The dirty deed is done. Liverpool’s owners, via their Kop Football holding companies, have finally convinced RBS and Wachovia to effectively mortgage the club to the hilt. The news came via an official statement on the club’s website, but like the latest stadium announcement this morning, the announcement was from Kop Football rather than the club.
Again there was no mention of George Gillett, the co-owner, in this statement, continuing his public silence since leaving these shores after the December meeting with Rafa Benitez. His son Foster Gillett disappeared two weeks ago, and is believed to have resigned from his position of company secretary at the holding company.
In the statement the figure of £350m is confirmed as was expected, and it also confirms that the previous credit agreement was due next month. They certainly cut it fine in agreeing the package – the previous deal was believed to be due at the end of next week, leaving them just seven days before hitting serious problems. It was back in October that Hicks insisted the debt package was just thirty days away from completion, at the same time as admitting that the new stadium was now going to cost £400m. In fact that was just the first in a number of hurdles the owners faced in trying to pile substantial debt onto the club. The thirty days came and went, and shortly afterwards came the admission that they couldn’t afford the stadium, which would now be “downgraded” according to Rick Parry.
It’s believed that former chairman David Moores and the chief executive Rick Parry were insistent that the £350m debt could not be secured in its entirety on the club. Even so, the banks were also unwilling to risk such a large amount without any kind of commitment from the owners. Rumours of raging disagreements between Hicks and Gillett were continually repeated, Gillett supposedly looking to see off Hicks by joining up with DIC to buy the Texan out. Gillett was reported more than once to be unhappy with the aims of Hicks in terms of this debt, but also to be finding it difficult to find the cash and guarantees required for his half of the deal.
Moores and Parry’s objections have seen the debt split in such a way that £105m of it is secured on the club, the holding company and the owners liable for the other £245m. Obviously this is better than the whole £350m being lumped onto the club, but the pair deserve little thanks for their efforts. Had they done their homework on Gillett and especially Hicks, they’d have seen that the pair weren’t even close to being compatible with their intentions for the club’s future, and we’d not find ourselves in this position. The club may not be directly responsible for the £245m, but the owners won’t be paying the interest on that out of their own pockets. The club’s priorities will be to pay the interest each year, directly or indirectly, and then if it’s been a successful season we’ll see what’s left over for transfers.
Today’s statement refers to a nice round figure of “£60 million of debt that was on the Club’s books at the time of last year’s acquisition”. The figure given in the offer document was just under £45m, and it said this was as at December 31st. So a matter of weeks later that debt had grown by £15m, the price of a useful winger.
It says that the £105m is to get the stadium work underway, to fund future transfers and to provide working capital for the club. There’s no indication of how that is split, for how long that amount is meant to provide working capital and player transfers, or how much progress it will allow on the stadium.
The £245m debt not directly on the club has been backed up using “a combination of owner cash, letters of credit and personal guarantees totalling £225 million.” The owners were struggling to get this finance, and that part of the statement is akin to them putting their hands down the back of the sofa and checking the gutters for any loose bits of shrapnel they could find, after selling their old vinyl on eBay and raiding their children’s piggy banks. In fact Hicks is raiding his children’s piggy banks, given this statement last year: “Having three teams, I view that as something my children will manage for the next 25-30 years.” Source: Tom Hicks Interview, BBC.
Again like the day’s earlier statement relating to the downgraded stadium, Hicks was referred to by name only in the release. It’s standard practice in any press release of this nature, from any company in this country or the US, to specify the position of any individuals quoted in the release, whether they are the owner, area manager or janitor. Not in this release.
