Wednesday, 6 October 2010

LFC: many unanswered questions



Edit at 12.45pm:


In his Sky Sports News interview, Broughton has just said that NESV would "do the right thing" on getting LFC a 60,000+ stadium but that they hadn't decided whether to build a new one or rebuild Anfield. I find this pretty extraordinary. Is this really a good deal for LFC without this issue agreed? Either NESV can't have a great deal of equity for investment or much confidence of raising debt finance for a new stadium. Time to put that scouse champagne (aka Diamond White) back in the fridge?



Where's the money for this coming from?



The fog hasn't cleared around the potential takeover of Liverpool Football Club by John W. Henry's New England Sports Ventures group, but already there are several key questions which Liverpool supporters should be asking:

  1. Although the LFC statement talks of the NESV offer "removing the burden of acquisition debt", is the c. £300m offer purely equity financed?

  2. If any new debt is being incurred in the purchase, what will this cost compared to the current c. £40m pa interest bill?

  3. With the current c. £100m pa wage bill, can LFC comply with the new UEFA Financial Fair Play rules without Champions League football? If not, will one of Gerrard or Torres have to be sold?

  4. The club requires around £400m to build its planned new stadium in Stanley Park, how will NESV finance this? Will further borrowing be incurred? Is any debt financing already arranged and on what terms?

  5. Part of NESV's success with the Boston Red Sox has been driven by increasing revenue through aggressive ticket price increases at Fenway Park, will the new owners pursue a similar strategy at Anfield/the new stadium?


Hicks and Gillett have boasted of "doubling profits" at LFC, but in reality the club is a financial pygmy on the European stage. Looking at the last accounts, revenue was almost £100m less than United's but the club's wage bill was only £20m less. That was in a season when Liverpool came second in the league and earned £20m from the Champions League...

The one thing that is certain is that there is no easy fix for Liverpool's financial troubles.


LUHG

15 comments:

Anonymous said...

I agree - very early days to decide if this is good or bad for LFC.

However, what I find interesting is that Tom Hicks and George Gillett both want to block this sale.

My question here is how can LFC be sold to NESV when the owners of LFC don't want to sell at the price offered ?

And, more importantly, can the same be done to the Glazers ?

The Red Knights stated during the summer that they cannot do anything if the Glazers just won't sell. What is different at Liverpool ?

Is it just that the United Board is full of Glazers - or is there something else that we could use against the Glazers to get 'em out ?

Adrian Lucas - Manchester.

steve said...

I don't understand the scousers' obsession with a new stadium. I realise it will bring in extra revenue but prices will have to go up and most if not all the extra revenue may be absorbed in finance costs. Why not just refurbish and extend their existing stadium incrementally. The main priority is to stabilise the debt and rebuild the team.

Anonymous said...

Who gives a shit about the murderers?

andersred said...

Hicks and Gillett can be made to sell in the event of default on the debt to RBS. No similar situation at Old Trafford sadly.

The stadium matters because they can't compete. They can't compete with the sugar daddy clubs like city and Chelsea, they can't compete with Arsenal, Barca, Real or even us.

Every home game at the Emirates brings in £3.5m in revenue. Every home game at Anfailed brings in £1.5m.

You're right Steve that the risk of a new stadium (especially for owners in it for the money not the love or glory) is higher ticket prices.

Anonymous, like Leeds I want them around and suffering not dead and basically forgotten!

anders

Magique said...

The reason this deal may be pushed through despite the owners not wanting to sell is down to the fact that when Martin Broughton was appointed as Chief Exec to oversee the sale process for the club the board was setup with Hicks, Gillet, Broughton, Purslow (MD) & Ayre (FD). This means that the owners are currently out voted 3-2 in favour of the sale and thus they have no say in the matter. They attempted to change the board of directors to replace Purslow and Ayre with their own people to stop the deal being agreed and this process is what is now in a legal battle to understand if they have the authority to do so, which appears to be unlikely.

Of course the whole reason that they were left out numbered on the board was due to the fact that they had the looming RBS imposed deadline for refinancing and needed to appear willing to make a sale of the club and/or look for additional investment.

Whether the Mancs will be in this position in 2013 is still to be seen though as I don't have the same level of understanding of the full financial situation there.

Phil Gregory said...

I'd probably argue that even if they did finance the takeover via debt, if they could get that debt at a much cheaper rate than H&G then they'd be a move forward for Liverpool.

