Americans to Borrow £298 million to buy Liverpool

[liverbird04]

Americans borrow £298m to buy Liverpool

 

 

Club likely to foot annual £21.5m interest payments

Moores family loaned £10m for new signings

 

David Conn

Wednesday March 14, 2007

The Guardian

 

 

Thomas O Hicks and George Gillett Jr, the two American businessmen who are close to completing their takeover of Liverpool, have borrowed almost £300m from the Royal Bank of Scotland to finance the deal. The bank has loaned the money at 1.5% above the current standard lending rate, meaning that about £21.5m interest will be payable this year.

The debt is not being taken on by the club in the way the Glazer family loaded Manchester United with £660m borrowings from their 2005 takeover, but professionals close to the deal said it was nevertheless likely that Liverpool would pay the interest, or pay Hicks and Gillett "a big dividend" at the end of the year to enable them to do so.

 

The terms of the loans are in the offer document sent to all shareholders, revealing that the two men are borrowing £185m to pay for the £174m takeover itself and associated costs, with another £113m available as a "revolving credit facility" to absorb Liverpool's debts and fund the club and preliminary work on the new 60,000-seat stadium. A further £200m will be borrowed to build the stadium but the way that will be done has not been worked out. The initial £298m loans are guaranteed by Hicks and Gillett personally.

The offer document also reveals how stretched Liverpool became financially last year as the chief executive, Rick Parry, searched for someone to take over the club. In August the then chairman David Moores lent the club £10m - £2m personally and £8m from a family trust - to let the manager, Rafael Benítez, have some money to strengthen the squad, which he spent on buying the striker Dirk Kuyt.

 

Parry said that with a takeover likely the club had not wanted to take on more bank finance. "We were at the limit in terms of our short-term borrowing facilities and were racking up expenditure keeping the stadium on schedule, so it was a fantastic gesture by David to make that money available." Along with the money Hicks and Gillett are paying for his shares, Moores will have his loans repaid in full.

 

The takeover is certain to go through after it was confirmed last week that over 80% of Liverpool shareholders had accepted the offer of £5,000 a share. Moores, the former 51.5% shareholder, will be paid £89.615m for the 17,923 shares he bought for about £12m.

 

Robert Tilliss, the New York-based financial adviser to Hicks and Gillett, said the men had been attracted by buying "one of the leading brands in the world's No1 sport". He said they would bring their sports business expertise over from the US, where $20bn (£10.3bn) has been spent in recent years upgrading stadiums whose ticket prices make those in the Premiership seem like a snip. Tilliss said the popularity of English football in Asia had also been a factor. "All clubs in the US continue to drive on international, national and local revenues, and the great brands of English football certainly have room to develop."

 

Hicks and Gillett, who have said they intend to be "custodians" and hold Liverpool as a family asset, will own the club via a company structure based in the tax havens of the Cayman Islands and the US state of Delaware. The ultimate holding company, Kop Investment LLC, is registered in Delaware, which has low corporation tax and no capital gains tax, and its principal office is at Hicks's corporate headquarters in Dallas, Texas. One professional involved with the deal said that this did not mean the two men foresaw a sale or flotation and were "sheltering" those future gains from tax, but that it was simply "a tax efficient" way to structure the deal.

 

 

http://www.guardian.co.uk/frontpage/story/0,,2033412,00.html

Edited March 14, 2007 by liverbird04

[jon_hall]

How come the shareholders on here haven't mentioned this being in their documents?

[Guest Scot]

This isn't a surprise is it? They were hardly likely to write a cheque.

[liverbird04]

This isn't a surprise is it? They were hardly likely to write a cheque.

 

might bring down to earth people wondering how to spend new found money.

Edited March 14, 2007 by liverbird04

[Guest Scot]

might bring down to earth people wondering how to spend new found money.

 

I really don't think this changes anything, mate. I'm no finance whizz but I'm not at all surprised they're financing the purchase, I'd be amazed if they were not. In fact, I'd think they were idiots. I'd be interested in the perspectives of some people who know more than I about corporate finance though.

[Dule]

So how much are they borrowing to pay for our summer recruits?

[Guest Scot]

I think the thing that will get more attention is Rick's 500k bonus

[SkippyjonJones]

He said they would bring their sports business expertise over from the US, where $20bn (£10.3bn) has been spent in recent years upgrading stadiums whose ticket prices make those in the Premiership seem like a snip.

 

 

Decmber 2006 I saw us play Chelsea at Stamford bridge. 3 weeks later I was at Gillette stadium to see the Patriots play.

 

The Chelsea ticket cost more..

