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

Re: Owners Complete Refinancing Deal

the devil you know versus the devil you don't know

many are automatically assuming DIC would be an improvement

things to consider:

Dubai's Debt Cloud

Why Liverpool fans are wrong to suck up to DIC

 

Re: Owners Complete Refinancing Deal

Just been lurking on a number of Liverpool supporters' sites and it looks as if Gillet and, primariliy, Hicks are on a charm offensive and trying to wangle their way back into favour. A key question still stands; where is £250(?) million for building the stadium going to come from?

And I should be well wary of jumping into the arms of the Sheikhs, either. These are uncertain times but I hope the players realise that as long as their wages and bonuses are still being paid, they owe the fans 100 per cent effort and commitment.

 

Re: Owners Complete Refinancing Deal

You'll be fine, they won't dare ruin Liverpool FC, unless their crazy.

 

Re: Owners Complete Refinancing Deal

They'll have to arrange another loan for the stadium entire. But this was expected. Like a mortgage the stadium will pay for itself over time. They have a breathing space of a year or so to sort that out and will thus be able to do so in a better financial environment than right now. We'll have to see how this all plays out but the financial impasse has been resolved. The owners will now know what money they have for transfers now and in the summer. They need to publicly declare support for Rafa now and buy Masch. If they do that then they can heal a great deal of the rift with the fans.

 

Re: Balague on Benitez rumours (8.1.2008.)

The owners back Rafa. About time!

http://www.skysports.com/story/0,19528,11661_3077872,00.html

 

Re: Ownership Saga [R]

You have a right to boycott. But it won't change anything.

The owners' interest is in putting a winning product on the field. This helps secure their investment.

The one thing we can do is show support for Rafa -- that will give ownership serious pause about making a change.

 

Re: Ownership Saga [R]

Big Tom is a busy guy

http://sanjose.bizjournals.com/sanjose/stories/2008/01/28/story1.html?b=1201496400^1581142

 

Re: Ownership Saga [R]

Any particular reason why the following post was removed?

 

Re: Ownership Saga [R]

I don't know, I did merge all the threads. But, I didn't do it based on posts. Look for it somewhere in corresponding chronological order.

freakin' conspiracy theorists... sheesh.

 

Re: Ownership Saga [R]

It's a bit difficult to look for it when I no longer have access to the bin.

 

Re: Ownership Saga [R]

Ah well, you're a fan of Livingston. They don't even play in the same "country" as Liverpool. I'm sure you wont miss any good conversations you might not have had here.

 

Re: Ownership Saga [R]

If I read reports correctly (both in LFCOnline and on other sites, the only debt-load on Liverpool FC is £45m for operations/transfers/etc and £60m for the initial deposit on the stadium.

That means that (contrary to popular reports) Hicks and Gillette are taking something like £100m - £150m of the load upon themselves. Now correct me if I am wrong, but didn't LFC have debt around £50m when Moores was chairman? And that was before there was a penny for the stadium?

Granted the American buyers are not Abramovich-type financial backers, but it is hard to suggest that they are falling down on financial stewardship of the club with these terms of the refinance. After all, they are apparently on track to secure financing for the stadium (which Moores has not done) and they have provided backing for quite a few expensive signings so far. There has also been plenty of money made available for a tremendous number of high-value youth signings ... who Rafa was never able to pursue as he liked with Moores at the helm.

Granted Hicks and Gillette have not always done things on Rafa's schedule (the Maschareno deal). However, if Rafa had not made poor decisions - as I and many others noted at the time - wasting time signing Bellamy and Kuyt (when a player like Torres was needed and a superior player in Anelka could have been had for much less money) .... the club would have had the scratch to pay Masch's option. And that is before we point out other mediocre signings such as Gonzolez, Pennant (who is not bad, but was too expensive given his role), Voronin (cheap, but a waste of space/wages), etc.

Let's consider the other 'big 4 teams' and their ownership situations:

Chelsea ... their owner has surely put money into the team ... although I don't know where the debt/operating deficit resides (with the team or on Abramovich). But he has not exactly been a model owner. Would you rather have an owner like Abramovich?

