Liverpool FC owners lose £42.6m

[cadmium]

http://news.bbc.co.uk/1/hi/business/8084182.stm

The parent company of Liverpool FC, owned by Tom Hicks and George Gillett, lost £42.6m in the year to August 2008.

The loss was mainly due to the £36m of interest payments that Kop Football Holdings had to make to service the debt taken on to buy the club.

Its auditors warned that the need to refinance loans by 24 July cast "significant doubt" on the future of the group as a going concern.

But they added the club's owners were confident they would secure the funds.

The US owners bought Liverpool in February 2007, promising to build a new stadium.

In their accounts, they say they are "committed to building a new stadium and actively seeking funding to complete the project".

But they admit that "the opening of the new stadium will be delayed until 2012".

The parent company's loss came despite the £10.2m pre-tax profit reported by the football club in the same period.

The profit was helped by increased television revenues and the sale of players such as Peter Crouch, John Arne Riise and Scott Carson.

The results for the parent company showed net debt on 31 July 2008 of £300m.

get out of the club, get out right now

[Kenneth]

Nothing particularly new or unexpected really.

[Icon]

They should check down the sofa!

[JohnOK]

The longer they stay, the less chance they have of selling us. Without a stadium in 5 years, God knows how much our debts would be with these 2 muppets in charge,

I'm still hoping they will be gone before the refinancing next month.

[cream]

There goes our transfer budget for the next 5 years.

[Vermilion]

Aye, i really worry where these two will take us, and what state they'll get us into if left to carry on, we'll likely muddle along with not enough cash to challenge consistently, or worse we end up with serious financial problems that will hamper and adversely effect us for a decade or more.

[Vermilion]

http://www.timesonline.co.uk/tol/sport/football/premier_league/liverpool/article6433996.ece

From The Times

June 5, 2009
Anfield's house of cards shaken to foundations
Analysis: Ashling O'Connor

More than any ordinary business — and we know that football is not that — the “going concern” question is a sensitive one for top European clubs.

For Liverpool, it is vital not only to their future as a solvent company but also their continued participation in the Champions League, on which they rely increasingly for the income to service their burgeoning debt.

It is a delicate situation. Uefa, which runs the Champions League, demands that clubs provide detailed financial forecasts before it will issue them with a licence to compete in its competitions.

But, despite worrying levels of debt and the caveat from their auditor at KPMG about their ability to remain solvent, George Gillett Jr and Tom Hicks, the co-owners, must have done enough to convince Uefa that Liverpool will not go bankrupt halfway through next season or the club would already have been thrown out of Europe.
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Given the continued reluctance of banks to lend money in the recession, the language of Liverpool’s accountants is not wholly unexpected. Auditors are required by financial regulators to make their assessments about whether a company is a going concern on the assumption that it can stay in business for the next 12 months. Increasingly, confidence in that assumption is low.

Yet the fact that a £350 million credit facility secured by Kop Football (Holdings) Ltd, the club’s holding company, is due for repayment on July 24 is undeniable. So, too, is the lack of a replacement arrangement with RBS and Wachovia, despite the insistence of the owners that there will be one in the coming weeks.

So KPMG has a duty to highlight the “material uncertainty which may cast significant doubt on the company’s ability to continue as a going concern”. Experts say this constitutes a special alert for shareholders — or, in this case, supporters. It is essentially code for “you should be worried about this”.

What is worrying for Liverpool is a basic admission that the club are not generating enough income to cover interest payments totalling £36.5 million and the ambition to attract the biggest — and most expensive — players to Anfield. Staff costs in the 2007-08 season were nearly £90 million.

Even if Gillett and Hicks do successfully renegotiate the soon-to-expire credit facility, there remains the question about their long-term ability to take losses that at the last count were £42.6 million.

There will be continued pressure on the owners’ American sports businesses to prop up Liverpool’s financial house of cards if the credit crunch continues to equal crippling lending terms.

It surely has not helped that they made a dud call on the direction of interest rates, entering into fixed agreements between 4.3 per cent and 6 per cent as the Bank of England cut its rate to a record low of 0.5 per cent. The cost of exiting these hedging agreements would total £30.6 million, prompting KPMG to describe them as “potentially onerous contracts”.

