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The US owners of Liverpool have completed its long-awaited refinancing, securing a £350m loan from Royal Bank of Scotland and Wachovia. The package will need to be refinanced again in 18 months' time. £105m of the debt will be added to the club's books. This represents a battle won by the chief executive, Rick Parry, and the former chairman and now honorary president, David Moores, who both refused to sign up to plans to burden the club with responsibility for the full £350m loan. The remaining £245m will go to Kop Football, the holding company for Tom Hicks and George Gillett, to refinance the £60m of debt on Liverpool's books when the club was bought last. About £60m will be made available to fund the start of construction for the new stadium at Stanley Park with money also being made available for player transfers and working capital needs.
The deal does not end uncertainty about the club's future or placate upset fans who were chanting 'If it ain't broke, don't Hicks it' at the game against Aston Villa. Mr Gillett, perhaps exasperated by some of his partner's public comments about manager Rafael Benitez, was resisting the refinancing terms and edging towards a deal with Dubai International Capital (DIC). A meeting between DIC and the banks was scheduled, but then vetoed by Mr Hicks. It was Mr Gillett who had long courted Liverpool, but it was Mr Hicks, with deeper pockets and a record for sports stadium development, who made the takeover possible. Mr Hicks was originally brought into the takeover deal by his fellow US sports franchise owner at a very late hour, but now appears to be the dominant partner. The name of Mr Gillett, who is thought to have blanched at the banks' demands for increased personal guarantees, does not even appear on the refinancing statement issued by Kop Football.
DIC is still keen on acquiring Liverpool and was selling assets to make sure it had the necessary money. They were not keen on the refinancing deal because it puts up the price of Liverpool. However, they are still interested, and although nothing is likely to happen in the immediate future, a takeover bid within the next year is still possible. No assurances have been given about the owners' long-term commitment to Liverpool.
UPDATE: All Is Not As It Seems At 'Pool – 01/02/08
It was claimed that the recent refinancing deal at Liverpool kept the greater part of the resultant debt away from the club. But the reality is a little more complicated. Americans Tom Hicks and George Gillett don't technically own Liverpool Football Club. They own the holding company, Kop Football, which in turn owns Liverpool FC. The £245m debt the holding company now has is secured on the owners and their assets, but that security would only be required if the holding company was incapable of making the payments on the loan. The interest costs of the £245m debt will be around £21m a year and Kop Football does not have any means to generate income than that which it is paid by Liverpool FC. The club's own debt has more than doubled from £45m at the start of 2007 to £105m and it has to find interest payments of around £9m a year on that amount. In total the club is going to have to generate revenue to cover £30m of interest payments a year. And that's before it starts borrowing the £300m+ required for the new stadium.
Fans are concerned that the club will be unable to afford high quality player purchases. This in turn could place in jeopardy the club's Champions League place and the loss of a potential £25m a year. In many ways the viability of the club is reliant on Champions League qualification, and even then on relative success in the Champions League. Fans are worried that Liverpool could follow the same path as Leeds which has ended up with the Yorkshire side in League 1. Hence the launch of a plan for fans to acquire the club, which we shall look at in more detail subsequently.
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