Ownership Saga: Are we sold, again? [R]

A new question that popped into my head is this: if the debt load from Hicks is so onerous why are the DICs willing to pay 50 million quid for the team over and above the full loan amount? These people have no track record of charitable investments! They still have to come up with 400 million quid! And then build a stadium. So the value has to be there. That leaves the supporter with a whom do you trust conundrum. Swarmy sheiks or clueless cowboys?

 

The most important thing about the Stadium is to get it right. This Stadium will be a crucial part of the club for decades to come. While it might be frustrating to wait a year or two while things get sorted out, a rush job now could lead to decades of regret.

 

But you don't understand. The sheikh is a red fan for life. He is totally irrational about his support of LFC. Like Abramovich, it will be an extensions of his ... ego and he will not demand an equitable profit.

He may as well be a scouser, such are his natural inclinations and respect for LFC's culture, atmosphere and history.

After all, he can just screw a bit more out of the poor Malaysians, Indonesians and Filipino workers who he pays two bits to build his colossal ego trip resorts and cater to the whims of all of the European tourists in Dubai and funnel the revenues straight into the new stadium.

Heck - maybe he will even build a stadium in the shape of the Liverbird ... or at the very least design a resort in the Persion Gulf that spells out "You'll Never Walk Alone".

Hicks might be a buffoon, but the Sheikh is one of the few people in the world who may trump him by an order-of-magnitude.

 

Someone rep this man for me.

 

I'm no financial whizz kid but I think it's more about what the club could become if managed properly. The club in it's current state is suppose to be worth 400/500 M (what's 100 million between friends ). But could be worth alot more in the future. And thats why there is some room for the offer price on the club, but also why Hicks doesn't want to let go.

The problem for us is DIC are in a much better financal position to make the club a success, because they can either invest there own money short term so the club doesn't have to pay the huge amount of interest like we do with Hicks. Or even if they do borrow money against the club, the interest will be at a much lower rate as there's no risk in Dubia going broke next week.

I don't think think many people really think DIC are in this for the love of the club, but who care's IMO our future will be alot brighter with them in charge for the reasons i've said above, but also because it would damage their reputation to be in control off a bankraupt club. Where as Hicks obviously doesn't care what people think of him probably isn't as conserned if we do go the same as Leeds, because granted he would loose some money, but he'd still walk away from the situation just fine because the debt will be against the club. And thats a risk he seems to want to take.

 

Is this the beginning of the End? I hope so.

http://www.skysports.com/story/0,19528,11669_3249362,00.html

Hicks is stepping aside to let DIC buy Gillet out.

 

That's interesting. Looks as if DIC called Hicks's bluff-- he had to buy Gillete's shares or allow them to do that. Wonder what the next step in this extraordinary gavot will be? That £105 million against the club's books, maybe?

 

The only thing i am worried about is how much we actually know about DIC.

I know we are all fed up with teh crazy yanks but will DIC actually do this in the right way or do we have another Abramovic who will wield the axe when his rattle falls out the pram ????

I agree that more money is always a bonus but at least Hicks and Gillet were sports owners, what the hell does DIC bring to the table ???

 

liverpool fans sure dont like the people of the country i live in.http://sports.yahoo.com/sow/news;_y...ap-liverpool-americanowners&prov=ap&type=lgns

_________________________________________________
chivas remember this
www.youtube.com/watch?v=M26TmdesvUU
www.youtube.com/watch?v=fX1N64hwXwg&feature=related
att: el torito silva

 

My opposition to the Americans stems solely from a healthy dislike of debt. Other than that, I am indifferent to either them or DIC. In fact, I was getting the impression Hicks was slowly realising sport, in particular football, in England is run along very different lines from over across the pond. You're right, too; DIC may turn out to be another Abramovic (rather than Glaziers) in the running of the club. The open arms behaviour to them of some of our fans worries me to that extent.

 

The url leads to a story that says Hicks denies doing just what you say he has done

 

He has been doing much denying of late, to be fair. Only for the contrary eventually to emerge.

 

well maybe I was simply pointing out that he denies the story -- not a surprise given UK media standards (or lacl there of) --and by the way it was Sky which translates as the S**.

 

Actually, you're more right than you even imagine. Sky has been reporting diffferent versions of the story for the last 3 hours. They have been quite disgraceful where Liverpool is concerned. It's also been an interesting last few weeks with Hicks seemingly using Sky and DIC using BBC and both have been nothing short of shocking in their editorial standards.

 

With this intertubesnetsurfing thingy I get to read both of them too Hell I get the late night Sky Sports report at 7 PM over here on the television -- It's a small f'ing world isn't it!

 

I also don't like being lied to but you're right the debt is the biggest concern. I got this E-mail from a friend that passed it along to all of the other Reds that he knew. I'm sorry about the length of the following quote but I think it is relevant and important to pass on here.

