts with similar or even the same people. One way or another, a lot of information comes my way that I can’t - or more accurately won’t - reveal on the site. I started to think through about some of this information; something didn’t feel right about various chunks of it.
All of a sudden, it was like something out of a film - all the past claims I’d based my opinions on were being called into question. It’s difficult to explain, but a hell of a lot of the assumptions we had as supporters were based on claims that DIC had put out there. I hadn’t realised this really, until that point, and they were flashing in front of me like scenes from a film. If anyone saw the recent Ashes to Ashes series on BBC1 they might be able to think about how Alex had sketchy memories and partial details of what had happened in the past, gaps filled in with assumptions, pre-conceived ideas of what had gone on, and as the series went on how much of this changed for her as new facts came into her possession, and old presumptions were discredited. I’m not at the point where the clown’s make-up disappears in the last episode yet, I’m probably still half-way through the series, but more and more is coming clear. Where’s Gene Hunt when you need him?
Talking of clowns, Rick Parry is known as Coco by supporters. At times I’ve felt sorry for him, often wondering if he’s spent hours trying to persuade David Moores to act a certain way only to find he can’t change his mind and he has to announce something he’s not keen on. I felt sorry for him when the owners came in, picturing him having to spend every day with Foster at his side as his working practices were noted down on the way to him eventually moving on and leaving the club. Even the ticket fiasco before Athens drew sympathy from me, when I wondered if the owners had decided to allocate themselves a few thousand tickets for their own contacts, and there was Parry having to explain where they’d gone without being allowed to say where they’d gone. (This wasn’t the case, as far as I know, it was just a thought at the time).
But I’m not sure that feeling sorry for him is the right thing to do. He’s been at the club for ten years, he had a big job at the Premier League before that, and he has no reason to expect an easy ride if he’s not acted to the best of his abilities. He’s well compensated for his job, no doubt enjoys perks most of us would dream of, and is right near the top of the club we all love. He’s no different to Rafa Benítez in terms of how he should be hired or fired based on how he does his job.
If we can excuse Benítez based on lack of transfer budget, lack of an assistant, off-field interference or whatever then we can excuse Parry on certain points. But what is he paid to do exactly? I was asked this question earlier this week by somebody not really a football fan, it was asked in all innocence. It’s a tough question!
Rather than go over the events of the past couple of weeks I’d like to think about the discrepancies between now and little over a year ago.
David Moores may have been the man with the ultimate decision to sell to Hicks and Gillett, but Rick Parry was the man who explained the pros and cons of the decision to him.
And one of those pros and cons was the debt. There’s no hiding from it, £298m was borrowed to buy the club and budget for the first season.
Parry knew all about this. It was all in the offer document, and he knew it would attract interest at about 1.5% above base rate. Estimates at the time put the annual interest payment at around £21m.
The offer document was hardly strict in its wording about how debt might be put back onto the club or not, but clearly strict enough to prevent the purchase costs going back on the club. The £245m portion of the debt that stands at holding company level equates fairly closely to the purchase costs of a year ago, suggesting that’s where this odd split comes from.
But all that had really changed in a year was that the club had to find the money to pay the interest on £350m of debt not £298m. Some of it was secured on club assets, more of it wasn’t. Some cash had been put in now too.
I’m not downplaying the worries about debt being secured on the club, but have they actually been overplayed? I really don’t know. I heard one theory that by putting £105m on the club the £245m was available at a friendlier rate, as was the £105m. So other than the fear of the debt not being paid, that situation could be argued to help the club. But it’s just a theory, I’ve not been told anything to suggest it’s even slightly likely.
We’ve also had the credit crunch, and rumours persist that Gillett and Hicks have been and are being hit by it. Again, I’m not downplaying it, but I wonder how much it really has hit Hicks. I’ve heard too many claims now for me to believe Gillett has escaped its pressures, but Hicks remains an uncertainty in that regard.
So trying to be open-minded, and not ready to angrily dismiss this next statement, how much worse of did our financial position come from what was known to be the case at takeover, to the point January when the next deal was signed? I can see an argument that says we shouldn’t be surprised, let’s put it that way.