I'd also say that there's a difference between finding £300m for the takeover and finding a further £400m for a new stadium. They won't be a sugar daddy owner, but they also won't be a leech on the club's cash.

The core business of Liverpool is profitable. Prior to falling out of the Champions League, they could quite easily invest circa £20m into transfers/wages per season sustainably from the club's own profits. If they can clear the debt and the corresponding interest bill, they'll do ok financially without external funding.

Anonymous said...

Wow, hicks and gillett really are rubbish businessmen. Giving all that power to one man to sell the club from under them.
Do you think the glazers would give that power? Maybe to Sir??

Anonymous said...

Will be United in a few years

Anonymous said...

Sir Alex Glazer?

Anonymous said...

Whilst one must take Sky news type vox pops with a grain of salt, it was interesting to hear the views of the Boston Rod Sex fans who would rather have the 300million sterling (US 500million) invested into their Baseball team.
The comment from the elderly lady about only being interested in her grand daughters playing saccar ring true the most loud. After the NFL , NBA and MLB , Saccar also falls far behind the NCAA college sports of football & basketball.

Liverpool's heritage and loyal local fanbase are most likely going to be the cause of its failure to move with the times.
If the next group of Yanks want to re-develope Anfield with more Corporate Boxes as they did Fenway Park in Boston, the fans will lose out, as the space taken up by the new boxes will come at the price of standard bucket seats, Can u see the reaction to the Kopites to having another tier on it with boxes & boxes instead of fan seating.....
I can see a banner moment !!!

Point of all this, If the sale goes through, dont be suprised to see these BUSINESS men perform a nice flip, Buy in at 300million and sell it on near to the Forbes valuation (and similar to H&G's) of near 900 million.

Each of the 100 or so different owners that went through the Portsmouth revolving door were the next great saviour too.

ja said...

Or maybe the Forbes (and Glazer) valuations are wildly inflated! Broughton has been hawking Liverpool around the world for months. If the club really is worth 600m + surely someone would have snapped it up?
The Glazers overpaid in 2005 through their own stupidity in ramping up the share price in the months before. Even a price tag of 1 bn looks toppy to use Gill's vocabulary re Tevez.

fattmatt said...

Anders

Any chance of letting us know when you are releasing the MUFC end of year results with your 'between the lines' analysis

Anonymous said...

The moral of the Liverpool tale is that a profitable club means nothing if debt gets out of control.

Their fate can happen to anyone or any business which services huge debt.

Anonymous said...

The latest saga involving the NESV takeover of LFC is the appointment of Damien Comolli as Director of Football Strategy. This crystallizes the NESV philosophy behind their LFC takeover. One, LFC would not see the 'sugar daddy' system seen in Man Citeh and Chelski. Simply, NESV is like a vulture fund looking to acquire ridiculously cheap assets for a song and rehabilitate the asset before selling for heaps of profit. Even the new Stadium project will be far from being crystallized. Second, in addition to Comolli's role, there's talk about using sports science, sabermetrics and statistical analysis for LFC. All this means a-la-Oakland A's playbook is that LFC will be operating on a shoestring budget while attempting to achieve above average performance on the field. We have seen this before in Sam Allardyce's Bolton Wanderers era. Big Sam got Bolton as far as he could on a shoestring budget but it's not a winning mentality but rather a defensive & survival strategy! Even Big Sam got sick of it at the end! For LFC fans, it's gonna be a big come-down!
Finally, Comolli's role as a 'perceived talent spotter' at Arsenal and Tottenham Hotspur reveals the well-trodden strategy of acquiring young and cheap players from developing countries, other inferior professional leagues or even from our own Championship and below, giving these players the platform & opportunity to perform and then selling them for massive profits. This will reinforced LFC as a selling club rather than one of the leading clubs of Europe. LFC will be similar to Ajax, PSV Porto, Benfica, Werder Bremen, Bayer Leverkusen, Lyon, FC Bordeaux, Lille, etc - each successful season leading to a plundering of their playing resources. LFC never had an Academy tradition & history of developing their own players (except for Steven Gerrard and Jamie Carragher) - Chelski also tried but todate, John Terry is their only successful academy breakthrough.
To sum up, these Yanks have no clue about international soccer!

Anonymous said...

@Anonymous

Ha Ha Ha - look at what NESV did at and for the Red Sox before you call them a vulture fund. What NESV are looking for is value, but for them at the Red Sox it was spending $60m to prise a Japanese pitcher out of Japan and then guarantee him $60m wages. How do you like them apples?