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Liverpool – it is all over bar the pain (and there will be quite a lot of that!)

By Tony Attwood

Before the round of games on September 11th I wrote in a semi-joking manner that both Tottenham Middlesex and Liverpool RBS would see the weekend as an opportunity to claw their way into the top half of the Premier League.  I have to say I am rather surprised to find my prediction coming to fruition.

In Liverpool’s case, perhaps there is an explanation as to their pitch troubles – they sold about £30m worth of players this summer, and bought in £20m with the money received.  A selling club if ever there was one.

But if Liverpool RBS are having a tough time of it on the pitch and are having to sell-sell-sell, that is nothing compared with what is happening financially, for this week, Liverpool’s  loans with Royal Bank of Scotland were placed into the bank’s toxic-assets division.

Basically that means RBS don’t see a cat in hell’s chance of getting their money back through the normal means of repayment by the owners, so they are now just going to do whatever is need be to get their cash, and let everyone else sink.

The deadline for action has been set for 6 October. If the owners have not repaid or refinanced the debt by then that’s it – the loans will not be extended, the owners will be in default, the bank sells the assets on its own terms to get its money back.  The owners can whistle for their money – but they won’t get it.

It was the likelihood of this move that always made the notion of six bids on the table, with lots of gents from China all getting ready to buy the club at a top price, so utterly unlikely.  Why pay the normal price when the bank is about to take it over and sell it off for a lower price, just to get its money back?  It was all a PR stunt.

Liverpool’s US owners owe £237.4m to RBS.  Hicks and Gillett separately owe RBS and the club in excess of £200m – possibly far, far more.  So a sale price of £500m might well allow RBS to take its money, and then also use the rest to pay itself the money Gillett and Hicks owe the bank individually.

RBS could put all the companies surrounding Liverpool FC (Kop Football Ltd etc) into administration.  But that means the club lose 9 points  and would currently be bottom of the league on minus 4 points.

A club in administration is worth less than a club without that handicap, so instead RBS will probably sell the club to anyone who can come up with £500m, or failing that £400m.

But there is a problem. For although such a sale gives the buyer the name of the club, its status, and the ground, and the club debt free, what they also get is a club is in a mess, with a first team in need of restructuring, a ground in very urgent need of (at least) overhaul (if not the building of a totally new stadium), a failure to sell all the season tickets, and a failure in income stream through an inability to get into the Champions League.

But the bank have no care about this.  They want their £500m back, and everyone else can go hang.  The EPL might tweet about a fit and proper person test, but RBS are only concerned with money.  If Jack the Ripper came up with the dosh, you can bet your life they’d sell.

As for the new owner, the total amount needed to make the club viable as a challenger for a European spot, is probably around £800m, with extra money needed to finance the new ground, rebuild the squad, rebuild the youth set up, and pay for the losses over the next couple of years while the rebuilding is going on.  Borrowing is going to be next to impossible in the UK as the reputation of football clubs is now at an all time low.

What’s worse, with the club not in the Champions League and its future looking uncertain, it is going to be hard-pressed to buy the players it needs to meet its fans expectations, unless of course it can find an oil sheikh.

But it has already been noted that Manchester City are unlikely to get their finances in order to qualify for Europe when the new regulations start to come in.  They may have stopped spending by then, but the amortisation of the funds will only just have started.   Further, any attempt to get around the problem by showing a profitable income from the club’s hotels and other facilities won’t be a starter either, since most won’t be built by then.

That’s the problem for Manchester City.  For Liverpool, the issue is worse since they will be starting three years later.   Thus Liverpool could be about to face a period of real pain.   If a buyer comes in and just buys the club, they will be a club without the ability to move back to what they consider their rightful position at the top of the league.   If a buyer comes in with say £800m, they could pull in some new players and get a stadium, but some of that money will count against them in the issue of who can go into Europe – and some players will not want to be there with the club so far off the pace in terms of getting into the Champs League.

In other words, having slipped out of the Champs League, unless they get back in this year (which seems unlikely) they are probably going to be out for a long time.

So really, the only bet is for a buyer to have £1bn, give half of it to RBS and for the rest build a stadium, and buy a new team, while just kissing Europe goodbye for a decade – but nevertheless challenging the big boys – who at that time might be Arsenal (no financial problems), Man City (money, money, money but not spot in Europe), and Chelsea (who may actually get their money issues sorted in time.)

