If you have read my wild ramblings off and on over the last couple of years you might recall that in my view the financial approach of clubs such as Liverpool and Manchester U is unsustainable.
This, I argue, is because their entire approach is based on three contingencies, all of which have to be maintained if they are to survive: a rising stock market, a banking sector always willing to lend more, and ultimately another buyer.
It is obvious that all three of these positions have long since gone, which is why the clubs are in such dire straits, and today (4 April) we see the results at both clubs. Liverpool’s co-owner has started to default on his debts, while Manchester U (who have been defaulting for a couple of years with the agreement of the lenders) have now started to look at selling assets.
The Manchester case is one that incorporates some speculation: the notion that C Ronaldo will be sold for £75 million in the summer is the essence of gossip – one could argue that if you believe that you will also believe that Cesc is off to Barca for £40 million at the same time.
But the difference is that Manchester need the money, Arsenal don’t. Manchester’s loans are now being openly traded at discount prices – if you have a mind to, you could buy a £10 million loan to Manchester U for about £2 million, for the simple reason that no one actually believes that Manchester U will ever be able to pay the debt back, and that liquidation is a more likely outcome.
However Manchester could stave off that disaster for a few months by selling the best players and not buying any more. Of course no one is going to stand up to Sir Alex F Word and say that, so they are holding on and holding on until he retires. From the owners’ point of view that can’t come soon enough.
The Liverpool case however is much nearer closure. Tom Hicks’ company which controls his sports investments has defaulted on three separate loans totalling over £350m by failing to make any interest payments on them. The money is owed to a huge group of different banks.
This is doubly important because in a few months time he and Mr Gillett, needed to raise another £350m to cover a loan for Liverpool they currently have from Royal Bank of Scotland and another bank. RBS which is owned by the likes of you and me, said at the last renewal that this would be the last one and that none of the money given could be used to buy players. Worse, that loan is secured through personal guarantees by Hicks and Gillett. Which means if they fail on that deal, then their own assets are seized by RBS (you and me) – and we could all end up owning ice hockey teams.
Gillett and Hicks have both dallied with the notion of bringing Arabs in to finance Liverpool, but they are looking increasingly unsure about this, particularly following the failure of the Arabs to close a much smaller dealer with Charlton because of “financial uncertainty”. (Incidentally you may have noticed that a substantial amount of money for the Tottenham stadium is going to come from “naming rights” – they have not actually considered that the sort of deal that made the Ems the Ems at Arsenal could not be done now. Those deals just don’t exist any more.)
You might think that sort of money problem is enough for any semi-sane individual, but we are dealing with Liverpool here, and in the midst of all this disaster they are seriously talking up the spending of more money. They still speak of buying a new stadium (which even using the Tottenham cheap-cheap model of stadium building would knock them back another £250m or so.)
And in case you want more… they have signed the Benitez fella with a promise that he can spend as much as he wants on anyone he wants, without those pesky owners getting involved. Given the Benitez track record all hell is going to break loose because they simply won’t have the cash to pay the instalments.
This is a story that I have been running for a while – I don’t think you will find it on teletext this morning or in most of the national papers. The Guardian is running it, and has actually put calls in to the Liverpool owners (they are not answering their phones), but as for the rest of the press, it is “There are serious doubts about the future of Fabregas as he returns from injury.”
But when Liverpool are declared insolvent, remember you read it here first.
Now, the butler has polished me spats, the chauffeur has the Rolls purring in the drive, and the game is afoot. “South!” I shout, and we are on our way to see the richest club in the world, and that dreadful Mr Ooooze. And perhaps to give a little cheer for Mr F and Mr A upon their return. What ho!
© Tony Attwood 2009. Oh what fun life can be.
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