Dubai International to make bid for Liverpool FC

[disco]

Bear in mind that a reasonable amount of the loan if working capital for the new stadium - the loan is therefore ultimately secured on said new stadium.

We would then be worth at least the value of the loan.

A 70,000 stadium generates at least 70,000 * £35 * 25 games (say) = 60m+ per season, probably more with corporates.

One thing that concerns me though, which hasn't been mentioned before, is the prospect of the stadium going over-budget. How on earth would you pay for that?! Have you ever heard of anything above a garden shed being built for what the builders/project managers said it would cost?!

[Morten_nogamst_Pedersen]

that's what my friend has said - the banks just woulnt touch it otherwise. Like I said who has ever heard of a club owing twice as much as its worth - it would be ridiculous.

The club is as serious risk because its currently worth nearly nothing which in the event of an issue with the loan repayments could be sold to almost anyone. Even worse banks to raise capital short term could look to liquidate an asset - ie sell a player to raise immediate funds.

The only bit of consolation is that he said we were more attractive as a takeover proposition but he didnt say to who.

It'll either be Tom, DIC or Harry

I'm getting my coat...

[enema of the state]

Just had a chat with a banker friend of mine. He said that it would be highly irregular in this country for Kop investments to use assets from LFC to pay debt on a loan that they own.

As for making us more palateable as a takeover option, I find myself in the unusual position of agreeing withe Enema

Hicks and Gillette are indeed controlling the flow of information, I've been on the end of a deal of it myself. Fingers crossed this analysis is right.

lets hope your banker friend is right. id like the opinion of a commercial lawyer whose seen the contract before id reast easy but i still think the actual amounts wont be unmanageable IF - and only if - the expanded stadium is built.

an extra 20k capacity brings in £750k extra per fixture - plus additional marketing and tv revenue. the amount of debt strikes me as nothing to pee your pants about but theres still rather too many unkowns and if we have the option of being owned by rich gulf arabs and have no debt at all on the club and cash to invest in the squad then id be in the rare position of agreeing with you...its a no brainer wed be better off with DIC.

[rushscored4]

the club is at a massive risk - my friend works for RBS and he has come back with the following:

"the reason for only £190m of the loan being secured against Kop football limited is that they club is only worth that. the owners have been asked to put up money and letters of credit that they owe to the banks and personal guarantees to make up the remaining debt of £160m. Currently on the market our club would be worth next to nothing."

So he said that our club is worth approx £190m and thats why only £190m has been secured against it (effectively) and the rest of the debt is secured against hicks and gillett personally. Who has ever heard of a club that owes twice what it is worth ?

At what level is your friend - an ordinary business or commercial relationship manager? That reply is so wrong in many different ways. The club (company) will always have a value because it is a going concern with a very healthy level of income and profits which would both increase once the new stadium is open. And Kop Football Ltd is an entirely separate company to The Liverpool Football Club and Athletic Grounds Ltd which is the legal entity that owns the club.

Just because the owners of any company uses it as security for a debt doesn't mean it has less or no value, just that the net assets are reduced in exactly the same way that buying a house with a 100% mortgage doesn't mean that the house is worth nothing!

Any additional debt borrowed to finance the stadium would obviously be secured against the assets of that property. In other words, if the company borrows £250m to build a £300m stadium that would increase the value of the company by £300m but the net assets would only increase by £50m.

Believe me, this is all standard business practice and is nothing to be concerned about - ask Rocket or anyone with a basic grasp of accountancy (which to be fair most people in the Royal Bank don't have).

[el matador]

It'll either be Tom, DIC or Harry

In all seriousness - It probably is the end of us as we know it. But out of this may come something good.

Once the stadium is complete - if its completed on time and for £300m i'll eat dirk kuyt's pubes, the income will go up significantly and turnover will also go up pretty dramatically. Im not sure if it will go up by as much as people think but it should add another £30 - £40m to matchday revenue. More if there are more corporate boxes built.

Still begs the question though - in 5 years time when the stadium is complete will there be anyone to watch us struggling in midtable. How the f*** can they expect to sell 100 corporate boxes at £50k and fill out a 70k stadium when arbeloa is our best player.

[Lecter]

Bear in mind that a reasonable amount of the loan if working capital for the new stadium - the loan is therefore ultimately secured on said new stadium.

