Marc
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Liverpool's proposed debts may spark alarm among fans INSIDE SPORT
Source: THE DAILY TELEGRAPH
WHEN Tom Hicks and George Gillett Jr bought Liverpool in a pounds 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 pounds 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 pounds 298 million borrowing by Hicks and Gillett, split imto pounds 185 million to buy Liverpool and pounds 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 pounds 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 pounds 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 pounds 500 million loan is 16 times Liverpool's operating profits for 2007, which are expected to reach the pounds 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.
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Cosmo
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Registered: 29th Mar 01
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Aye, read that on a Liverpool forum earlier today, was going to post it myself before you did actually 
Two reasons why it wont happen....
1. The yankee doodles arent stupid enough to try to reorganise the debt now, with the current market how it is, when they have atleast 18months left on their current loans which gives them more than enough to run the club during this time.
2. The yankees have said many many many times that the new stadium will be financed in the same way as the Emirates. I.e. it'll be secured against future match day revenue so not the club itself. It will also involve selling the naming rights in some way (probably incorporating the Anfield name still though).
So although there may be some truth in the fact they will be getting more loans for the stadium - the fact they will be secured against the club itselft isnt true.
The owners also made a big big deal about how the club was bought totally different to United debt, so to change this now would be popularity suicide for them - and they arent that stupid I hope.
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Nath
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Registered: 3rd Apr 02
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Going
Going
GONE
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Cosmo
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Registered: 29th Mar 01
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bust 
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Hammer
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Registered: 11th Feb 04
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Did i not always say Liverpool were going to go bust?
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Cosmo
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quote:
Originally posted by Hammer
Did i not always say Liverpool were going to go bust?
No, you said we were all going to die in a blaze of glory.
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Hammer
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Registered: 11th Feb 04
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Oh yeah, my bad!
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Cosmo
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quote:
Originally posted by Hammer
Oh yeah, my bad!
It was United you said were going to go bust 
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Hammer
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Registered: 11th Feb 04
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Doesn't sound like me but i'll take your word for it
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Tom
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Registered: 3rd Apr 02
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I think we'll go bust tbh.
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Cosmo
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quote:
Originally posted by Tom
I think we'll go bust tbh.
Who will you be supporting afterwards Tom?
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Tom
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Registered: 3rd Apr 02
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Split between tottenham and derby tbh.
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Tom
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Registered: 3rd Apr 02
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What about you?
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Cosmo
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Derby are up there on my list, great potential.
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Marc
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Registered: 11th Aug 02
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You'll always have a soft spot for United though won't you 
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Cosmo
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quote:
Originally posted by Marc
You'll always have a soft spot for United though won't you
I thought I always kept my love for them hidden 
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strick206
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Registered: 12th Apr 07
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Nice, having to get a big loan to finance the club
bigger debts in relation to profits than uniteds too
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Cosmo
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quote:
Originally posted by strick206
Nice, having to get a big loan to finance the club
bigger debts in relation to profits than uniteds too
We have always had loans to buy the club, I have no problems with that actually happening as its normal business practice to do so.
It just depends on what its secured against. Uniteds is against the club, where as Liverpools is currently secured against Hicks and Gillett personally.
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strick206
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quote:
Originally posted by Cosmo
quote:
Originally posted by strick206
Nice, having to get a big loan to finance the club
bigger debts in relation to profits than uniteds too
We have always had loans to buy the club, I have no problems with that actually happening as its normal business practice to do so.
It just depends on what its secured against. Uniteds is against the club, where as Liverpools is currently secured against Hicks and Gillett personally.
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Cosmo
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aye, currently, and hopefully the future too!!
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