[fyds]

'The debt is not being taken on by the club in the way the Glazer family loaded Manchester United with £660m borrowings from their 2005 takeover, but professionals close to the deal said it was nevertheless likely that Liverpool would pay the interest, or pay Hicks and Gillett "a big dividend" at the end of the year to enable them to do so.

 

The initial £298m loans are guaranteed by Hicks and Gillett personally. (they also said the rest would be - my Ed)'

 

These are the key passages, the rest is quite speculative - finance by debt is standard parctice for such heavy programmes, especially if a significant part of it is embedded in a major capital project (new Stadium). Nonetheless, this hardly dents their pockets. It is also I reckon highly unlikely that the club will pay the ineterest on the debt or pay them a 'big dividend' as that is predicated on sales and large success which will only come when a new stadium is built, open and paying back. In the interim they know they have to fund a team to get that success while the stadium is being built.

 

Not a terrifically coherent article in its proposition.

 

As with Mike too - my mates stateside are always telling me how expensive footy tickets in the Uk are compared to NHL, MLS, Baseball and gridiron tickets are over there.

Edited March 14, 2007 by fyds

[Guest Scot]

Depends some. If you're American and buying it in sterling then it's expensive. Last time I watched an NFL game at the Panthers it cost me $50. Cost me about that for the Bobcats too, and they're sh*te.

[fyds]

Depends some. If you're American and buying it in sterling then it's expensive. Last time I watched an NFL game at the Panthers it cost me $50. Cost me about that for the Bobcats too, and they're sh*te.

So about £25 then - still cheaper than most here.

[Crazy Horse]

Prices for NFL games round here go from about $85 to a couple of hundred...oh well, the Norwegians and Japanese can well afford it.

 

[fyds]

Prices for NFL games round here go from about $85 to a couple of hundred...oh well, the Norwegians and Japanese can well afford it.

 

Where exactly is 'around here' in your case Andrew?

[Snoeker]

Thanks to Mr Moores for scratching in the attic for some loose change, eh.

[Guest prophet]

Whats new with the Americans?

 

They are born with DEBTS, live by DEBTS and die buried under DEBTS!

[Tim]

They said at the beginning that the purchase would be funded by debt which would not be on the clubs books (also worth noting that at the last reporting date the debt taken on by the glazers is not on the mancs books).

 

They also said that they weren't sure how the stadium would be funded by I would expect this to be done through the club.

[Stevie H]

has anyone here ever bought a house and paid cash?

[richt71]

They said at the beginning that the purchase would be funded by debt which would not be on the clubs books (also worth noting that at the last reporting date the debt taken on by the glazers is not on the mancs books).

 

They also said that they weren't sure how the stadium would be funded by I would expect this to be done through the club.

 

Tim is this not standard mode operi due to offseting against tax etc??

[Spike]

RP?

[Bailo]

has anyone here ever bought a house and paid cash?

Have you forgotten that if you don't have the money to outright pay for something, you should NEVER borrow?

[smokescreen]

Have you forgotten that if you don't have the money to outright pay for something, you should NEVER borrow?

 

Types Mr Dunce on his psion palmpad from his Citroen Diane.

[jimmylibel]

At the press conference they said they would be borrowing to finance this deal but that it wouldn't be the club borrowing.

 

So basically nothing new here.

[Leo No.8]

Absolutely - no surprises here.

 

Some people seem to expect Gillett and Hicks to turn up at Anfield with a load of briefcases full of notes to pay for the club, and that these guys surf across their money vaults like Scrooge McDuck during the evening. Of course it's all financed, how the f*ck else were they going to do it? It's just not news the way the tone of the piece tries to make out it is with it's forboding headline etc.

 

And as regards transfers, United haven't exactly struggled in the transfer market since the Glazers arrived have they? And they placed all the debt on the club itself. I'm sure Rafa will get a handsome sum to spend this summer.

 

The only little gem of interest in that whole article was the fact that Moores stumped up for Kuyt. Nice one Dave...

Edited March 14, 2007 by Leo No.8

[beejay]

might bring down to earth people wondering how to spend new found money.

 

That's the real point. Can't see any great war chest for David Villa etc in those figures, the guys aren't likely to do a Moores and pay for a new striker out of their own pocket and the club doesn't have the cash flows to fund big money transfers by itself.

 

Think we will spend there or thereabouts our usual £15-20m net in the summer, anymore is being unrealistic these guys aren't sugar daddies.

[Guest]

has anyone here ever bought a house and paid cash?

 

 

A house no (not the full price - about 60%) the rest paid by the bank

 

and part of a hotel, yes.

Edited March 14, 2007 by Figaro