Hicks: Loan payment skipped to get banks’ attention

Liverpool co-owner Tom Hicks said last night that the non-payment of a quarterly interest bill by his family’s Hicks Sports Group (HSG) came as part of an attempt to re-negotiate the terms of the loans it relates to.

A report yesterday on the FINAlternatives website claimed HSG had defaulted on the loans, worth over $500m US, and had entered into talks with lenders “about a forbearance”. This is a term usually used in reference to short-term payment arrangements made to avoid foreclosure.  However, according to Hicks, the situation is not as dire as that report suggested.

Hicks has been in discussions with the lenders behind the HSG loans in an attempt to restructure the debt, or preferably to reduce the debt and in turn enable new investors to buy into those interests.

Those interests include the Dallas Stars NHL hockey side and the Texas Rangers MLB baseball side, but do not include Liverpool FC. Hicks has appointed Merrill Lynch to help him find buyers of minority stakes in either of the two US franchises. He is willing to reduce his own shareholding to as little as 51%. He currently owns 95% of the two sides.

However it seems those lenders – somewhere in the region of 40 separate institutions – have dragged their heels over making a decision on his proposals, and Hicks claims this action might just wake them up: “We’re doing this to get everybody’s attention so they’ll make a decision and cooperate with us,” he said.

The interest payments had been due on Monday, but it wasn’t until Friday that it appeared in the FINAlternatives report after somebody leaked it. Hicks said: “This is really between me and the banks and the lenders to HSG.”

Hicks was keen to make it clear that Hicks Sports Group is a separate entity to other interests not only Liverpool FC but also Hicks Equity Partners and Hicks Acquisition Company. A statement also added that HSG’s financial setup is completely separate to Hicks and his family’s personal family interests.

Some changes were made to the HSG website yesterday, with all references to Liverpool FC removed. In a legal sense HSG and LFC are not related.

HSG does own half of the operating company that runs the home of the Stars, the American Airlines Center, but according to reports in Dallas this is not affected by the debt.

After being under much criticism from supporters for using so much debt to fund his sporting acquisitions, he is now trying to reduce that debt by replacing as much as possible with investment from others: “As I find the right partners to bring in, that share my long-term vision in how to grow these teams, the proceeds will be used to pay down and pay off all of the bank debt,” he said.

He has owned the Stars since 1995, and has seen their value rise from $84m to $273m according to the finance magazine Forbes. Their latest valuation of the Rangers, which he has owned since 1998, is $412m – a healthy increase on the $250m he paid for it.

Hicks says he is the single largest lender to HSG, and that he fully intends to fund both teams “as long as I need to.” He said the situation with the loans, “will have absolutely no impact on the fans, the players, the employees, on the suppliers and the sponsors, to anybody.”

In a report in the Star Telegram, Andrea Ahles said Hicks “would not disclose exact figures on how much the interest payment was or what HSG would do if the lenders do not agree to a debt restructuring plan”.

In a press statement released yesterday Hicks said: “These issues relate only to HSG. Like so many other companies and institutions, HSG has been impacted by a global credit crisis which no one could have anticipated. The company is not asking for additional money; it is only asking for full access to the interest reserve account and revolving credit line as well as some amendments in the debt covenants.”

According to that statement, there is “minimal risk to the banks”. There are 40 banks, the debt totals $515m US.

Hicks said: “In the meantime we continue to interview prospective partners for the team, and we are optimistic because these are two strong long-term investments for the right people.”

The Star Telegram quoted Hicks as saying that what HSG are doing is something that a large number of US companies are trying to do in the current financial climate: “The banking industry is frozen, and there are thousands of companies around the country that are going through the same thing.”

The situation certainly wasn’t a concern, at least publicly, to the deputy commissioner of the NHL, Bill Daly. “We have no concerns about the Stars’ ability to carry on,” he told the Globe and Mail in an email to the Toronto-based newspaper.

George Gillett, Hicks’ co-owner at Anfield and owner of Canadian NHL outfit the Montreal Canadiens, has also disclosed recently that efforts were underway to have a fresh look at how the finances of his own various interests are structured.