The proposed takeover of Liverpool by New England Sports Ventures (NESV) for £300 million has the club’s supporters excited about a new dawn. Not without reason: American owners Tom Hicks and George Gillett’s leveraged takeover in 2007 has taken Liverpool out of the Champions League and to the precipice of financial oblivion.
But are the Dippers too excited, too early, about the new takeover, just as they were in 2007?
Certainly Liverpool supporters should be cautious in welcoming the new ownership. After all, even if the legal challenge from Hicks and Gillett is seen off in the High Court next week, there is no guarantee that NESV, which also owns the Boston Red Sox baseball team,will pay-off all debt from the stricken Merseyside club, let alone plough Manchester City-style millions into player acquisition.
While NESV has promised to eliminate “all acquisition debt” potentially up to £100 million of working capital debt is also owed by the club. It is an educated but sensible guess that this so-called football debt is unlikely to be cleared by NESV in the acquisition. In fact, no promises to such effect have been made.
Neither are funds guaranteed to build the long-awaited new stadium on Stanley Park or bring Anfield into the 21st century. The new stadium is essential to Liverpool developing the revenues streams that will keep the club in touch with the new ‘big four’ of Manchester United, Chelsea, Arsenal and Manchester City.
Without new revenue, there is no guarantee Liverpool will not slip behind Tottenham Hotspur, Aston Villa and even crosstown rivals Everton in the Premier League pecking order. After all Liverpool is minuscule in financial terms. The last published accounts showed a £54.9 million pre-tax loss, with annual interest totalling £40.1 million on gross debt of £378.6 million. It’s the direct result of a leverage buyout the owners promised wouldn’t happen.
While the debt is significantly lower at Anfield than that built up by the Glazer family at Old Trafford, so is Liverpool’s operating profit, which was just £27.4 million in the last recorded accounts. The Anfield club is significantly under-commercialised in comparison to major rivals and revenues are just 60 per cent of that at Old Trafford. Without Champions League football Liverpool may not even break even under the new UEFA financial fair play rules.
It’s a situation that has led Royal Bank of Scotland to take control of the Anfield board, marginalising the American owners and forcing through a sale. The £300 million sales price is tantamount to a firesale given the £500 million value placed on the club by this year’s Forbes magazine valuation.
No wonder Hicks and Gillett are willing to take the sale to court or face losing up to £140 million in equity they have loaned the club. Liverpool’s dilemma; the alternative to takeover by NESV is probably administration, with RBS now keen to liquidate whatever assets it can from the club and walk away.
Liverpool’s financial turmoil has, of course, resulted in chronic under-investment in the playing squad over the past two seasons. Not that Rafa Benitez did much with the millions the board handed him in six years on Merseyside.
The irony in Liverpool supporters’ understandable protests over Hicks and Gillett is that the leverage buyout was previously greeted by jubilant celebration. It proved yet another false dawn in more than 20 years of domestic failure down the East Lancs Road.
However, United supporters should be cautious in celebrating Liverpool’s recent decline as amusing as it may seem. There but for the grace; the risks associated in a leveraged buyout having been amply demonstrated at Anfield.
The Glazers have more time than their compatriots 30 miles east, having paid off bank debt through the £504 million bond issues last January. But if the wolves have been kept from the door then under-investment in the playing squad is perhaps only 18 months behind Liverpool. There is every risk that retirements will materially affect the playing squad’s quality at Old Trafford.
Meanwhile, Anfield waits to see which owner will squeeze the club next.
34 thoughts on “Beware owners bearing big promises”
Yep in terms of United purchases to replace retirees, a new GK is all we can hope for.
Falsely they could go for a middle of the road buy (Lindegaard) or potential (de Gea), with either to battle it out with TK for the no. 1 slot. Not a good idea in a position that needs experience & stability.
In the other positions Rafael will be earmarked for Neville, Nani for Giggs & a switch to a 3 man central midfield rotation to replace Scholes. Further down the line Evans to replace Ferdinand.
Aside from that we will be lucky to get the 3 amigos we have had presented to us the last two summers!