I’ve heard claims that the most recent finance came at a high rate of interest, but neither Gillett nor Hicks have said that, not for the £245m or for the £105m. It’s all come from presumptions from certain people. If - and again this is purely out of open mindedness - the interest rate was the same, the new finance deal caused a relatively small increase in the interest burden. I used 7.1% as a rate that sounded feasible compared to the £21m figure I mentioned earlier. The interest on £298m rounds to £21.2m. The interest on £350m rounds to £24.9m. I’ve not looked at interest rates between takeover and January 2008, I’ve just used the same figure twice. And it leaves us £3.7m a year worse-off in terms of our burden for paying off any interest.
This is as valid as any other educated guess that has been made about the interest costs of the finance. And it suggests that we should have been exactly as worried a year ago about debt as we are now.
That’s my own simplistic way of looking at things. If it’s so bad now, why didn’t Parry warn Moores et al back then?
Or is it not really quite so bad now?
I’ve more questions than answers, but more often than not I can’t find anybody with decent, believable answers. If Parry answered that question, short of coming out with some proof that the interest rate is significantly higher than a year ago, he can’t defend himself. He’s helping to worry us all that Hicks and Gillett have put us into unmanageable debt - but it’s only a fraction worse than a year ago, and in football terms it’s a tiny difference.
The stadium costs are still a worry, or are they? if we did take the word of Hicks in his statement of a few months ago then we’ve got £60m waiting there ready to get the diggers hired, foundations dug, and whatever else £60m gets you these days. I’ve heard nothing to suggest that the £60m wouldn’t be enough to get things moving - in fact I’ve heard that even without a change of ownership the stadium work can commence as soon as the necessary approvals have been received.
Getting finance for construction projects is usually done in a way that money is released bit-by-bit over the life of the actual building work. By the time the building is completed, whether it’s a house or something bigger like a stadium, it’s time to pay the full regular payment to cover both the interest and gradual reduction of capital. Simplifying figures for a moment, 7% interest on £300m is £21m a year. If the club paid £24m a year over 30 years at that rate of interest the stadium would be paid for by the end of the thirty years.
DIC are planning to borrow to pay for the stadium too, so criticism of the plans for the stadium financing apply equally to DIC, give or take the potential of fractional differences in interest rates.
Estimates vary as to how much of an increase in revenue would come from the new stadium. We’re not in London, so haven’t the same pull in many ways that Arsenal have, but we’ve no less pull than Manchester United either. But figures of an extra £40m a year seem achievable, and that’s before naming rights are added on. Around £16m a year extra plus naming rights, from the new stadium alone.
Then you remember this £350m debt. Well knock £60m off that for now because it relates to stadium costs. Even so it’s still around £20m a year in interest to find if the current finance model remained. But even that’s a big “if” now. Hicks spoke of ideas where investment wasn’t made using borrowed money; instead it comes from investors looking for a return linked to financial performance. That’s potentially going to mean more than £20m a year if the performance is good enough - but if so then it would suggest good times on the pitch and off it.
And of course, there would remain that worry that the investors in question would not allow the board to spend on transfers if it was to hit their profits too hard. But such concerns can be addressed in agreements made at the time of investment. Hicks would be shooting himself in the foot if he didn’t consider that issue, because a sizeable portion of our income has to go on transfers.
None of this has come from anything one side has put to me to try and win me over, it’s come from my decision to stop for a moment and think. To put other concerns and fears to one side for a moment and to look at things with a less negative approach.
When you compare 12 months ago with now, removing the negativity of the owners’ disagreements and the stories about how George Gillett has no way of staying on board given his financial position, you see that there is a possibility - that’s all - that life under Hicks’ sole ownership may not be as bad as feared. If it is, and again it would be hard for him to answer, why did Rick Parry not warn David Moores?
Very little has changed materially. The stadium costs have gone up because it’s a far superior stadium; I doubt many would want to go back to the “Parry Bowl” idea.
If - and it’s subject to being checked out by those with access to the figures - if the club can afford the interest payments as much now as it could a year ago then where the money actually sits is not a real worry. Securing it on the club means that the owners could be tempted to take more risks than if it was secured on their own other assets, but other than that there should be room there for the club to make the payments and so there never to be a need to worry about the security.
Figures given for Liverpool’s financial gap from Manchester United can’t all be blamed on a smaller stadium, so where are we going wrong? Can we sort that out? Can we sell more shirts in China as mocked by one reporter or other recently? We should be able to. In fact we should already be doing so. Why we’re not is arguably down to Rick Parry, who could have hired a team a long time ago to ‘exploit those markets’ as some would say.
