What was Liverpool financial problems a few years back?

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What was Liverpool financial problems a few years back? Empty What was Liverpool financial problems a few years back?

Post by BarcaLearning Sat Mar 22, 2014 5:02 pm

Quick one, and btw its nice to see them back amongst the top competing for the title with a realistic chance again Smile

So I missed it all and couldnt find exactly details online, but what was the financial situation with them a few years back? How did it happen and were they forced or willingly sold the club etc? Thanks.
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Post by mr-r34 Sat Mar 22, 2014 5:21 pm

TLDR Version

G+H bought the club on a massive loan

False promises, sell to buy

interest payments per year through the roof

Went a few days away from administration

Bank forcefully sold to new owners.
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Post by BarcaLearning Sat Mar 22, 2014 5:37 pm

Any more details? Hard to imagine such a huge club about to have owner control in such a way that it gets to such a bad situation...
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Post by BeautifulGame Sat Mar 22, 2014 5:59 pm

http://www.theguardian.com/football/2010/oct/06/liverpool-takeover-hicks-gillett
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Post by Art Morte Sat Mar 22, 2014 6:28 pm

Didn't check out the link, but basically Hicks & Gillett financed their whole Liverpool adventure through loans without managing to meaningfully improve our finances or fortunes on the pitch. And they didn't have the financial muscle to maintain that even in the short-to-medium term, so the club was left to deal with it on their own, with their own revenue, that wasn't sufficient, leading to the real threat of administration.

FSG, our current owners, have still been taking out loans, but at least they have managed to increase our revenues and have been able to invest in the team and absorb the, rather big, losses we have made in the past few years.

I think both of these owners' vision was to do with us what the Glazers have done with United, only that FSG actually look like they might be able to do that while H + G were just a couple of idiots.
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Post by RedOranje Sat Mar 22, 2014 6:52 pm

Despite the CL win in 2005, Liverpool FC were slipping away from the rest of the top 4 financially. The chief shareholder (Daniel Moores) could not provide the type of finances necessary to carry the club forward and the board was not effectively managing the club's commercial deals. As such Liverpool's Anfield stadium was (and is) the smallest of the top 4 by some measure and the club was lagging well behind in commercial revenue, which cut into the club's ability to compete in the transfer market. As such, in 2006 Moores and the board put the club up for sale. Initially, it looked like a Dubai-based group would take over for a £450m fee, however the acting Chairman Rick Parry took extensive time to consider the offer and subsequently before that deal could be completed a better offer [£470m] was submitted by George Gillett Jr. and Thomas Hicks, Sr., two American businessmen with holdings in American sports [Montreal Canadians and Dallas Stars & Texas Rangers respectively]. The Dubai group withdrew their offer almost immediately afterward. Parry and the board then accepted the bid from Hicks and Gillett.

This deal from Hicks and Gillett consisted of a £175m payment to Moores, £45 million of club debt, and £215 million for the new stadium proposed for Stanley Park. Almost £300m of these funds were raised though loans from RBS [£185m] and other borrowing facilities of [£113m]. Before their takeover, Liverpool had net debts of £44.8m. The deal further included promises that construction would begin on the new stadium "within 60 days" of the completion of the takeover and that none of the loans which they had taken out to purchase the club would be transferred to the club upon takeover. None of these promises were fulfilled. The new stadium never came and the loans used to purchase the club were completely and fully transferred onto the club's books, putting massive interest payment burdens on a club already struggling to compete financially. By 2010, Liverpool FC's debts had ballooned to around £237m, and the interest payments grew along with that. Financial reports from the club even suggest that H&G were utilizing funds from the club to pay for their own travel expenses at times.

By late 2009 H&G had all but given up any pretense of a new stadium being built and were looking for investors or takeover offers. Due to the financial crisis RBS was demanding that Liverpool reduce its debt to the bank to below £100m. However, H&G continued to refuse bids and refinanced their loans through other lending companies and institutions, buying time but dramatically increasing the interest payments. In April of 2010 H&G rejected a £118million offer from the New York-based private equity firm Rhone Group for 40% of the club. In the same month RBS agreed to a 6 month extension on the loans, however only on the condition that they appoint Martin Broughton as Chairman of the club with a view on finding a buyer. Throughout the summer, however, the owners refused to accept any of the bids as they failed to meet their valuation of £800m. Remember, this a club that they bought for roughly £470m and saddled with almost £350m in debt, and they wanted to make a profit of nearly £400m on it's sale. Hicks and Gillett AGAIN attempted to refinance the debts in June of 2010, however were blocked by the club's board. In September of that year RBS lost patience and moved the club's loans to their toxic assets division, indicating that they would almost certainly refuse to extend the loans. The loan period was to end on October 6.

