By Tony Attwood
Two stories at once – this one, and the fact that Arsenal Ladies won the league yesterday (Sunday). I’ll come back to the triumph of Arsenal Ladies in the next piece. First…
Liverpool’s finances look awful – more awful than before. But I don’t think that that is the whole story. Give me a second, and I’ll try and explain.
When it became clear that the finances of Liverpool FC were a perfect example of a basket case inside a basket case, the Spirit of Shankly group of supporters, wrote to RBS asking them not to support the club with finances any further. The idea was to force the owners to sell.
The bank rejected the plan, and took the most unusual of steps of writing to anyone interested explaining why they were still supporting the club. They spoke of it being a going concern, with good prospects, or something like that.
What they didn’t quite spell out was that they (the bank) were indeed supporting the club by continuing the overdraft and loan facilities, but they were laying down a very strict timetable for repayment.
There was also the clear implication that the club needed to get itself sorted financially, and should move back into profit pretty quickly, if they wanted to retain a working relationship with RBS.
Unfortunately, despite having some success in 2008/9 (at least a damn site more than 2009/10) Liverpool made a loss of £55m – their worst ever performance. Which suggests that in a year’s time when we see the 2009/10 figures, there is going to be a lot of stuff hitting a lot of fans. (That’s rotating fans used for air cooling, you understand, not the other kind).
So, £350m in debt and interest payments of £40m per year.
So that’s point one – a reasonably good year on the pitch, but record losses, and an edgy bank.
Now, point two. The accounts suggest that Liverpool FC had to pay the banks £250m owed on 24 January 2010, but they failed to do so. Serious stuff. Then a second date was set: 3rd March, and it looks like they failed to make the payment again.
Then, to keep the bank peaceful Hicks and Gillett appointed a chairman with the explicit task of flogging off the assets. In return RBS agreed to continue the loan, of £237m until a sale is achieved. The bank seems to be ok with this providing the sale is within a few months.
It is because of all this that KPMG the auditor, said that the club is now “dependent on short-term facility extensions”. They also said, “This fact indicates the existence of a material uncertainty which may cast significant doubt upon their ability to continue as a going concern.”
If you have not seen that before (and I know this is UNTOLD Arsenal and so I should be covering stuff that isn’t anywhere else, but this bit is an exception – others have written about it) you might like to try it again.
“This fact indicates the existence of a material uncertainty which may cast significant doubt upon their ability to continue as a going concern.”
Now I know lots of people think that I like to overplay the disaster stuff, and that EPL clubs are safe, and it will all be ok in the end, but this is the auditor of Liverpool talking.
So far then, point one, they made a record loss in a year when they ought to have been making a profit. And point two, they have defaulted on their bank repayments, and are living on the short-term goodwill of the bank.
Point three is that the EPL has taken an interest in the club. So much so that they formally asked Liverpool to state that they were not about to go bust, and could continue into 2010/11. That was a bit silly, since you would hardly expect a business that is up for sale might suggest that it can’t continue trading. But anyway Liverpool said they were fine.
They didn’t talk about the stadium, work on which was supposed to start in March 2007. Nor the fact that they now don’t have a penny for the project.
And this is where it gets really interesting. It is Point Four.
2009/10 was a fairly grotty year for Liverpool. They have slipped from 2nd in the league to 7th (I think), and dropped out of the Champs league early, as opposed to the quarter finals the year before. Which means less match income, less money from TV, and so on. Next season will be even worse.
And this brings me to the key point.
Richard Scudamore is the EPL’s chief executive – the man who is leading the fight with Platini, over the financial rules which will soon govern Champions League football.
Scudamore rejects the notion that all clubs in the Champs League should, like Arsenal, be making a profit. Instead he wants sustainability. Here’s his example: “if you can prove beyond reasonable doubt that what you’re doing is sustainable it should be allowed. If Mr Fayed wants to take X millions of profit from his business and invest that over time I don’t hear any commentators around the game say that what Fulham are doing this season is wrong, or what he’s done over the last 10 years is wrong. But he might fall foul of the current Uefa proposals. It’s the blunt break-even concept versus the sustainability….
“Ultimately the clubs run themselves and we can only take them so far.”
An unfortunate example, given that Mr Fayed has put Fulham up for sale, but think of Liverpool for a moment. Scudamore’s definition of “sustainable football” would give no comfort to Liverpool. Even if Scudamore were to convince Platini, the Liverpool would still not be allowed into the Champions League.
Put together it looks like this…
- The club is living day to day, and must find a new owner quickly who can pay off the debts.
- But the current owners will want more than a takeover – they want profit too.
- The situation at Liverpool is on a knife edge, and it is getting worse because of this year’s comparative failings.
- The EPL is not even trying to defend Liverpool’s position as it argues with Uefa.
Of course a very rich person might come in and for reasons that might not be very apparent at the moment, pay off the existing owners, pay off the debt, and pump lots of cash into the club. But, there’s just one other issue.
There is a rather nasty rumour doing the rounds about the personal life of one player. I am absolutely not going to mention it, because I have no evidence about its truth, and if it is untrue it is a typical media approach to blackening someone’s name just for the hell of it. I hate it when they do it to Arsenal, and I am not going to support it just because it is Liverpool.
But, the fact is that if someone were about to throw £500m at the club, they might pause for a moment, to see where this story goes, and unfortunately that pause might be a bit too much.
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