EXCLUSIVE: H+G and the £144m LFC loans - How the world's press got it WRONG

According to the media, Tom Hicks and George Gillett have invested £144m into Liverpool FC since 2007.. £144m is the magic number, and it has been repeated in almost every newspaper, blog and news program worldwide over the last couple of weeks. However, as I will illustrate, that figure is not even correct (!), and not a single journalist on the planet has got it right yet.

Sounds hard to believe, right? Well, it's not. When it comes to LFC's finances, the press has *repeatedly* got it wrong, and this is yet another example of that.

FROM WHAT SOURCE DID THE £144m FIGURE ORIGINATE?

As far as I can tell, the figure originated in an article written by excellent football journalist David Conn for The Guardian on October 6th. In the article, Mr Conn stated:

"The deal with [John W] Henry...leaves no room for the repayment of the loans which Hicks and Gillett made to Liverpool, which stood at £144m on 31 July 2009, the date of the club's last published accounts".

Every newspaper under the sun (and every LFC website/blog etc) then copied that figure, including the Telegraph, The Daily Mail and a whole host of others.

The fact is Hicks and Gillett have NOT invested £144m into the club itself. The correct figure can be established by tracing all the loans to the club from Kop Football Ltd over the last 3 years. Before I get to that though, it is important to appreciate the overall structure of LFC, and how money from Hicks and Gillett filters through to the club:

STRUCTURE OF LFC

Kop Investment LLC (KI)
An American company, co-owned by Gillett & Hicks. This owns:

Kop Football (Cayman) Ltd (KFCL)
A company registered in the Cayman Islands. This owns:

Kop Football (Holdings) Ltd. (KFHL)
A UK holding company. This owns:

Kop Football Ltd (KFL)
Another UK holding company. This owns:

Liverpool Football Club & Athletic Grounds Ltd (LFCAGL).
This is the club itself.

WHERE HAVE THE LOANS COME FROM?

Money has filtered down from KI all the way down to the club (LFCAGL). This is the process:

1. KI loans money to KFCL
2. KFCL loans money to KFHL
3. KFHL loans money to KFL
4. KFL loans money to LFCAGL

Step 4 is what this article is about, i.e. establishing the true amount of money loaned to the club by KFL.

LOAN #1: 2007

KFL loaned the club £64m. (Below = Snippet from KFL's accounts):

*Click to enlarge images



LOAN #2: 2008

KFL loaned the club more money, with the total owed now standing at £79.9m. (Below = Snippet from KFL's accounts):



The actual amount loaned in 2008 is not revealed, however we know that a loan WAS made because the following is stated: "The company continues to loan funds to the club on an as-needed basis".

LOAN #3: 2009

KFL loaned the club more money, with the total owed now standing at £100.8m. (Below = Snippet from KFL's accounts):



This figure is confirmed by LFC's last published accounts, dated 31 July 2009 (Below = Snippet from LFCAGL's accounts):



Look again at Mr Conn's comments in the Guardian article:

"The deal with [John W] Henry...leaves no room for the repayment of the loans which Hicks and Gillett made to Liverpool, which stood at £144m on 31 July 2009, the date of the club's last published accounts".

As you can quite clearly see, this is wrong. On the 31 July, loans made to Liverpool by Hicks and Gillett stood at £100.8m, not £144m. Even if we take into account any amounts due within a year of 31 July, it still doesn't amount to £144m (Below = Snippet from LFCAGL's accounts):



If we include the £20m highlighted above, that would make the total figure owed to KFL £120m.

What's happened here is simple: The Guardian (and seemingly the rest of the football media) has misread/misinterpreted LFC's accounts. If we look at KFHL's accounts for 2009, we discover the following:



The £144m figure has been taken from the wrong set of accounts! As you can see:

* Kop Cayman loaned Kop Football (Holdings) Ltd £144.4m.

* £144.4m. may well have been loaned from KFCL to KFHL (i.e. Hicks and Gillett loaning money to themselves), but until the money filters down to LFCAGL, it is not a loan to the club.

* Only £100.8m made its way down to the club.

* This is the figure owed to KFL from the club

DISTINCTION BETWEEN THE CLUB + HOLDING COMPANY?

This is important because Hicks and Gillett can only claim their money back from the club (That is, if the loan has not been converted into equity already) Since the club only received £100.8m, this is the figure that matters. Other things to consider:

* H+G own the Holding Companies - they're not going to take their own companies to court to get their money back, are they?!

* LFCAGL existed before H+G came on the scene; the holding companies did not (in their current form).

* Whether we like it or not, H+G lent Liverpool £100m - they are entitled to claim that money back, just like any other loan (again, if the loan has not been converted into equity).

H+G's situation is similar to RBS' situation:

* RBS loaned Hicks and Gillett money under a loan agreement
* Now they want it back, and they're entitled to repayment.
* H+G loaned Liverpool (LFCAGL) money under a loan agreement.
* They will want it back, and under the loan agreement, they're entitled to call in the loans.

The idea that they will 'lose' that money is fanciful at best. If the sale to NESV goes through, and the loans are still outstanding (i.e. not converted into equity) Hicks and Gillett will simply go to the courts and start an action for repayment of that money loaned to Liverpool

ULTIMATELY, WHY DOES IT MATTER?

I guess it doesn't in the grand scheme of things (unless you're interested in true facts about the club, that is!). However, should we not expect a rudimentary amount of accuracy from newspapers like The Guardian and the Telegraph? This kind of inaccuracy irritates me because it very quickly becomes accepted fact, and then gets repeated across the globe without anyone bothering to conduct even rudimentary fact-checking.

The rampant perpetuation of this kind of inaccuracy is one of the things that prompted me to start this site in the first place. I got fed up with reading sloppily researched articles in the press, which often led to people parroting incorrect facts and figures during discussions about LFC.

I highlight this issue because it is vitally important that fans have access to correct information in order to make an informed choice.

NB. This is not a pro-Hicks article (!) - It's anti-media inaccuracy, and that's it.

Jaimie Kanwar