"From the Sons of Shankly -

You may or may not have heard of us. But here’s a little bit about who we are.
To do exactly as it says on the tin. A Union for all Liverpool Supporters.
A voice that represents us all. A platform for us all to stand together and fight for what we believe in. It is early days, and more details of how the organisation will grow will appear over the next few weeks and months. But the catalyst for our formation…..

We want Tom Hicks and George Gillett out of our club - why?

THEY LIED & HAVE JEOPARDISED OUR CLUB FOR THEIR PERSONAL GAIN

They promised that all loans would be would be secured against their own personal assets.

THEY LIED

They have taken out a loan of £350m. £105m has been secured against the club and £245m against Kop Holdings - which owns 100% of Liverpool Football Club and has only one source of revenue: The Club. So, regardless of the smoke and mirrors, Liverpool Football Club has to pay all of the interest on all of the £350m. The interest payments alone for this debt will be around £30m each year. All of which will be payable by Liverpool FC - more than enough to wipe out the club’s operating profit.

Gillett and Hicks have only taken out this new loan over an 18 month contract. This is very unusual for a deal of this size; three years is the usual minimum term. Wall Street analysts believe that this is because they had difficulty in getting the banks to lend them the money. Which raises questions about:

THE STADIUM

£60m of that loan has been earmarked for starting construction of the new ground.
There is no funding yet in place to complete the stadium, nor has planning permission been granted for a 71,000 capacity. Existing consent is for 60,000, with any increase depending upon improvements to transport and car parking. With no underground car park, the new plans have less car parking than the original 60,000 design!

If they can’t borrow again in 18 months then they cannot complete the stadium. How can they pledge now that the stadium will be built? In the same way they pledged it would be well on its way to completion twelve months ago - by misleading us.

So do they actually intend to complete the building of the new stadium?
Should Hicks & Gillett get the loan to actually build the new ground, the additional interest payments will be £25m per year.

This will leave Liverpool Football Club to shoulder annual payments of £55m in interest alone. Which begs the question:

WHERE WILL THE FUNDS COME FROM FOR TRANSFERS?

When they took over, Hicks & Gillett promised to back the manager in the transfer market.

From the two transfer windows Hicks and Gillett have owned the club for, Benitez has spent £48.5m on players, and recouped £33.5m in player sales. A net spend of £15m. This is the up-to-date figure that includes the purchase of Skrtel and the sale of Sissoko.

The club brought in around £30m from the run to the Champions League Final last season alone. On top of this there is the increased TV money the club has received.

Where is the money Gillett and Hicks have backed the manager with? They’ve lied to us, they’ve manipulated the press, and some people have believed the spin. We won’t.

In reality, after all the talk about money and Snoogy Doogy, the manager has spent £15m in the last two transfer windows. How is that backing him in the transfer market?

It is about time the real picture was painted for all Liverpool fans out there.

They promised to respect the club’s heritage, history and traditions.

THEY HAVE LIED AND LIED.

They asked to be judged on what their actions. Well they have failed to make a start or produce the funding on the stadium, the major reason why David Moores looked for investment, they have failed to back the manager in the transfer market. They have not put one single cent of their own money into this club and they have undermined the traditions of the football club and the office of manager.

They have, however, managed to create huge debt for LFC to pay off without any end product. How, exactly, is the football club in a better position now than it was twelve months ago under David Moores?

After the Sunderland game, we staged a 15 minutes stay behind protest at the end of the game. We intend to do the same again.

During the protest, Steve McManaman commented on Setanta that the Americans had backed the manager in the transfer market, secured their new loan bringing money into the club, and we should all forget about it and move on. We don’t blame McManaman, a fair number of good Reds have been won over by their spin, so why shouldn’t a blue?

So it’s time to spread the message and get the real goings on from within Anfield to a wider audience. It’s about time the truth was exposed.

Hicks and Gillett have to be forced out of Anfield before they wreak more havoc."

http://www.sonsofshankly.com/aims.html

Now people might believe that some supporters of LFC are anti-American but I don't believe this is the case. And still some others might be won over by the "sh!t sandwich your eating is better than the one you don't know at the deli" argument but I'm not. I think SOS has done a good job of making the current dilemma pretty transparent.

What about DIC? They seem to be the real deal but of course after the H&G show it is understandable that everyone wants to be more cautious. One thing is sure in my mind and that is H&G must leave the club for the good of the club. They lied.

Yes, Prime Minister
You lied - The Tangled Web
[youtube]8keZbZL2ero[/youtube]

 

If we can chase H&G out we can chase the Dubais out, these are proud men, if the fans turn on them they wont like being hated, they want to be loved even if its bought love

 

ANYWAY....................

As far as i read the latest news it is possiable for Hicks and DIC to have %50 each, if they buy out Gillet.

Do we think this is simply a stepping stone to DIC buying the whole lot or could this arrangement actually work for any length of time ?????