In fact the quotes from Hicks have clearly been passed through his PR company’s filters first, carefully worded to try and convey Hicks in a much better light than he really is held in. It would be funny, in parts, if the subject matter wasn’t so serious. The quote starts: “This new financing package is a strong vote of confidence in the Club’s financial strength and a recognition of the exceptional opportunity represented by the construction of the Club’s new state-of-the-art stadium at Stanley Park.” If the club’s financial strength was so great, the original plan to lump all £350m on the club would have been done last autumn, and the £400m stadium plans wouldn’t have needed downgrading. And then a little bit of ego massage: “The successful completion of this financing package is particularly significant in light of the currently challenging credit-market environment.” The speed with which Hicks, or Rick Parry on his behalf, denied any accusations that Hicks was suffering due to the “credit crunch” was unprecedented, well unprecedented where the lethargic Parry is concerned.
Then comes a plea to try and forget the past months of lies, spin, broken promises, embarrassment and incompetence: “With the refinancing process now done, Club supporters can look forward to the timely commencement of construction work on the new stadium and renew their focus on actions on the pitch.” A few impressive drawings of what may still remain an imaginary stadium and an admission that you’ve just more than doubled the club’s debt, with nothing to show for it, does not ease the serious concerns of the supporters. In fact with the overall debt that the club is going to have find a way of servicing standing at seven times what it was 13 months ago, and with £300m more still to find to build this stadium, supporters have every right to be concerned.
This stadium, if it overcomes any planning objections, will be able to hold around 26,000 more supporters than the current ground. But will a demoralised set of supporters be motivated to fill this ground often enough to justify the costs in building it? If the owners continue as they have done in their first eleven months, it’s highly unlikely. Never mind challenging for the title, any more interference and reneging on promises could see the club drop out of even the UEFA Cup places.
They took the club over making clear statements to show they were expected, as part of the agreement to sell by the previous regime, to improve the playing squad by investing extra funds into transfers. They held discussions with manager Rafa Benitez and agreed with him the plans for the summer’s transfer dealings. Then they stopped it all, in the end spending less on transfers than the club had earned from Champions League money alone. Throughout all this they were unwilling to discuss their reasons for the sudden change from their earlier promises. As most other Premier League clubs were spending more than they had ever spent before, Liverpool were spending pretty much the same as they had done in past seasons, £20m net. Yet the owners were telling anyone who would listen that they had been full of generosity, had invested heavily, and were expecting a serious league challenge. Unfortunately for them, Rafa Benitez had no intention of sitting in the background taking all the blame whilst the owners mislead fans over their investment in the squad.
With the truth starting to emerge, the owners were fighting a desperate battle to keep a lid on it. Rafa’s attempts to negotiate some incoming and outgoing winter transfers, which would overall result in no expenditure for the club, were blocked. They interviewed his replacement, and were going to sack him if he went out of the Champions League. They told him to shut up. Or to be more precise, Hicks did. Gillett was already beginning to shrink into the background.
The reports that Rafa was on the verge of being sacked were frequent and continuous. Liverpool fans are always wary of press speculation, but this speculation was coming from the handful of journalists who normally have the fans’ respect. The club and the owners were busily denying suggestions the credit crunch was hurting them, that the owners had fallen out, that Hicks was looking to sell, that Hicks was looking to buy Roma and more. But not one single denial that they were planning to sack Rafa, not one single sentence that showed the kind of support that could have ended those reports.
Now, after the damage has been done, Hicks has seen fit to try and show some support, verbally at least, towards the manager. He’s quoted as saying: “Since the meeting with Rafa on December 16th, at which some widely reported communications issues were discussed, Rafa has been assured that he has continuing and enthusiastic support as the Club’s Manager. Reflecting that support, Kop recently approved his transfer payment request to sign Martin Skrtel for £6.5 million and is in discussions with Rafa and Club management regarding additional player signings this summer. Rafa is under contract for two more seasons following this season. I am solidly behind Rafa and am confident of the team’s competitive prospects under his continuing leadership.” Note how Hicks says “I” rather than “we”, suggesting Gillett really is being pushed out.