Of course all of this open-mindedness relies on Tom Hicks being able to get the finance he maintains he still can. DIC’s hints at knowing he can’t are either based on fact, or are tactics that are a part of their strategy to unsettle Hicks and those thinking of joining with him.
If everyone involved in the battle for control wants to be all high-and-mighty about washing the dirty linen in public, and the Liverpool way, and all the other stuff thrown out if an opponent does or says anything then that’s fine. Just practice what you preach.
If DIC’s leaked claims that Hicks is on the ropes are true then the battle will soon be over anyway, so it’s a case of waiting until he accepts it and they can come in. The fact they aren’t sitting quietly in wait suggests that he isn’t on the ropes. They’re trying to get him onto them. A lot of people say that this is acceptable, that this is business and in business it’s important to play dirty if you want to do well.
Again that’s fine - but surely it’s also acceptable for all the different sides in the battle to act this way?
Talk is increasing of a finite period having already started, in which Hicks must take up an option to buy Gillett’s half or lose his right to a veto. We can all guess where this talk originates, and it seems to be against what Gillett said in the recent interview. Hicks had merely “threatened” to invoke a veto, said Gillett.
And if the veto time limit of the end of May turned out to be true, would DIC be happy with just the 50%? The earlier claims they could then force Gillett out by blocking moves for the next round of refinancing seem to be untrue. The £105m debt can stay on the club unless the board agree to move it. It can’t be removed by the will of one owner. The rest of the debt may be on the holding company, but it’s secured on other assets belonging to each owner. DIC would not, despite claims we’ve often heard, find it easy to force Hicks out once inside the company any more than Gillett could.
Out of interest, what right did George Gillett have to (according to reports) rebuke Ian Ayre for spending time in London with Tom Hicks as he went to try and get his finance deal done? Hasn’t George Gillett been using Rick Parry to do exactly the same thing with DIC? One of the owners used an executive of the club in discussions with investors aimed at ending the current mess of an ownership situation. So did the other.
I hope that presents as confusing a picture as the one in my mind. To summarise it all, Rick Parry has learned nothing significantly new about Tom Hicks since he was advising David Moores on his sale to the Americans.
DIC were going to pay £201m I believe for the club, including debt, just over a year ago. Now it’s reported at anything from £400m to £500m. Why? What did they miss? They’re not a charity. So why pay double now?
Did David Moores snub them, if so, why? For more money in his own pocket? Or because Rick Parry told him to? Or was it the offer of life presidency? And why does David Moores now think Tom Hicks is so bad. And I’m not talking about the letter, because this goes back much further than that.
And I’m not asking for a list of reasons why Tom Hicks is so bad. I want to know what changed significantly in a year. Parry knew his time at Anfield was limited from the day the Americans took over, the original plan could have seen him out of the door already so he’s done better than he might have expected out of this. But he no doubt felt that once the owners were in, he could survive beyond the two-year maximum they had him marked down for. It seems this idea has been scuppered.
So, we now know Parry stands to lose his job if Hicks takes over. But would he have lost his job under DIC first time round? Is he assured of a job second time round? Is there a bonus in this for him one way or other?
In all, we’re expected to believe that Tom Hicks is so bad for this club that George Gillett is in fear of his life for selling to him. But Rick Parry agrees he’s bad for the club too, so much so that he’s spending a lot of his working week on various trips to London to speak to DIC. And he’s doing this with George Gillett’s blessing, on George Gillett’s behalf almost.
So what’s in it for the club now that wasn’t in it for the club a year ago? Or is all this “best for the club” stuff just a smokescreen?
Even if Tom Hicks threw the towel in today, and Rick Parry agreed to resign at the same time, with no pay-off, I’d still want those questions answering. I’d still want to know what changed significantly; I’d still want to know what the true motives were then and what they are now. From Parry, and from DIC. And also, I’d want to know what Gillett’s true motives are now. Why did he spring out of his early retirement plan as far English soccer was concerned?
So there are, as best as I can explain it, the reasons why I stopped believing any and every negative story about Hicks, and why I started to question the others. If Hicks wins, do we not deserve the right ourselves to have feelings towards the owner based on as much truth as possible? Let’s hate him for the right reasons, let’s crack down on his real faults, let’s try and make the best of it. If it happens. But if DIC’s claims are true this is all academic anyway, they’ll be in and Hicks will be out, but at least in 12 months’ time any unexpected and unwanted policies would be harder to implement, because we’d have questioned them first, rather than let them in with open arms and able to do as they please.
