Monday, September 27, 2010

Why No one wants to buy Liverpool FC

As a key date for the potential sale or take over by The Royal Bank of Scotland approaches, you have to wonder why no real contenders are stepping up to buy the legendary Liverpool FC.

The answers lay in the the position of RBS who is the major creditor against LFC and The Kop Holding company, which is the company which co-owners George Gillett and Tom Hicks set up back in 2005. The situation is complicated but the easiest way to break it down is like this:

Tom Hicks wants to sell the club as it has now become a dead weight around his finances. He would like to sell at either a profit which at last estimate would be around $600 million pounds or at the break even point which would be around $400 million. This would allow Hicks to walk away with some of his money, buy out Gillett who pulled out of the team last year, and still keep other aspects of his business sound.

The problem for Hicks and for the club is that if a buyer cannot be found before the October 15th deadline proposed by RBS, then the bank may seize the club in order to get back some of the money it lent to Hicks and Gillet to buy the club back in 2005. RBS has made it clear that it is not in the business of owning and running football clubs, and the last thing RBS wants is to hold onto Liverpool.

If the bank takes control of the club it will try to sell it almost immediately. This is where finding a buyer before October 15th gets tricky.

The bank can only sell the club for the amount it loaned Kop Holdings, approximately $240 million pounds. Which means any potential buyer logically would wait until after the club is taken over to put in an offer. For fans of the club they would have to endure the embarrassment of being taken over buy a bank, oddly enough a bank that needed to be bought out by the government because of bad business dealings like this. It is a further sign of the slow decline of a once dominant football club.

May no mistake about it the American owners Tom Hicks and George Gillett are to blame for most of this, they bought a team with credit, hedged on the value of the market. When the economy faltered in mid 2008 the team was officially in trouble. Their stand off-ish nature with the supporters, the at times unbelievably hostile nature between the Hicks and Gillett and the long time stand off between the ownership and former manager Rafa Benitez had left this club unattractive to buy for some. However make no mistake someone or some group will buy this club.

The question for supporters is will it be before or after the RBS reign?

Cheers,
Mike

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