Tough times.  Maybe a nine point penalty would be easier, just to get it all over with in one go.

Elsewhere…

Our match day coverage extends to five pieces – unbeatable journalism for the Arsenal supporter.  There’s the previews, the socialising report, the match report, the analysis of the ref, and the injury comparison.  A full index to the five-blog special on Bolton is on www.blog.emiratesstadium.info

While on the history site there’s a comparative analysis – have injuries always been this bad, or is it all Wenger’s fault.  Guess what?

Of course Making the Arsenal doesn’t change, but it has as much relevance now as it did last saturday.

As for Arsenal Worldwide, Walter promoted that enough in his referee’s report of the Bolton game so I am not mentioning it again.

16 comments to Liverpool – it is all over bar the pain (and there will be quite a lot of that!)

  • Paul C.

    Tony – great point right at the end about Chelsea. For all the flak we have given him through the past 7 years, Roman Abramovich now seems to be turning out to be quite a responsible owner, funnily enough. He demanded Chelsea learn how to break even, and despite everyone thinking that was just a bluff and that he would continue to splash the cash, he then went out and SUPPORTED Platini in his Fair Play guidelines, pretty much ensuring that Chelsea have to pay their own way (although I can see Roman still putting in the minimum 15m per year to get specific players).

    What seems clear is that Chelsea are starting to get their wages under control. Letting Ballack, Cole, Carvalho and Deco go is a huge first step in that direction, although it wont really be sorted until Drogba, Lampard and Terry (with their huge salaries) eventually clear their books.

  • Marc

    Paul – Drogba, Terry & Lampard are all nearing the end of their careers. Their current contracts will most likely be their last, at least at Chelsea. This is where the test will come, they will need to replace the spine of the team whilst showing financial restraint. Can they do this? We’re going to find out over the next few years.

  • Paul C.

    Marc – I never said it was going to be easy!!!!!!!!!

    I agree, that will be the big test, but Roman has tied his own hands behind his back now so to speak by publicly supporting Platini’s guidelines.

    Quite honestly, I think Roman was looking for a way to get rid of Chelsea fans EXPECTING him to just splash the cash every time they need a player. He has put a huge amount of money into Chelsea to get them where they are now and I think he now sees his job as done. Now it is up to the club.

    Chelsea are banking on their youth system producing AT LEAST 2 or 3 1st team players. That really will be the acid test.

  • Wrenny

    Chelsea won’t be able to spend big to buy replacements, they would fall foul of the Uefa financial restrictions (unless their revenues were to rocket up). They have to do it on a budget, and that means investing in youth. Ideally, they should already have the next Drogba, Lampard and Terry at the club.

    Chelsea won the FA Youth Cup last season, so that’s a good sign they might produce the players they’ll need. But those 16-18 year olds have a long way to go!

  • Common Sensei

    They will be OK – I mean even though we never get to see them during any league matches, Chelsea have a fair amount of half-decent to good quality young players, and apart from the obvious their first team isn’t all grandads just yet 🙂

    I think the real test of Chelsea’s mettle will be not just the quality of their first 11 (who will in my view be every bit as good as they have been). it will be the strength of their squad once they stop buying to order – and in a massive reversal of fates ARSENAL for a change will have a massive solid quality packed squad that cost very little … and this is where we shall see the fruits of Wenger’s labour (and taking on the chin the various insults some fans have been happy to air).

    I see the league reshaping to have at the helm, the teams who invested mostly in their talent scouting and youth setup, as well as a squad full of younger players – Arsenal of course being far ahead of Chelsea, United and Everton (who I still think have a fair chance of displacing Liverpool if they cacn get their attacking players sorted).

    Interesting times, but althogether non-scary times, feeling good as ever in the Arsenal Red

  • Wrenny

    The big problem with Chelsea is their low revenues. Their wage bill is something like 80% of their revenues, while Arsenal and Man Utd are below 50%.

    They don’t have the revenue to support themselves without Abramovich’s cash injections, which they’ll have to do without if they want to stay in the Champions League. And without the CL their revenues will be lower, which will in turn make it even more difficult for them to break even and get back into the CL!

    They’re still posting big losses – around £48m for the 08/09 season if I remember correctly. I’m not so sure they will be OK.