Arsenal is doing very well now ... but their stadium deal put them under an enormous debt load and their very tight transfer policy (cash-flow management) has been noted quite frequently in the past. They have terribly high ticket prices and very nearly missed out on Champions League - which would have put them close to the connundrum 'Pool almost found itself in under the Moores.

Manchester United - the Glaxer purchase totally alienated old-fashioned fans. It added a huge debt-load to the team, as well. For a few years, at least, if appeared as if SAF had his hands quite tied with respect to big transfers. However that is all now in the past. The team is now rolling in cash, expanding Old Trafford yet again, purchasing the creme de la creme of young Continental talent, etc. It is hard to say that the club is in bad shape financially (or competitively at this point).

The current Liverpool ownership group by far most closely parallels the Man Utd situation. If anything, Hicks and Gillette have been freeer spenders than the Glazer families. Neither the Glazers or the Hiicks/Gillettes are highly involved owners (though second generation family members of both ownership groups seem committed to the sport/institutions. The debt load of both teams is substantial. In Man Utd's case it seems to be sustainable by revenue growth. In LFC's case, that remains to be seen. But at least the team is not going to be saddled with that debt.

As others have mentioned above - the solvency and business approach with acquisitions of DIC are hardly rock solid either. Ownership by Shinawatra would have been shady. Morgan would not have been able to bankroll the team on the same level as Hicks/Gillette. I don't really know if Moores could have done a much better job than securing Hicks and Gillette as new owners. Especially compared with the ownership situations of other similar clubs in EPL. The Lerner group has hardly broken records with Aston Villa. The recent attempted acquisition of BFCF was a comedy that almost maid Gold and Sullivan look like decent fellows. The Gaydamark guy that bought Portsmouth is as shady as they come. The WHFC purchase has been a mess ...

Things at LFC could be far worse than they currently are. The stadium is coming, the team is solvent and money is available for spending at better levels than under Moores. The owners have unsettled Rafa a bit to be sure - but the owners/boards/presidents at Chelsea, Arsenal and Man Utd have also made decisions that have unsettled their managers in the last 3 - 4 seasons.

Bearing all these things in mind - especially the details of the terms of the financial restructure - I think the popular jumping up and down and throwing the toys from the pram about Hicks and Gillette is a bit overdone. The owners ARE bearing the great majority of the finanical risk for the current debt. They are putting their money where there mouths were regarding transfers. ANd the stadium is on its way.

Rafa is a great manager - but it is important for even a great manager to feel pressure to perform. There is no reason for the Rafalution to stall given the signings he has been able to make .... He now needs to buckle down and turn the many gifted players at the club into a team that exerts its will on other teams. Compared to the players the team had under Houllier (when they finished 2nd mind you) Rafa has an embarrasment of riches:

+ Momo Sissoko is the Igor Biscan of this club (not sure for how long).
+ Yossi Benyouan is the Vlad Smicer of this club.
+ Sami Hyppia is the Traore.
+ Xabi Alonso is in the Gary MacAllister, Danny Murphy or Jamie Redknapp role.
+ Masch is the Hammann on this team.
+ The forward depth is much deeper on paper (though Kuyt is no better than Emile Heskey the underappreciated). Crouch is a wee bit better than Neil Mellor.
+ Steven Gerrard and Jamie Carragher are now at their peak.
+ Kewell and Pennant are comparable or superior to the wing players from that period (Riise, Murphy, etc)
+ Daniel Agger is the Henchoz on this team (pesky metatarsal notwithstanding)
+ Finnan and Arbeloa are excellent fullbacks - the equivalent of their counterparts during the Houllier period (Carra, Vignal, Traore, Babbal, etc)

The youth talent at the club is leaps and bounds beyond the level under Houllier.