With Momo Sissoko close to joining Juventus and John Arne Riise rumoured strongly to be on his way out, there’s every chance that this transfer window will close with the club having brought more in than they spent in transfers, meaning that the example given is hardly indicative of any extra investment in the squad.
The reason Momo is being allowed to go is because of a lack of opportunities in the first team. He’s not played to the best of his abilities when he’s had his chances, but with Javier Mascherano and Xabi Alonso in the squad, and Steven Gerrard playing all his games in the centre now, not to mention the easing in of Lucas, Momo’s just about surplus to requirements. But he’s only surplus to requirements because we’ve got the other four in the squad – for now. Javier Mascherano, currently on loan to the club and one of the top players in the world in his position has still no idea where his future lies. He can be bought for £17m under the terms of the loan agreement, and that amount would be paid over the five years, but despite Rafa’s clear desire to keep him the owners have so far refused.
Making Mascherano a permanent member of the squad is an absolute minimum requirement now for the owners if they do want to show they support Rafa. But only a minimum. A public, open and honest apology to Rafa wouldn’t go amiss, but Hicks hasn’t got the humility for that. Which is why Liverpool fans shouldn’t hold their breath waiting for the apology they deserve either.
It’s hard to imagine how Hicks could ever get back to the position he was in almost a year ago when we gave him our trust, and welcomed him to our club.
That trust has gone. This finance package is reportedly over 18 months – by which time it’s unlikely that Rick Parry will still be in a position to block any replacement finance package from being secured in full on the club. In fact by then the £350m will have increased to at the very least £650m to incorporate the stadium costs, and that kind of money will cost the club £45m a year in interest alone. They’ll need to find more than that if they want to start reducing the debt.
Expect more spin in the coming weeks and months as Hicks tries to convince supporters he cares about the club as much as we do. Be careful that you don’t fall for something that sounds good, but is really just a bunch of carefully-chosen words picked to distract.
Hicks won his battle for finance, and got quite wounded in the process by getting on the kinds of terms he didn’t want. But there will be more battles to come, and Liverpool fans will win this war.
The statement in full:
KOP COMPLETES FINANCING PACKAGE
Paul Eaton 25 January 2008
Kop Football (Holdings) Limited (“Kop”), the owner of Liverpool Football Club (the “Club”), is pleased to announce the successful completion of a £350 million financing package.
In addition it is pleased to announce confirmation of the selection of the architectural firm HKS, Inc. as designer of the Club’s new stadium at Stanley Park.
The Financing Package
Kop has secured a £350 million financing package, led by The Royal Bank of Scotland and Wachovia Bank NA, which replaces previous financing that had been due in February 2008. The new financing will meet all of the Club’s current financial needs and includes facilities to support the commencement of construction for the new stadium at Stanley Park and to provide working capital for the Club and future player transfers. Of the £350 million financing, £105 million is Club-level debt that will be used to fund commencement of construction of the new stadium at Stanley Park, for future player transfers, and to meet the Club’s working capital needs.
The other £245 million will be at the holding company level and was used to refinance the £60 million of debt that was on the Club’s books at the time of last year’s acquisition as well as the loan related to the share purchase at that time. The overall financing is being supported by a combination of owner cash, letters of credit and personal guarantees totaling £225 million, ensuring that the Club remains on a sound financial footing.
Tom Hicks said: “This new financing package is a strong vote of confidence in the Club’s financial strength and a recognition of the exceptional opportunity represented by the construction of the Club’s new state-of-the-art stadium at Stanley Park. The successful completion of this financing package is particularly significant in light of the currently challenging credit-market environment. With the refinancing process now done, Club supporters can look forward to the timely commencement of construction work on the new stadium and renew their focus on actions on the pitch.”
The New Stadium:
Confirmation of the selection of HKS was based on the firm’s successful development of an improved stadium design that meets the objective of a cost-effective, supporter-friendly design. The new stadium, scheduled to open in August 2011, will ensure that Liverpool Football Club and its supporters get the much-anticipated groundbreaking iconic design at a capacity of approximately 71,000 seats, significantly more than is currently available at Anfield.