The total none acquisition debt is £60m, £40m is debt associated with the new stadium and £20m is “footballing debt”….
as a liverpool fan i honestly hope united dont get taken down the route of LFC. as much as i wish for uniteds decline it must be on the pitch not off it. good luck in ridding your club of the vermin that are preying on our clubs.
Why are you here?
oh ffs… what the fuck has that really got to do with the article you spazzy cunt?
I read a few articles on united sites about this today. All of you state that were over the moon with the takeover and we see it as a new dawn, etc. Not one of you mention that many of us are in fact of coure skeptical – but we find ourselves in a desperate situation. I agree with much of what is said here, unlike the post I read on republik of mancunia today – i know we dont like each other Im ok with that – but that guy has got some kind of mental illness about it. Im from Liverpool and worked in manchester for 6 years (and go back at least once a week) and most of my mates are season ticket united fans there – and ive had some shit over the years, but even I dont fucking hate your lot even 10% as much as his hatred – which truly runs deep.
I dont mind articles from rival clubs when they have a semblabce of point – but i state again – we are not all over the moon, we dont see this as a new dawn, rather a necessary next chapter.
unbelievable and so blinkered as ever….if/when this takeover goes throug lfc will be almost debt free, your club his heading for an even bigger fall that we were in, heading towards £billion yes a billion in debt, like us your club have taken on the wrong owners as thousands of you lot agree with your green and gold protest, luckily for you when the glaziers levereged the buy out of utd took plae you already had a great side, a side that was in their prime, now tho several of those players and the manager are coming to the end of their careers, van d sarr, neville, scholes,giggs and a couple of more and dont have the no where near the same qaulity coming through the ranks, so to replace those players on todays market it would cost utd well over 1 hundred million £, which your club simply dosent have anymore as most of your proffits are getting taken to service the debt as it was at liverpool, so you can look to a future of buying in the bargain basement as it been proved since ronaldo was sold [where did that money go ?]see where im coming from, your making exactly the same mistake as lfc made back in the 90s letting the best players get old together, so guys there is one thing that is very certain, your in for a very uncertain future, as i see it the longer your stuck with glaziers your going to get deeper and deeper into debt find yourselves out of the CL just like lfc, lose control of the power you had over man city who will overtake you lose your best players lose your manager and thats all going to happen in the next season or so, worry about the state of your own club and take care.
terry – calm down, I think I’ve presented a balanced view of Liverpool’s problem as a contrast with our own. I’m well aware of what’s happening at our club and I think you’ll find if you read more closely that there are dozens of articles about United’s financial problems on here. The principal difference being that United’s ability to pay the massive debt is greater than Liverpool’s because of the greater revenue from 1) the stadium and 2) commercialisation. I happen to agree with you – we are making the same mistakes and investment will be needed. Will it come – I very much doubt it. Of course the difference is we’ve got Alex Ferguson, you had Graeme Souness.
hi ed…yes i agree with the 2 points that you make 1, the stadium & 2, commercialisation, but as far as sir alex goes his days are nearly up and will be leaving utd at the same time as great players who have been the backbone of the club for many years, so no matter how big the club is in the 2 points that you make which is fact thats of no use if most if not all proffits are getting swallowed up to service the debts, and as i pointed out to replace those such great players i mentioned on todays inflated prices will surley cost in the region of £150 million, where is that money going to come from? when money is required to service the debts.
Just a couple of points.
When Hicks & Gillett arrived, they promised to not put any debt on the club (a leveraged buy out), but reneged on this a year later. This is one of the reasons they are labeled as liars.
Secondly, the reason Liverpool’s revenue streams and turnover are so low in comparison with MUFC is mainly because of the stadium. United and Arsenal make around a million pounds more per home game than LFC due to the greater capacity and corporate facilities of Old Trafford and the Emirates. Liverpool are reckioned to be in the top four most supported teams in the world, and the second highest supported club in Britain. The new owners must build a new stadium or increase Anfield capacity to at least the level of the Emirates to make LFC championship contenders again.
Mark – Anfield is one problem, under-commercialisation is a bigger problem (and therefore opportunity). As I understand it NESV are switched on that Liverpool is a media asset not just a football club etc.
