An interesting article appeared this morning in the Independent relating to Dubai International Capital’s interest in taking over at Anfield. It was the first one in a while, after what had been a never-ending flurry of stories that hit their peak when Tom Hicks announced all talks were off after a meeting in Dubai two weeks ago. The reply to that was a claim in the Liverpool Echo that talks had been called off because Hicks had refused to consider the idea of a fan representative being given a vote on the board. The claim had come without any quotes, but with a strong suggestion that it had been made via the DIC camp, and saw Hicks issue a strong denial about the truth of it.
Then it went quiet.
Behind the scenes little was being said. DIC seemed to suggest privately that they were confident they had the legal footing to launch a challenge to Hicks’ veto. Yet people inside the club suggested that not only had Gillett not accepted the offer which Hicks was supposedly vetoing, no offer had even been made. And Hicks had not changed his stance that he was close to finding minority investors to join him at Anfield, taking a majority share himself. DIC didn’t ever confirm officially that they had insisted on a fan being given a voting seat on the board, but the SoS (Spirit of Shankly) supporter’s union stated they hadn’t been approached on the matter; it seems it was never any more than an attempt to use the emotions of the supporters yet again as a means of attacking Hicks and drumming up more support for DIC. Except most fans saw through it, and perhaps it did DIC more harm than good, more fans opening their eyes to the way they’ve been used in recent months.
Liverpool’s seven-game run came to an end on Sunday, in controversial circumstances in terms of how the referee handled the game, but also showing how much more Liverpool’s owners need to invest in the squad. Perhaps that was seen as an ideal opportunity for DIC to remind Liverpool fans they were still in the background, they were still interested, and in what has at times been like an election campaign once again hinting “vote for us and we’ll buy you more players”.
The Independent article was headlined confidently from a DIC point of view: “DIC to seal £400m deal for Liverpool in ‘three to four weeks'”. But Liverpool fans are learning more and more to ignore the headlines and analyse whatever sits below.
Two reporters had worked on this story, Jason Burt and Ian Herbert, but it contains little more than speculation, and a reminder that DIC really are still interested, and still confident of winning this battle. In quotes, the story gives “three to four weeks” as the timescale for DIC’s success, saying a “source close to the proposed deal” told them this, and that it was a bid for full control of the club. Note it said full control, not 100% ownership.
The reporters claimed they were told DIC were confident of doing the deal for £400m, which works out at a far lower figure than what would have given George Gillett the £80m profit from leaks of two weeks ago. The £400m figure would give Gillett and Hicks a share of £50m profit, or £25m each. Reports varied two weeks ago on how much Gillett was supposedly going to make, but all insisted by then that it was at least £40m now, with up to £40m tied to future club success. That’s a full sale price of £430m to £510m dependent on which figure – if any – was true.
As well as the £400m figure, the reporters claimed they had been told, again in quotes, a “third party” investor was being sought by DIC to take on a minority stake. Nothing was said about who this third-party investor might be, whether they were already in agreement with DIC, or how much exactly their minority interest would be. There has been some speculation that Share Liverpool could be getting a chunk, but that is purely speculation. Previous claims coming from the “sources close to the negotiations” had said Hicks was willing to become a minority shareholder himself, and this has been speculated again today, but it remains nothing more than speculation.
Despite the article saying Gillett is “believed to already have an agreement in place (for DIC) to buy his share” this also remains as speculation, with people in the club claiming no such agreement exists as yet. The article claims DIC are “confident that Tom Hicks… is now close to agreeing to sell to them”.
The debt run up by the club since takeover means it now requires a bid of £350m to pay off the loans alone. It matters little that the club was sold for far less than that a year ago, Hicks and Gillett are not going to sell at a loss, leaving themselves saddled with part of that debt. More to the point, they want a profit for their troubles and £400m remains at the low-end of what they would sell for. They know that if the club can get through the next four years or so until the planned new stadium is bringing all its extra money in, alongside improved TV money and better exploitation of the commercial side of the club, profits should be substantial. DIC know this too, of course, and no doubt feel they can do more to increase those profits.
The source in the Independent article was quoted as saying: “It’s not a cheap deal and Hicks is holding out but there is confidence that it will now finally happen.”
And that’s what it boils down to. DIC are confident. They feel they’ve got Hicks backing into a corner and given time he’ll finally give in. But Hicks seems to be far less worried than DIC would like. Confidence is good in the football world, and no doubt is good in the business world. But confidence alone isn’t enough.
Adding more to the story, it seems the Independent had been told DIC’s Sameer Al-Ansari, the Liverpool-supporting Chairman of the Dubai group, plans to involve other “investment vehicles” in its plans for Anfield as part of a scheme to raise its profile, mentioning a possibility of hotel group Jumeirah being used as part of the new stadium development. The claims reported for some time now of DIC’s intention to review the club’s operations from top to bottom are repeated.