The new stadium will feature enhanced amenities for the Club’s supporters while preserving the history and traditions of Anfield and the Club itself. It will be anchored by an expanded 18,500-seat standalone KOP, an increase of more than 5,000 seats.
Kop also announces the appointment of KUD International as project manager for the stadium. KUD, which will establish a Liverpool office to oversee the project, has developed projects globally, including Silvertown Quays, a large-scale mixed use scheme in London, as well as collegiate and professional stadiums in the United States including the Philadelphia Eagles’ Lincoln Financial Field and the San Francisco Giants’ AT&T Park.
Laing O’Rourke, the largest privately owned construction firm in the UK, has also joined, and provides further depth of experience to, the project team. Laing O’Rourke is currently working with developer Grosvenor on The Paradise Project in Liverpool – Europe’s largest city-centre regeneration scheme.
Tom Hicks said: “HKS has developed a more efficient design that, at the same time, is just as stunning as its original design. Liverpool supporters should have high expectations for the future: a premier sporting experience at their new stadium at Stanley Park and a winning Club on the pitch for years to come.”
In response to questions recently raised about owner support of Rafa Benitez as Manager, Tom Hicks today commented: “Since the meeting with Rafa on December 16th, at which some widely reported communications issues were discussed, Rafa has been assured that he has continuing and enthusiastic support as the Club’s Manager.
“Reflecting that support, Kop recently approved his transfer payment request to sign Martin Skrtel for £6.5 million and is in discussions with Rafa and Club management regarding additional player signings this summer.
“Rafa is under contract for two more seasons following this season. I am solidly behind Rafa and am confident of the team’s competitive prospects under his continuing leadership.”
10 thoughts on “Hicks wins finance battle, but the war goes on”
I agree with practically that has been written by Jim Boardman but we have to be realistic. Hicks and Gillett are here to stay at least for the foreseeable future. Singing Mascherano on a permanent basis is the minimum we expect and it’s a start to heal the wounds but come summer, Hicks and Gillett will have to buy the quality players that we’re sorely missing: a left-winger (Quaresma) a left-back (Wayne Bridge) and striker (Diego Milito).
FOR EVERY ACTION THERE IS A RE-ACTION! and i do not believe H&g realise what thay are letting them selves in fore concerning LFC and its very VERY faithful supporters! this is not the “good old US of A” where most “fans” take it laying down, in England we tend to stand up and fight for what we believe in! so Messrs Hicks and gillett you have been warned SYOTOS
Yeah there’s much more going on here than meets the eye. Great analysis by Jim Boardman. I don’t think its the end of the story and we’ll see what happens next.
I don’t for one minute think Hicks believes its onwards and upwards from here, whatever he says. My punt is he’s still maneuvering to maximize his profit from a sale to DIC.
What’s clear is that things will have to settle down very quickly now else the owners will have a depreciating asset on their hands.
Give up, we must not!
We are already making waves.
I know people in PR, similar to those Financial Dynamics lost supporting Hicks, and one thing’s for sure Hicks advisors would have done their darnedest to have Gillett co-sign this press release. The fact he does not is significant and a clear sign that all is not well.
Parry and Moores may try to spin it that they’ve prevented Hicks from totally having his way on the debt on the club. But it’s their foolhardy and cash-hungry stance that created this sad mess in the first place.
Jim, I still think we, the fans, need to do all we can to put a spanner in the works of Hick n Dick by challenging 100% the planning application to hurt them hard. If there’s anything you can do to highlight what’s possible would be great.
And, we must keep the banners flying high and singing songs from the roof-tops to get these charlatans out.
Jim your passion for the club is obvious and your disapointment in what has happened is also clear but continueing this mistrust and hate approach will not serve Liverpool Football club well.