Of course a new stadium isn’t an immediate fix. Almost certainly the new stadium would be built with debt not cash – see Arsenal’s minimum spending over the past five years as a result of that. Long term good for Liverpool, short term you’ll go backwards.
We may go backwards, it depends on how that debt is structured, and remember LFC will be freeing up a lot of profit instantly by not payment these huge interest payments and PIK fees – as a United fan you’re very familiar with those.
On the commercialisation issue, there is certainly room for that to grow, see my comment about being in the top four most supported clubs in the world. But it is one area where Hicks and Gillett did excel. Ian Ayre the commercial director brought in Standard Chartered as shirt sponsors, a deal that rivals the best in the premiership, and LFC shops are opening up all over Asia.
I’m a Liverpool fan and although you do have one or two digs at my club I have to say your article on the whole is bang on the money.
I will say one thing though Liverpool fans arent welcoming the Red Sox owners with open arms, far from it. Hicks and Gillett talked the talk and many fans fell for their lies. John Henry will have to let his actions do the talking if hes to be accepted.
I also think although United fans can wallow in Liverpools misery and demise at the moment none should want them to go down or disappear into obscurity. What would a Premier League be without the Man United Liverpool rivalry.
captainhormone, read the second to last paragraph, see that part? I’ve put it below as you’re not too bright. That’s what he is posting about.
“…But if the wolves have been kept from the door then under-investment in the playing squad is perhaps only 18 months behind Liverpool. There is every risk that retirements will materially affect the playing squad’s quality at Old Trafford.”
I have to say Ed that despite lots of supposed facts, a good load of that article is not right mate. You say “there is no guarantee that NESV, which also owns the Boston Red Sox baseball team,will pay-off all debt from the stricken Merseyside club.” That’s not true. Broughton himself said that the debt that is being wiped is written into the purchasers (NESV’s) contract. You also say about there being no guarantee that NESV will plough Manchester City style millions into player acquisition. Broughton has specifically said they WON’T do that. I don’t get your article mate. With your knowledge, you should be concentrating doing an article on our club. We are the ones in trouble. You would be better served telling our fans about the fair play rules & how our debt is going to paralyze us & our team. With the dippers debts wiped out, they have nothing to fear, generally or with the fair play, should this deal go ahead with NESV. They will have a relatively clean sheet & clean bill of health. Can the same be said for us mate? If there isn’t a drastic turnaround with our finances, we won’t be able to hit Europe anymore due to these rules Platini’s introducing.Lastly the guy who owns the Sox isn’t worth much granted, but its his backers. 17 of them. Some of them are from powerhouse financial companies. I am dead worried we are seeing a transition of power slip from us to all our biggest rivals. That’s what you should be writing about. Glazer is what we should be writing about because if he isn’t sorted mate, we won’t have a club, let alone bragging rights over the dippers twice a year.
Cantona – Actually let me be more certain for you – NESV will absolutely NOT pay off all debt. Only “acquisition debt”. There’s a good amount of debt that Liverpool has developed trying to compete at the top because of their tiny income – some for players, some as part of stadium development that has never happened. As they like to say in Liverpool, good to be on possession of the facts.
re cantona…nice to read a more balanced view, yes it is fact that IF the nesv takeover happens lfc will be left with a small very manageable debt on the club compared to the very worrying mufc debt which is spiraling out of control towards a massive £1 billion..this is not me gloating this is fact, tell me if im wrong please but the utd/glazer debt isnt due to be called in by the banks untill 2015? which gives them even more time to sponge and leech from mufc, its now common knowledge that they need to take money out of the club to help support many of their failing businesses in the states [that sounds very familiar to dumb & dumber at anfield] again do tell me if im wrong?. personally i find it a crying shame that the 2 most successfull clubs of this country have found themselves in this situation theese owners are nothing but leeches and a cancer in our clubs that is eating their way to long term disater, they must be stopped and again this is not me having a go but i do feel that utd fans need to start taking a leaf out of liverpool fans books and start getting more millitant other than just for example the green n gold protest.
Also Ed; See this.
“MUFC interest bill over £40m again in y/e 30.6.10.”
Did Malc pay himself a £70m+ dividend under the bond issue?
Our accounts show operating profit of £100m+ but massive pre-tax losses.