We would then be worth at least the value of the loan.

A 70,000 stadium generates at least 70,000 * £35 * 25 games (say) = 60m+ per season, probably more with corporates.

One thing that concerns me though, which hasn't been mentioned before, is the prospect of the stadium going over-budget. How on earth would you pay for that?! Have you ever heard of anything above a garden shed being built for what the builders/project managers said it would cost?!

Lets assume this is all correct

Until then we have this current loan with projected repayments / interest at £30-40 million, then will have the stadium loan on top of that

I cant see how these loans and their projected revenues add up to anything more than a neutral balance sheet many years down the line when the stadium is built

[enema of the state]

Third, and most importantly, I am informed the placement of a new deal with the bankers makes the sale of the Club to a 3rd party a seriously more attractive proposition I don't understand these things... but my source most certainly does) "

and if the yanks have polished us up commercially, put us in a better position for the long-term and then sell us on to the arabs.....whats the ****in problem???

The danger outcome is that lfc involutes, fails on the pitch and cant keep up with the loan repayments - that ISNT going to happen because in that scenarion, hicks and gillet take a bath financilly. lfc will/would be sold on LONG before that. lfc's on field success is linked to H+G's profits - if theyre still around, its likely well be doing ok#

[el matador]

Lets assume this is all correct

Until then we have this current loan with projected repayments / interest at £30-40 million, then will have the stadium loan on top of that

I cant see how these loans and their projected revenues add up to anything more than a neutral balance sheet many years down the line when the stadium is built

the reported interest rate is 5% then the payment interest only on £350m is £17.5m per annum.

[danwms]

the reported interest rate is 5% then the payment interest only on £350m is £17.5m per annum.

Thats a play of Mascharano's quality a season we can't spend the money on.

[BFG]

At what level is your friend - an ordinary business or commercial relationship manager? That reply is so wrong in many different ways. The club (company) will always have a value because it is a going concern with a very healthy level of income and profits which would both increase once the new stadium is open. And Kop Football Ltd is an entirely separate company to The Liverpool Football Club and Athletic Grounds Ltd which is the legal entity that owns the club.

Just because the owners of any company uses it as security for a debt doesn't mean it has less or no value, just that the net assets are reduced in exactly the same way that buying a house with a 100% mortgage doesn't mean that the house is worth nothing!

Any additional debt borrowed to finance the stadium would obviously be secured against the assets of that property. In other words, if the company borrows £250m to build a £300m stadium that would increase the value of the company by £300m but the net assets would only increase by £50m.

Believe me, this is all standard business practice and is nothing to be concerned about - ask Rocket or anyone with a basic grasp of accountancy (which to be fair most people in the Royal Bank don't have).

Agree with all that. I'd also be absolutely shocked if the RBS were willing to lend 100% of the market value of any company, it would represent too big a risk in the event of default so I can't see any of the original post being true.

[Lecter]

the reported interest rate is 5% then the payment interest only on £350m is £17.5m per annum.

Thats only paying the interest off though not the actual loan itself

[disco]

I'm probably giving them too much credit () but surely this is the sort of thing that was worked out 1 year ago when they were considering buying the club

All that's being argued/negotiated since is how it's being secured.

I'm very interested though to know how they think they can support 30-50m a year in transfers on top of loan repayments....

[Bob]

Can someone wake me up when this is all over?

Is there a crunch date when this should all be sorted one way or another. I had hoped that would be near the date that G&H could default on their payments - a situation that was highly unlikely...

So is there another date... or will this just endlessly rumble on...?

[rushscored4]

the reported interest rate is 5% then the payment interest only on £350m is £17.5m per annum.

If that interest rate is true then the banks must think that this is an extremely viable loan with no risk as that's half a percent below the Bank of England base rate!

However, the US Federal Reserve Rate (the equivalent of the BofE base rate here) was reduced yesterday by 0.75% to 3.50%.

I would expect a deal like this with assets and personal guarantees as security to have an interest rate of between 1.5% and 2.5% above base rate, i.e. 7% to 8% per annum if borrowed in the UK (i.e. from the RBS) or slightly lower if using a US bank (i.e. Wachovia).

[BFG]

the reported interest rate is 5% then the payment interest only on £350m is £17.5m per annum.

5%

Where'd you here that figure mate? Seems like a massively low rate for a business loan.