Dubai International to make bid for Liverpool FC

[BFG]

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 3.25%.

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).

Beat me to it.

[el matador]

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).

I used a reported figure of 5% - if the figure of 7 - 8% is to be believed then its even worse.

[rushscored4]

Beat me to it.

Although I had to edit it as I got my maths wrong on the new US Fed rate!!

[Exiled_red]

5%

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

Read somewhere in articles (can't remember where) that rate would be ~1 or 2% above base rate, base rate at the moment is ~5.5% so probably looking at 7-8% interest, making repayments on a £350m loan (interest and capital) over 25 years or around £30m a year.

On top of that we will need probably another £300m loan for stadium. I can't see where we will get significant transfer funds from

[Flake]

It strikes me that anyone buying the club with 105 million worth of loan attatched would effectively, on purchase, provide the loanee with 105 million worth of profit...

[BFG]

Although I had to edit it as I got my maths wrong on the new US Fed rate!!

And I thought you knew your stuff.

[rushscored4]

I used a reported figure of 5% - if the figure of 7 - 8% is to be believed then its even worse.

How is it worse??? Did you expect the RBS to lend the money at a lower rate than they borrow it at?!

Look at how Arsenal's turnover has rocketed since their move to the Emirates:

Arsenal

OK, their first 6 months' accounts showed a modest loss but that was down to the incidental costs of the move and profitability will increase proportionately in the future despite the huge interest payments they are making on the loans to finance the new stadium.

[el matador]

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).

If you owed 100% of the value of the house and the asset hasnt appreciated then effectively its worth nothing to you - as once the asset is sold ALL the revenue goes to the bank.

That's how Liverpool is - if Hicks and Gillett tried to sell liverpool tomorrow with this debt hanging over their head - do you think someone would pay them £190m the club is worth and then offer to cover the debt ?

When companies are sold on for £1 as we have heard several times in the past years its because the company is worth nothing as it owes more than it is actually worth.

Liverpool is effectively worth nothing - that's why it is more attractive to potential buyers. The £190m valuation of the club is made up of revenues, brand worth and assets like players and physical structures. That combined gives liverpool a worth of £190m.

[rushscored4]

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).

Read somewhere in articles (can't remember where) that rate would be ~1 or 2% above base rate, base rate at the moment is ~5.5% so probably looking at 7-8% interest, making repayments on a £350m loan (interest and capital) over 25 years or around £30m a year.

[kurtangle01]

So tomorrow they're going to announce their refinance deal and hide it behind some nice pictures of a stadium that, at present, we can't afford?

[rushscored4]

If you owed 100% of the value of the house and the asset hasnt appreciated then effectively its worth nothing to you - as once the asset is sold ALL the revenue goes to the bank.

That's how Liverpool is - if Hicks and Gillett tried to sell liverpool tomorrow with this debt hanging over their head - do you think someone would pay them £190m the club is worth and then offer to cover the debt ?

When companies are sold on for £1 as we have heard several times in the past years its because the company is worth nothing as it owes more than it is actually worth.

Liverpool is effectively worth nothing - that's why it is more attractive to potential buyers. The £190m valuation of the club is made up of revenues, brand worth and assets like players and physical structures. That combined gives liverpool a worth of £190m.

With respect mate, that's bollocks...

The formula usually used for valuing a company is a multiple of the net profits (known as the Price Earnings or P/E Ratio) PLUS the net assets. Assuming net profits of (say) £20m a year and a P/E ratio of 10 plus net assets (such as players) of £100m then the company value would be £300m even if the debts matched the fixed assets (e.g. land and property).

[disco]

If you owed 100% of the value of the house and the asset hasnt appreciated then effectively its worth nothing to you - as once the asset is sold ALL the revenue goes to the bank.

That's how Liverpool is - if Hicks and Gillett tried to sell liverpool tomorrow with this debt hanging over their head - do you think someone would pay them £190m the club is worth and then offer to cover the debt ?

When companies are sold on for £1 as we have heard several times in the past years its because the company is worth nothing as it owes more than it is actually worth.

Liverpool is effectively worth nothing - that's why it is more attractive to potential buyers. The £190m valuation of the club is made up of revenues, brand worth and assets like players and physical structures. That combined gives liverpool a worth of £190m.

You're right, the club has no current value to G&H, however any buyer would have to either take on the loan or pay it off for G&H. Either way, a buyer would either have to pay off or take on the existing loans so the club is worth at least £190m, probably a lot more now due to the likely increase in cashflows in 3-4 years time.

I have a mortgage on my house, but someone will still have to pay me £x00K to buy it, not just the mortgage!!

[Cormack74]

So tomorrow they're going to announce their refinance deal and hide it behind some nice pictures of a stadium that, at present, we can't afford?

If I may appropriate something from the New Labour spin machine:-

"A good day to bury bad news"

(Good being a relative concept obviously)

[kurtangle01]

If I may appropriate something from the New Labour spin machine:-

"A good day to bury bad news"

(Good being a relative concept obviously)

Exactly what I was thinking as I typed that.

[el matador]

With respect mate, that's bollocks...

The formula usually used for valuing a company is a multiple of the net profits (known as the Price Earnings or P/E Ratio) PLUS the net assets. Assuming net profits of (say) £20m a year and a P/E ratio of 10 plus net assets (such as players) of £100m then the company value would be £300m even if the debts matched the fixed assets (e.g. land and property).

ok - lets take your formula

our net profit for last year were approx £15m (reportedly in the echo). If you use the PE ratio of 10 the club goodwill would be worth £150m.

then add the net value of the assets to that - do you think our net assets are worth only £40m ? Remember this has to include player net values, the stadium, land, the training facilities, and not the mention the value of the brand.