Should the date have arrived without change, Liverpool FC would have been unable to pay back the loans and face takeover by the bank, which would result in administration and a 9 point deduction to Liverpool's season. If the bank were then unable to find a buyer the assets of the club would also have to be sold off to pay for the debts.

In an attempt to avoid this fate, Broughton and the other local board members at LFC (Christian Purslow, Ian Ayre) agreed a deal to sell the club to New England Sports Venture for £300m. As this was significantly less than what they wanted for the club, Tom Hicks attempted to fire Purslow and Ayre and replace them with his son and assistant which would give him an effective majority control of the board and allow him to block the sale. The board, with the backing of RBS, took Hicks to High Court over the attempt to fire members and block the sale, and on October 13th the court found in their favour, finalising the sale of the club to John Henry's group. The £300m fee payed off the loans to RBs and covered other immediate fees, thus saving Liverpool from administration/insolvency, the point penalty, and possibly even worse.


LIVERPOOL OWNERSHIP TIMELINE (Final 7 months)
16 April: Club put up for sale by Hicks & Gillett
4 October: Club receive two "excellent bids", one from NESV, one from Asia
5 Oct: Hicks & Gillett seek to remove Purslow & Ayre from Liverpool board
6 Oct: Board agrees to sell club to NESV for £300m
8 Oct: Premier League clears NESV to continue with takeover
12 Oct: Hicks & Gillett lawyers admit breach of RBS contracts by trying to sack board members
13 Oct: High Court rules against Hicks & Gillett, allowing NESV sale
13 Oct: Hicks and Gillett gain restraining order on the sale in Texas court
14 Oct: High Court rules Hicks & Gillett injunction is ineffective
14 Oct: New hearing begins in Dallas, adjourned until Friday
15 Oct: Hicks and Gillett withdraw TRO, enabling NESV to confirm their £300m purchase of Liverpool Football Club



http://www.liverpoolecho.co.uk/sport/football/football-news/liverpool-fc-takeover-how-lfc-3362432
http://www.theguardian.com/football/2010/sep/09/rbs-tom-hicks-george-gillett-sell-liverpool
http://news.bbc.co.uk/sport2/hi/football/teams/l/liverpool/9094283.stm


tl:dr

  • Hicks & Gillett takeover in 2007 with promises of new stadium and no debt

  • Hicks & Gillett immediately break promise and load club with debt of loans for purchase of club

  • Hicks & Gillett break promise on new stadium and demonstrate incompetence in attempts to run club, increasing debt and interest payments

  • Financial crisis leads RBS to take a strict stance on club's debts, force appointment of new Chairman with eye on selling

  • H&G refuse offers, attempt to block sale of club

  • Deadline looms for insolvency/administration

  • Court rules in favour of board & Liverpool, forcing sale of club

  • H&G continue unsuccessfully to sue club for months and years to come.
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Post by BeautifulGame Sat Mar 22, 2014 6:53 pm

Art Morte wrote:Didn't check out the link, but basically Hicks & Gillett financed their whole Liverpool adventure through loans without managing to meaningfully improve our finances or fortunes on the pitch. And they didn't have the financial muscle to maintain that even in the short-to-medium term, so the club was left to deal with it on their own, with their own revenue, that wasn't sufficient, leading to the real threat of administration.

FSG, our current owners, have still been taking out loans, but at least they have managed to increase our revenues and have been able to invest in the team and absorb the, rather big, losses we have made in the past few years.

I think both of these owners' vision was to do with us what the Glazers have done with United, only that FSG actually look like they might be able to do that while H + G were just a couple of idiots.

FSG loans are only overdraft for 30-40 mil isnt it? They put in their own money to buy us cant even compare with H&G
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