  • Eirik

    Its jack the lads fault

  • Clerkenwell Gooner

    I really feel for the players who have shown loyalty to Liverpool FC through all this upheaval, players such as Gerrard and Torres, but I wonder how long they can stay?

    Gerrard, possibly at his age, is not a great selling prospect, but I can easily imagine Torres gone in the January window.

    Could this why Barça turfed out Zlatan (aside from Pep hating his guts)? So they can take advantage of yet another Liverpool fire sale (hello, Mascherano), buy Torres to put alongside David Villa?

    Torres is apparently a big fan of Lord of the Rings, so he probably wouldn’t mind playing in a team of hobbits, and his being a bit taller than the rest of them would come in handy.

    With his talent, and at his age, I wouldn’t hang around in a club that is never going to give me CL football ever again, I’d be off.

  • Paul C.

    Wrenny – you are right about the losses for Chelsea. It will be very interesting to see how much the wage deductions for Deco, Ballack, Cole and Carvalho impact both their losses and their wage/turnover ratio this year. If I remember correctly they announce around New Year so that will be an interesting set of accounts (as well to see if Ramires is included in this years accounts or next).

    Clerkenwell – Torres has looked completely disinterested so far this season. If I am Liverpool I cash in as quickly as possible and start the rebuilding process. Carragher and Gerrard dont have much more in their tanks and Torres is their one true asset right now. I would imagine they are waiting to see if they are close to CL Football or not come the New Year.

  • kiwigooner

    Tony

    It’s all coming home to roost. I wonder if the RBS put the screws on Liverpool, whether banks in general will be less inclined to finance Transfers for example?

    Oh by the way, Tottenham Middlesex, is that the place or an indeterminant sexuality between male and female?

  • Robbie

    About ownership, someone should write about Jay-Z wanting to buy a stake in Arsenal, seems like it could really happen. Maybe that’s good for the commercial revenues. We’ll all buy arsenal-bling.

  • PeacefulWarrior

    Regarding the 9 point deduction, I read in an article recently on sky sports that epl wont deduct 9 points from Liverpool because the debt is because of the owners or something like that.

    This is what I got from a source:

    1) It isn’t administration. No deducted points. RBS take control.

    2) RBS lent I think around £250m. They’ve probably got back around £100m in interest payments already.

    3) The club is probably worth at least £400m, it is clearly a profitable enterprise.

    4) RBS can make a solid profit selling over £250m.

    5) RBS are publicly owned. The club is massively high profile. There is undoubtedly more benefit in it for RBS to sell the club for £350m to reliable owners than £400m to some clowns who only want to maximise profits.

  • Peaceful Warrior – I think the list of points you put up doesn’t really reflect what is going on.

    1) It isn’t administration.

    RBS has the choice – and they are (I think) threatening the owners with administration if they don’t co-operate. Admin is an option, but only one option.

    2) RBS lent I think around £250m. They’ve probably got back around £100m in interest payments already.

    This is really wrong. If you have a house on an interest-only mortgage you pay interest, but you still owe the debt. Liverpool has paid nothing back to the bank, which is why the bank is charging an extra £2.5m a month in default payments.

    3) The club is probably worth at least £400m, it is clearly a profitable enterprise.

    I can’t see how it is profitable at all. If it were, it would be paying back loans, but it is not.

    4) RBS can make a solid profit selling over £250m.

    I really think this is quite wrong. Liverpool owe something like that straight to RBS. But the owners owe RBS and Liverpool money too, and since RBS has control of the club it can use that to get money from them. RBS will not walk away from half the money it is owed.

    5) RBS are publicly owned. The club is massively high profile. There is undoubtedly more benefit in it for RBS to sell the club for £350m to reliable owners than £400m to some clowns who only want to maximise profits.

    This just doesn’t make sense to me. RBS are answerable to the state, and the state cannot be seen to be doing something in this area just to help a football club.

    So sorry, I disagree on each point.

  • Super strona i ciekawe informacje. Brawo! ;]

  • PeacefulWarrior

    Thank you Tony for clearing that up 🙂

  • Samuel

    It,s rather obvious now why nobody wants to buy Luckypool ,a club running on empty (no money )and not even worth the paper that the shares of the club are written on plus another useless English manager in Roy Hodgson ?