Rafa has been assured of the next two years of his contract and he needs to show that he is essential to our teams success. So far this season it is not looking good. I do agree with you that signing Massy is an essential move for the owners to approve ASAP if they want to get any credibility back with the fans
It is time to bury the hatchet Jim and get on with supporting the players and the club for the remaining league games that we need to win to qualify for next season in the Champions league.
It is time to chill out and stop beating the drums of war the unrest iyou create will serve no useful purpose for our team.
All that Hicks is interested in is money, and there is only one way to fight him effectively. A boycott is the only option. One empty stadium for a home game would say more than any amount of negative press, protests, or badmouthing on forums etc. It may seem extreme but extreme measures are what’s called for.
I don’t agree with Yossa.Its fans like Jim who gives us facts backed by evidence that ensures we at least have a chance of finding out the truth about the hillbillies.Already there is a weakening amongst fans who were so anti hicks, brought about by the promise of signing Mascherano.
We must remember what they have done with their lies and how they have treated Benitez and us the fans otherwise we are on a slippery slope.Their statement makes it clear that the absolute maximum we can expect to spend this summer is £45m but that is loan money.
Keep up the good work Jim.
I’ve got no love for the yanks, don’t get me wrong, a lack of honesty and investment into squad, not to mention a lack of understanding of the sport and culture have not helped their case. But what people must understand is that this is business. Gone are the days when football clubs were run by a wealthy local benevolent family who could afford the lose their playmoney on their favourite pasttime. These guys are businessmen, and business is a hard world, so people really need to take those rose tinted glasses off.
That said these guys are clearly not the sharpest business men out there, but the fact remains liverpool needs a new stadium, which realistly can only be built on borrowed money. Did people really expect them to build a new stadium for free? Okay so they, claimed they would not lumber this opn the club, but come on a businessmans word is not really anymore different to a politicians, and people dont really tend to trust them either. Yes, they have lied and mislead us, but it would be niave to have expected them to do anything else.
While I would welcome DIC to come and plug loads of money into the club, the building of a new stadium would still involve borrowing against the club, abliet just at a lower rate
Amen to that business men are not fans they make money in any way they can
Yossa and Wood, you guys are badly missing the point here. Of course building a new stadium involves borrowing and expense but only a small fraction of the £350 million is going towards initial construction costs for the stadium. The vast majority is merely refinancing the huge initial loan with which H&G bought the Club. Therefore it is not going towards either the stadium or strengthening the team even though the Club will have to meet the crippling interest payments (over £30 million per annum) on the full £350 million. This is an incredibly disadvantageous deal for the Club and is a breach of the promises Hicks made when he persuaded David Moores to sell to him instead of DIC (God what a mistake that was).
Just to put this all in perspective the Club could easily have borrowed the small portion of the £350 million that relates to construction without Hicks and Gillett (This is what Arsenal did). Therefore H&G are adding no value whatsoever to the Club by this loan. Quite the contrary they are saddling it with huge interest payments for which the Club gets nothing back in return. In fact the only things H&G have brought to the stadium project are huge amounts of debt, uncertainty and delay.
By making numerous references to the new stadium Hicks is hoping to fool reds’ fans into believing thats where the majority of the £350 million loan is going but this is simply not true. I really hope Reds fans are not naive enough to buy any of Hicks bullshit. This arrangement will cripple for years any attempt by Liverpool to remain competitive on the field.
This is not to mention the nightmarish effect Hicks’s rift with Rafa has had on morale at the Club. Even if you have major doubts about Rafa’s overall coaching ability (and I for one do) you can’t go about publicly undermining the coach without making him a lame duck. To do this mid-season at a time when we were still challenging effectively on four fronts is an act of criminal stupidity. Its no surpise to hear that Hicks helped bring Bush to power in Texas. The similarities between the two are uncanny.
Hicks intent is to confuse just enough reds fans to prevent us from effectively mobilising against him as a unit but this is exactly what we have to do.
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