Liverpool - Finances

When Gillett and Hicks bought the club they set up a new company called Kop Holdings. This seems to have been done to allow them to borrow piles of money to do the deal. This is where the problems began.

As you look through the various pages on this site you will see some areas where it is purely about the "club", other areas the "group" is mentioned and included. Liverpool FC is the club, Kop Holdings is the new company which actually owns Liverpool FC.

As reported elsewhere the way the club is now set up means the club owes the group money. What Gillett and Hicks are trying to do is to get Liverpool FC to pay off the loans they took out to buy Liverpool FC. This is to no benefit to anyone except Gillett and Hicks. In the the "good old days" all club money stayed in the club, now it leaks out at a great rate, and goes into this Kop Holdings company that exists purely for the benefit of Gillett and Hicks.

The area where this shows up most clearly is in the "interest payments" section. The club had little in the way of interest payments up to the new ownership as it was a well run club with little or no bank loans. Now the club has huge interest payments to match the huge loans that the new owners took out to buy the club.

The other area that needs to be looked is the amount of money being spent on player transfer fees. In the last 5 seasons covered of Rafa the club spent £266m on new players. He may well have then sold them again but that is the amount that the club has sanctioned him spending.

The way the finances have been run under the current owners has led to the mess that seems to be consuming the club in the 201-11 season.

The Kop Holdings company owed the banks £234m as of July 2009. It is highly unlikely this figure has reduced subsequently. The interest rate on this has been roughly 5%, something the banks will be happy with. What  the banks are not happy with is that they seem to have little chance of getting their £234m back.

The Kop Holdings also had loans of £144m from an offshore company run by Gillett and Hicks.

The banks (RBS and Wachovia Bank) want their money back, or some agreement in place that gives them confidence that they will get it back at some point in the future. Usually what clubs do is guarantee their payments against the assets they own. So for example Arsenal's big loans to build the Emirates were taken out against the redevelopment of Highbury. Liverpool's problem is that they have now ended up with hardly any assets. Yes they own Anfield and it is valued in the books at £73m, and the players are valued at £121m however they already owe various people £226m. When the amount of money in the bank, and the amount of money owed by other clubs is taken in to account Liverpool have assets of only £14m. (This is at July 2009).

So when RBS look at what would happen if Liverpool couldn't pay them, they see very little to make them happy. Could they sell Anfield for £73m? Could they sell all the players for £121m, to teams who would know how desperate they are to sell ?

This is where the option of administration comes in. Others clubs who have gone down this route have done so to get rid of their debts, or a huge proportion of them. What the club could do is say "sorry we can't pay you, we're going into administration, we'll give you 10p in the £ for what we owe you, by selling off players as quickly as we can".  The £234m disappears down to £23m and Liverpool are debt free. The banks get some of their money back, the clubs that Liverpool owe transfer fees to, get 10% of what they are owed. This last point is why the 9 point deduction was put in place.

 

Last updated: 10 October 2010