Much of this improvement is due to Rafa's guiding hand. On the other hand, Rafa has won only a single truly significant trophy for all of these gains. And he has still never led the team as high in the league as Houllier did. In many ways - Rafa's period with the club ironically resembles Houllier's highly influential but ultimately unfulfilled period leading the French National team ... when Gerard prepared Les Bleus for a generation of success but was not the man to ultimately lead them to it.

What would a coach such as Del Bosque, Mourinho or Capello do with a roster like the Reds have right now? I hope we never have to find out - because I hope that Rafa can couple his shrewd team-building, tactical acumen and coaching (he does get more out of his elite players than Houllier ever did) with the motivation, drive and commitment to push this group of players towards the only goal that matters for the club - to add to their championship history in the top division.

Nothing that the American owners have done so far has caused any permanent harm to these goals. Now it is time for Rafa to recognize where the team is and commit to winning the championship before, or in the first season that, the Reds open the New Anfield.

 

Re: Ownership Saga [R]

I feel like I've seen a ghost! And, I don't even mind reading this long post since it's been so long from your last one.

 

Re: Ownership Saga [R]

I have no spare time. A promotion at work, coupled with full-tme work towards an MBA and a new little one at home do it for me.

This occasion seemed worth the effort, though.

 

Re: Ownership Saga [R]

Congrats on all fronts.

 

Re: Ownership Saga [R]

Ah, did wonder where you'd gone. Enjoyed the long analysis. Careful, they have a word limit when writing theses ...

Well done on the non-football achievements.

 

Re: Ownership Saga [R]

Particularly since its the first post of yours I've agreed with in donkey's years

 

Re: Ownership Saga [R]

I don't know where you got this impression.

 

Re: Ownership Saga [R]

Recall several years ago when there was tons of flack as they sold Patrick Vieira and did not spend a dime to replace him ... even though there were some relatively low-cost veterans available.

They ... very nearly missing out on the all-important 4th spot (but for a bit of dodgy lasagna) that in the standings and crashing financial oblivion. Thierry Henry even talked about getting on with things starting around that time.

There were even rumors that Wenger was on the way out (it ended up being Dein in the end and Peter Hill-Wood has hung in there, albeit with new investors doing some of the financial heavy lifting).

 

Re: Ownership Saga [R]

http://www.soccerway.com/news/2007/...hand-wenger-a-70-million-pound-transfer-kitty

Arsenal's stadium has led to a very favorable financial situation.

 

Re: Ownership Saga [R]

Now, yes.

Three years ago ... things were balanced on a knife's edge.

I am not comparing the 'instantaneous' position of LFC to its rivals. I am comparing LFC to the position that its main competitors have been in (at one time or another) in the past few seasons.

You might well say that once LFC builds a 60,000 seater (with lots of corporate spots) that the team will be back on the financial gravy train*. The stadium simply never would have happened if Moores remained chairman and I wonder if Morgan would have been able to swing the development either (IIRC he was in favor of the groundshare idea).

In any event, before Emirates came 'on line' and the debt for that nearly £1b development was re-structured - Arsenal were not that far from financial peril.


* Of course Matt Clark and others wonder if the club can fill the new stadium 50 - 60 times a season (even Arsenal have had some thin crowds at Emirates, and they have an enormous catchment advantage) ...

 

Re: Ownership Saga [R]

Not my work, but a very good explanation in layman's terms of the story behind the financials from another message board.

Starting out with last year. Gillet & Hicks borrow £219mm to purchase LFC and take on the assumed debts of the clubs.

That borrowing is secured by their own assets. I can't remember the exact number, but generates something like £20mm in interest, which suggests about 10% interest rate (that would be pretty high, but not unheard of for a leveraged buy-out). I expect this was 'floating rate' interest rate (i.e., if interest rates go down, so does the cost) like LIBOR (London Interbank Offerred Rate) + incremental credit spread, due to the leverage. Think of it like a floating rate mortgage. PRIME rate + 2% or something like that. In this case, LIBOR + 4/5%.

This financing is short-term (i.e., through Feb), probably because at the time, the pair expected to be able to fund the final deal (i.e., the one where they 'secure' the debt on the club) cheaply and in conjunction with the stadium plans.