The bottom line is, when they add it all up, will they reckon it is worth it?

[Vermilion]

http://www.telegraph.co.uk/sport/football/leagues/premierleague/liverpool/5446879/Liverpools-350m-debt-sets-off-alarm-as-Tom-Hicks-and-George-Gillett-warned.html

Liverpool's £350m debt sets off alarm as Tom Hicks and George Gillett warned

By Paul Kelso, Chief Sports Reporter
Published: 10:22PM BST 04 Jun 2009

Liverpool's owners Tom Hicks and George Gillett have been warned by their auditors that failure to refinance a £350 million loan due next month will threaten the club’s ability to operate as a going concern.

The warning is contained in accounts filed yesterday which also reveal that Hicks and Gillett paid £36.5 million in interest last year, contributing to a holding company loss of £42.6 million.

The American co-owners are in negotiations with banks RBS and Wachovia to refinance the debt, repayable on July 24, and are also seeking fresh investment from a third party.

The owners remain confident they will agree a deal with the banks, but in accounts for the club and its holding company, Kop Football (Holdings) Ltd, auditors KPMG warn of a “material uncertainty” over the club’s future.

“The group has credit facilities which expire on July 24. The directors have initiated negotiations to secure the replacement finance ... and these are ongoing,” KPMG write. “These conditions ... indicate the existence of a material uncertainty which may cast significant doubt on the Group’s and parent company’s ability to continue as a going concern.”

KPMG’s comments serve as a reminder of the crucial nature of the refinancing talks. The accounts also demonstrate that the profit made by the club, £10 million before tax in 2007-08, is swallowed by interest payable on the owners’ loans.

Sources close to the owners said that KPMG’s warning was a technical formality given the proximity of the refinancing date.

They also said Uefa has just renewed the club’s licence to compete in the Champions League, a condition of which is that the club is a going concern.

In the accounts Hicks and Gillett insist: “The directors have a reasonable expectation that the group will secure adequate resources to enable [it] to continue in operational existence.”

The accounts also show they have provided personal guarantees against £185 million of the debt.

[cream]

Thats some ****ing depressing reading. We'll be all over the press tomorrow, what players would want to come to a club that looks like its going bankrupt.

[Darth Marty]

Thats some ****ing depressing reading. We'll be all over the press tomorrow, what players would want to come to a club that looks like its going bankrupt.

Normally id blame you for being a depressing miserable *******, however this time you are right. What a ****ing mess we are in eh.

[Charly]

This is hardly surprising news, after the same thing was said about the Mancs a couple of months back. Difference is they already have a huge stadium, and generate twice the income nearly.

Basically, we can break even each year providing we dont buy anyone, and are sucessful in all competitions. That covers the interest payments. Thats the Yanks legacy. Thats Moores legacy.

How did they ever believe thay could finance a stadium too? To do so would create an even larger debt than the Mancs.

Moores could have borrowed £300m himslef, and buil the stadium, and we would have been in the current situation, but able to service the debt from the extra ticket sales.

The only way we can get out of this is if a new owner has £400m to buy the club (this should also clear the debt, £400m for a new stadium. £100m on new players.

Thats nearly £1bn just to match the Mancs. No one has this sort of money to burn. The Yanks have nearly destroyed this club.

[Guest]

**** it, Wellard is out of the equation now.

[Nicey]

Jesus ! these two have been a ****ing disaster ... I think a press statement will be required to calm down the natives

Was not that long ago we were touted as one of the best run football clubs in the world ...

Shocking .. careful what you wish for

[blacky]

IMO any potential buyers will be circuling the club now. The yanks must be starting to panic. Refinance is due next month, from what I have read RBS are looking for the yanks to invest more cash and make more assurances. They don't seem to be able to sell their american franchises to help fund this. I have a gut feeling they are going to be forced into selling.

[Nicey]

Well I for one hope they get there fingers burnt and we come out smelling of Roses cant help but feel they are getting there just deserts, I think we will be fine, they on the otherhand will take a very big hit on this disingenuous gamble