More speculation in the article comes in the shape of a claim that “the reason for the apparent confidence now could be that several of Hicks’ loans are due for refinancing within two or three months. This may be the trigger for his main lender – believed to be JP Morgan – to force him back into talks with DIC and accept its offer for Liverpool.”
This again causes some concern. It is of course possible that the reporters have scoured old press releases and other documents, in turn finding that loans announced in the past genuinely are due for renewal in the next few months. It could be just speculation by the reporters. But if it’s not then where has this information come from? Would Tom Hicks, his family or his staff be likely to reveal such vital information to anyone outside their own circle, let alone reporters for the Independent? Would JP Morgan be willing to breach client confidentiality and wreck their reputation by feeding such vital “facts” to the same paper? Would someone trying to unsettle Hicks as much as possible be willing to make up such “facts” in order to help their cause?
It may well be that Hicks has got loans due for refinancing before the summer, and in the current financial climate it would be no surprise if he was worried about how the refinancing would work out. But this smacks more of wishful thinking than fact.
More insight into that comes from the next couple of sentences in the article: “The full level of the Texan’s debt is unclear. But DIC sources believe he has been hit badly by the state of the financial markets in the United States, which has seen the value of assets which he has borrowed heavily against drop – in some cases by between 30 and 50 per cent.” So DIC – or sources from DIC – are guessing just how much Hicks has been hurt by the financial troubles in the US. In two sentences they admit they don’t know how much debt Hicks is in, yet claim to know he’s borrowed heavily against his various assets. It’s not an uneducated guess – the initial purchase of LFC came completely from borrowed money and the values of many US assets have fallen – but it really is just a guess.
We’ve seen the Klinsmann admissions contradict statements and newspaper quotes from Hicks, and anyone with a knowledge of how to use Google and a spare couple of hours can find endless ‘evidence’ against Hicks from days of old. Even if taken with a pinch of salt it’s often pretty damning. But how much of what has been said in recent months about Hicks has come from the guesses of those feeding information to reporters on behalf of DIC?
The article in the Independent states rather obviously that if Hicks isn’t able to get new finance deals in place when any of his loans become due then the existing lender becomes the owner of any assets that were down as security. It seems that the reporters have spoken to someone who is playing on the perceived difficulties in Gillett and Hicks’ bid for refinancing of their LFC debt in January and the growing mess in the US markets. It’s been said for some time that Gillett was the main reason from a financial point of view that refinancing was difficult – he had far fewer assets with which to guarantee his half of the loan. It’s also been said for some time that the other main difficulty was down to other board members blocking the attempts to load all of the £350m debt onto the club. The other factor in the delays was in terms of the type of finance package on offer – in this case not exactly the best one.
But how much trouble will Hicks really have when it comes to refinancing? Despite the worries in the US it seems unlikely he would be refused new finance point blank. They aren’t necessarily going to be the best finance deals he’s ever signed up to, and he may have to settle for shorter-term deals than he’d like, perhaps having to add more assets as security – but if he wants new finance he’ll get it.
If the dollar drops against the pound then his share of Liverpool FC increases in value in terms of dollars. At two dollars to the pound his half of LFC before any profit would be worth $350m. If the dollar went as far as 210 cents to the pound his half would be worth $367.5m. Nobody can predict how the markets will go, how low they’ll fall or how long they’ll take to recover, and how the dollar’s value will rise or fall over that period, but it could be argued that holding tightly to his only non-dollar investment for a little while longer would be wise. The difficulty of course comes when the LFC finance deal is due for renewal, when the assets required by the UK banks for security on his half of the £245m debt not on LFC’s books are likely to be worth less money. But for now he might well be able to sit far more comfortably than DIC seem to be assuming.
Liverpool fans want the ownership situation resolving now, before we get any closer to the next transfer window, before we find ourselves creeping into another season. If big changes are afoot, thanks to a change in control, it’s far better it happens before the new season kicks off. But those who are trying to get control of the club are more concerned with getting a deal done on their terms, and that means we may spend the summer in limbo with Gillett and Hicks supposedly join owners but not willing to speak to each other.
The article tells us little, other than showing DIC’s interest remains as strong as it was before Hicks announced all talks were off. It speculates on how precarious Tom Hicks’ financial situation could be, but bases that on the state of finance in the US as a whole rather than on anything that is known about the state of Hicks’ finances. Tom Hicks has not changed his stance – he intends to be a majority owner of LFC and has minority shareholders lined up to help him achieve that. All in all – nothing has changed.