Global financial markets implode in what us finance types would call a 'Credit Crunch'. In short, no one will lend to anyone else.

Fast forward to now.

RBS & Wachovia come up with a new financing package for G&H. Undoubtedly, the 'credit spread' (i.e., the interest rate paid over the government rate or LIBOR) is higher. Having said that, LIBOR rates are coming down (following the Fed & BoE). Lastly, since they are using club assets to guarantee, the spreads might also be a bit lower. Hard to say what they are paying.

What we can say, however, is that given the current market conditions (and probably our league form endangering CL revenue) is that the lenders are asking for additional guarantees from G&H, which they have given.

OK, to the new debt structure...

£245mm loan to the holding company, "KOP FOOTBALL HOLDINGS".

What did it pay for?
Replaced the borrowing used by G&H to buy the club shares (£219mm) and retire the debt the club previously had on its books (£60mm).

Who's on the hook?
This loan is secured by owner cash, letters of credit and personal guarantees of G&H to the tune of £225mm.

Who's paying?
Undoubtedly, LFC will be paying the holding company interest, in order to keep up payments.

£105mm loan to the club itself.

What did it pay for?
£45m towards 'working capital'. Think of this like a Current/Checking Account. This will fund the transfer kitty, salaries, upkeep, basically everything related to the ongoing running of the club. If the club makes a profit, it get's paid into this account, then the holiding company can draw some away as a 'dividend', in order to pay the interest costs of the holding company.

£60mm towards getting the new stadium construction going. They will borrow more (probably specifically against the new stadium revenues) to fund the rest of the development.

Who's on the hook?
The club.

Who's paying?
The club.

What's it all mean?

The key issue here, is the relative lack of revenue LFC generates. Correct me if I'm wrong, but I think club profits were in the region of £20mm last year. That's about what we made from our CL run.

I believe the new Premiership TV deal is also more lucrative to us, so maybe we will get a kick from that.

The key is that we will struggle to break even, if performances on the pitch do not keep us in the CL. That means no funds for new and better players, etc.

The stadium deal, perhaps partially finance by the sale of naming rights, will eventually mean more gate receipts and financial security. The sooner the stadium gets built, the better off the club will be.

Could we see a repeat of the Leeds situation?

Unlikely, unless they go crazy in the transfer market or we fail to stay in the Premiership.

However, there is a distinct possibility that failure on the pitch could be self-propogating...

Don't make CL = No money for new players = Can't compete = Don't make UEFA = etc...

=================

All in all, it's not the financial arrangements that worry me, it's the guys in charge...​

 

Re: Ownership Saga [R]

True and not true. While we have been able to make some big purchases in the past year or so, the debt is still a major issue, it is just lurking further beneath the surface than previously had been. Over the last fiscal year we were the most profitable club in the world iirc (I think when you weight the £ sterling against the € on a month-by month basis we beat Madrid by a whopping twelve quid! ), I am pretty sure we still only just did enough to cover the loan repayments and net transfer/wage spending for the year, which is still very worrying.

I have been finding it hard to juggle work, my social life and still find time to keep up-to-date on the more in-depth footballing matter this season but if I am correct that would mean we would need the kind of success we had last year both in on and off (e.g. marketing) the pitch every season from here on out just to keep afloat. Which is... not good. Apologies if this has already been mentioned - I am just skimming through.

 

Re: Ownership Saga [R]

Post away, William. Interesting insights about the debt issue. Actually, this is my biggest fear, be it Hicks & Gillet or DIC in charge at Liverpool. My understanding, when two Americans strode onto the scene was that the inevitable debt was mainly going to pay for the stadium. Now it's less clear and, as you said, just to keep afloat will leave far too little room for any slip-ups. Unless the mythical, untapped merchandising potential is somehow unlocked. Given the way things have progressed so far, I am not holding my breath.

 

Re: Ownership Saga [R]

How long would it take to complete building the new stadium? Is there an estimated time period?