George Gillett and Tom Hicks were given the clearest sign yet that the Royal Bank of Scotland has run out patience with them after the bank moved their debts to its Global Restructuring Group.
With less than a month to go until the deadline for the massive debt to be refinanced or paid off the decision is seen as evidence that from RBS’s point of view refinance is not an option. The club’s current owners need to find hundreds of millions of pounds in less than four weeks or they face losing the club.
It was also claimed tonight that RBS CEO Stephen Hester was personally overseeing the high-profile account.
The RBS website describes the unit as playing “an important part in managing major corporate clients across the globe who find themselves in financial distress.”
Liverpool fans have been in agreement for some time that their club is in financial distress, now RBS are reported to have made this official. The restructuring group also has responsibility for “the management of any problem lending portfolios” and “returning those accounts to the originating Group Business Unit / Subsidiary in a satisfactory condition.”
With the group also responsible for “maximising debt recoveries” and “obtaining levels of reward proportionate with risks undertaken” (and that means reward for the bank, not the current owners) it seems more unlikely that Hicks and Gillett will still be Liverpool owners by the time next month’s Goodison derby kicks off.
The Telegraph reported tonight that the debt was shifted to the restructuring group back in March, but whatever the timing of the move it’s clear that RBS have taken a dim view of Hicks and Gillett’s conduct and that their patience is close to running out.
In fact the bank’s patience was already extremely thin in March when – according to parent company accounts – they were only willing to grant Hicks and Gillett an extension of 16 days for the debt. This would later be extended long enough for the enforced appointment of Martin Broughton as chairman to go ahead in April.
Broughton’s appointment was made in order to facilitate a sales process, Hicks and Gillett standing down as joint chairmen and Broughton talking about an approximate deadline of the end of August to see a sale go through. That deadline wasn’t met.
The sale process, described by Broughton as a “willing buyer, willing seller auction”, has hit problems along the way.
In June the new board reportedly blocked an attempt to refinance the debt, an attempt by the owners to bypass the sales process and prolong the club’s problems.
Then George Gillett was reported to have tried stalling the process in July by informing RBS he had a buyer lined up. The buyer just needed a little more time to get his bid together, a bid that would pay off the debt and see the new stadium built.
That bidder turned out to be Yahya Kirdi, a former off-licence and pizza-store owner with no evidence of having any links to the high-powered and wealthy Middle East businessmen who were supposed to be backing his bid.
The reported claims from Gillett came at a time when interest from a consortium fronted by Kenny Huang was about to hit the headlines.
The Chinese consortium he was acting for was later reported to have made a bid for the club in time for a deadline set by Broughton, a bid that was strongly believed to have been the only one made, despite claims from the club’s MD Christian Purslow that suggested there had been more. “A number of bids” can of course mean just one.
Huang made an announcement soon after that he was withdrawing from the process, amidst claims that he had run out of patience with the club’s board and felt they had not been taken the bid seriously. This coincided with some determined efforts to try and discredit Huang, designed to try and prove he’d been no more serious than Kirdi the Pizza man.
Huang had never been billed as the man with the money – although bank sources confirmed prior to his withdrawal that he had proved the money was in place. And regardless of how serious his bid really was, it was no longer on the table anyway.
Assumptions were made that he mustn’t have been serious in the first place – and it almost went unnoticed that the club had very suddenly stopped talking about the sales process and the claimed “number” of other bids.
With the October deadline moving ever closer it seems increasingly likely that the nearest the club had to a serious bid was also the only bid.
When the owners finally refinanced their initial loan in January 2008 they also amended the articles of association of both Kop Football and Kop Football (Holdings). Those amendments give RBS the power to take the shares of one or both owners should any debt secured on those shares be called in.
RBS are believed to be looking for the club to be sold ahead of the deadline rather than them taking control of it. However the bank taking control of the club – at least in the short term – is still considered to be a preferred option to putting the club into administration. Administration would see the club deducted nine points but still can’t be ruled out.
Bloomberg said sources close to the deal had told them that RBS were now willing to accept a down payment of as low as £100m “with an agreement to pay the remainder of the loan down over a longer term”.
They also quoted Stephen Schechter, CEO of Schechter and Co, who gave them his opinion on how the situation at the club may unfold: “The roulette wheel stops spinning on October 6,” he said.
“If you were a prospective buyer, I would call RBS and say I’m interested in buying your loan. I would notify Gillett and Hicks that I’m the new lender and there will be no extensions, renewal or modifications of the loan: It is due and payable in full on October 6.
“What that does is stop the game.”
What Liverpool fans are now concerned about is what happens when that game stops.
It’s far too early to celebrate the end of the bad times.
There is always a fear that Gillett and Hicks – veterans of situations like this – will have more stunts to pull. And even if they have run out of tricks the club will still need a buyer. Without one administration is inevitable.
Should a buyer be found, be it a buyer of the RBS debt or a buyer of the club, there no longer seems to be a requirement that they invest in the proposed new stadium or indeed in the playing squad. Previous assurances that the “right buyer” will be found look like being replaced by efforts to find any buyer.