 

The latest I've heard is that Gillett will sell Hicks 1% of the total shares and sell the rest of his stock to DIC. This will leave Hicks with 51% and DIC with 49%. I assume that DIC will attempt to increase their stake at some later point until they assume a majority stake.

 

Heard that too but the other 49% will not be worth a damn as DIC is not interested in being a minority owner. Gillete allegedly told Hicks that he either matched DIC's offer for the full 50% share or DIC gets it. Hicks himself is flying over to Blighty to sort this out. Expect some more twists and turns.

At least these off-field dramas are no longer being used as an excuse for ordinary performances.

 

That is a real possibility. Local financial gossip is that JP Morgan has already made dark hints that Hicks's other US investments could be at risk if he doesn't keep his eye on the ball. Probably rubbish, though; the difference between reports based wishful thinking and facts, particularly on Liverpool's off-field issues, is usually as wide as the mouth of the Mersey.

 

His other investments might be at risk? That is absurd! All the critics of Hicks suggest that if he defaults on LFC loans that he would just walk away with no personal consequences! I cannot understand this!

Hicks wants LFC to succeed commercially as much as anyone in the world. There is no way that he wants to add a debt load that the club cannot bear because he would be finished in the businessworld if he defaults on these loans. He would never be able to raise a dime and he would have an extremely hard time operating his existing sports holdings (Dallas Stars, Texas Rangers, etc) if he was not even forced to sell them to raise scratch to pay off the Kop loans. The cash flow requirements for US sports franchises are tremendously higher than the cash flow requirements for a team like LFC (look at the salaries for baseball players and hockey players ... they make most EPL players look like paupers ...) ... he depends on credit as his lifeblood.

Bottom line.

I would rep you if I could. The financial and political ignorence on display from some posters here (as well as some of the LFC fan groups) is cringeworthy. I have not seen anyone here standing up suggesting that Hicks is optimal ... but there are no facts in evidence that DIC or any other likely owner who has been suggested (Steve Morgan all the way back to Man City's owner) would be superior.

The actual valuation of LFC is based to a large extent on the club's continued sporting success, brand image and history. The club currently has pretty creaky operations and untapped revenue flows due to the limitations of the ground and lack of earnest development of commercial opportunities amongst its worldwide fanbase. Any owner is going to make it a priority to rectify those issues. That is going to require investment.

Virtually any billionaire is going to finance that investment using debt. His WACC is low enough due to available cheap credit lines to make debt a better option than cash (just as I don't choose to pay off my mortgage using savings because I can get more by investing my savings than I save by paying off the mortgage early). This is Finance 101.

 

I don't believe the rumour either. Too much high-flown hyperbole about. But I do think you missed the general point about the JP Morgan warning.

Except credit lines ain't cheap, these days. They are even more expensive the less of your money you put down as deposit. Adverse selection, moral hazard and all that.

You have it right, though, that the potential future earnings of Liverpool Football Club are higher than the cost of borrowing to finance the organic growth of asset. My worry, and this is a cultural problem more than anything else, is the potential for slippage. But then, maybe that is why Americans take more risk and are ultimately rewarded more than most of us. By the way, I heard that Arsenal also has very high debt burden but it is guaranteed by the physical assets of the owners. Again, more rumour than hard fact.

PS I'd be interested to know where you obtain a higher interest rate for your savings than your borrowings

 

My mortgage is a fixed-rate 5.625% loan. It is not hard to find investments that (for very little risk) average a higiher rate of return than 5.625%. Particularly over a 30 year time-frame (the length of the loan).

If I have trouble maintaining a 5.625% rate of return in my investments, my wife and I will take some of the money we would have invested and use it to pay down some of the loan amount (there is no prepayment penalty) ahead of time until we can identify low-risk investments with higher rates of return (again).

 

I was being sarcastic. I think more of Hicks' assests are tied in as collatoral than his critics are suggesting. I don't think JP Morgan would have given the loan to Gillett/Hicks if they had not put up other assets as collatoral.

Critics are saying Hicks could walk away if Kop Holdings defaulted. I don't think that is true. He would lose his ability to run his other businesses, if not lose them out-right. Gillett had one of his companies (ski area) get wiped out in chapter 11 before ... it took him some time to recover because he lost assets in the settlement.

There are very few arbitrage opportunities available ... reward is hard to find without risk. You just have to avoid foolish risk.

They do and it was a big problem until they got in the new stadium and saw what the revenue flows would be like. Had the revenues not matched projections - they would have been in a world of hurt. The solid revenue numbers allowed them to refinance the stadium loans and lower their cost of capital.

They also had the advantage of being able to develop and sell of the old Highbury site for far more than Liverpool will be able to recover from 'Old Anfield', since Liverpool has to make a lot of that land available for community use in turn for getting permission to build on Stanley Park. Arsenal was able to pay down more of their debt once they developed and sold the Highbury site - which of course is located in prime London real estate.