Like I said in my other post, please concentrate on our cause. We need our fans awake to Glazer.
Cantona – there’s tons of articles on this site about Glazer. Just read more closely. In fact I’ve held a solid anti-Glazer stance on this blog for more than five years with fact-based analysis to back it up. I think this article is a good contrast with our position and therefore a valid study.
Input from other fans is interesting to hear, as long as it is put across in a measured, logical & thought out way. In this case it is, so it should be encouraged.
Pure and simple or me. First of all fuck of LIverpool fans wtf are you even doin gon hre. and LUGH… the glazers have to go !
re- harrison what a sado you are…maybe if you payed attention a little more you may learn how to put real pressure on your yanks and not just by wearing green n gold…like it or not both clubs mufc & lfc are and have been the backbone of football in this country, believe me your very nagative comments and fans like will not help your cause, be more positive watch listen & learn from what lfc fans [those like me] who have a more balanced view and have learnt how to put pressure on UNWANTED owners.
terry – fair enough point. I enjoy seeing Liverpool lose but there’s no rivalry if the club disappears or ‘does a Leeds’ because of debt. It’s criminal that the FA have allowed this to happen to Liverpool and United, the two greatest clubs in the country’s history.
cheers ed….i feel exactly the same, but i do firmly believe that in the next year or so mufc will be in exactly the same position as lfc if something drastic is not done about theese leeches posing as human beings..how can a club of utd’s magnitude go from the very rich state it was in to a debt of £83.6 million in debt over the financial year, and over £500million in total its a disgrace that the footballing authorities just sat back and let it happen, theese american owners and i include lfc proposed new owners in that dont have any affiliation to our great football clubs, they are only there to use and bleed us as a money making vehicle.
terry – fundamentally United is a very strong business. 100m profit, losses made on interest payments and some huge exceptionals which are mostly not cash. They won’t be included next year so in theory United will have a large transfer budget next summer. Issue really is the PIK debt that takes overall debt from 520m to more than 700m. The Glazer have to pay that down, and they will using club cash to do it.
One thing we can all agree on: YANKS OUT!
CUNTS >>> http://www.bbc.co.uk/news/business-11499023
Yep they have shown little respect for two of the iconic footballing clubs. To say their conduct is a disgrace is putting it mildly.
Thanks for the link, I’m sure Ed will be writing about this later.
How people are allowed to do this is beyond me, no wonder the world economy is in turmoil.
Good point, hardly “New Labour”‘s finest hour. Blair & his cronies are from the same school of thought as these sad excuses for human beings. No respect for history, I’m alright Jack & stuff everyone else.
ed..maybe even tho im not so sure that utd will have a large transfer budget on that one we will have to wait & see. but as you have already stressed utd in theory will be jumping from £500 to £700mill in debt so please enlighten me as where this substantial budget is coming from because at the moment i just dont see it, 12 months in football can be a very long time, things hapeen, take for instance the 2 very things that yourselves and lots of other clubs fans have used the likes of rafa and dumb & dumber to beat us with now all of a sudden thay have gone so things do change in the football world sometimes for the good sometimes not so good.
terry – well there’s 60m of exceptionals in this year’s accounts that won’t be included next year. Also some amortization etc that won’t be included on player retirements. A lot of United’s loss is accounting practice rather than cash. In fact United has more than 163m sat in the bank in cash. But as I said the Glazers will take the cash for other purposes. The large transfer budget I mention is theoretical. Do I think it’ll happen – probably not.
As a Yank, (although not a Boston Red Sox fan), I can tell you firsthand that NESV is not afraid to spend money on players.
Henry is no Hicks/Gillett. When he took control of the Red Sox, they were perennial second-place finishers to the NY Yankees who have always spent money like crazy. Henry brought the Red Sox up to the #2 spending position and they won the World Series twice.
He also did it without whoring out the position of the club, which is one of the oldest and most venerated in baseball.
Even Liverturd fans who are cringing at the thought of another American might want to give Henry a chance. Not that they have much choice. I still hope those pud-knockers get relegated.
hi zombie cucumber…Q4U ..we keep reading that john henry is the front man of a large consortium of 17..can you please throw any light on who theese other people are and are they wealthy or not ?.