Site Update: JK is away until July 31

10/15/2010 05:36:00 pm

LFC SALE: A breakdown of *how* NESV's £300m purchase money will be spent...

Now that Liverpool FC is finally sold (!), it's time to take a look at what exactly has been sold, and what debts/liabilities may be paid off with NESV's £300m purchase money.

What company has been sold?

Q. Is it Liverpool Football Club and Athletics Grounds Ltd (LFCAGL) that has been sold, or is Kop Holdings Ltd (KFL)?

The evidence seems to suggest that it is the company that runs the CLUB (i.e. LFCAGL) that has been sold (and will be retained).

* LFCAGL was incorporated over 100 years ago (!)
* Kop Football did not exist before 2006.
* KFL is owned outright by Tom Hicks and George Gillett.
* Hicks and Gillett are merely majority shareholders in LFCAGL.

KFL is a holding company, thus it 'holds' the shares that make up the club:



This is confirmed in the acounts for Kop Football (Holdings) ltd (KFHL), another holding company owned by Hicks + Gillett:



The following is stated in Hicks' ill-fated restraining order petition, filed earlier in the week:

"Broughton, Ayre and Purslow...have conspired with RBS [and] NESV...to devise and execute a scheme to sell the iconic Liverpool Football Club and Athletics Grounds Limited ("Liverpool FC" or "the Club") to NESV".

Here is the documentary evidence:



Hicks' petition will have been prepared by highly qualified lawyers; and in that petition, they explicitly state that Purslow, Broughton and Ayre tried to sell LFCAGL to NESV.

I'll concede that it's possible that KFL might *also* form part of the sale; indeed, David Conn of The Guardian suggested that in a recent article (and reiterated it to me in a recent email). This might turn out to be the case, but I personally do not see the benefit to NESV of retaining KFL:

* It will have no further utility - no income; no expenditure; no prospect of growth. LFCAGL is the company that ticks all those boxes. And given its redundant status after the sale, KFL will probably be dissolved anyway.

* KFL is a wholly owned subsidiary of Kop Football Holdings Ltd, another holding company owned by Hicks + Gillett. Quite how NESV would purchase KFL as part of the sale when it's owned by another company (!) is a mystery.

* KFL currently owes KFHL £145m. Why would NESV buy KFL and assume that debt? if they did, they would be in debt to Hicks and Gillett! This makes no business sense.

EDIT: Several of this site's excellent commentors have suggested (in the comments section below) that perhaps the loans from H+G to the club were converted into equity, thus wiping out the debt. I've considered this as a possibility; there is anecdotal evidence to support it but no irrefutable evidence (not that I've found anyway).

Also, the loans to LFCAGL from KFL are very explicitly referred to as repayment 'loans' in the accounts, loans that are 'repayable on demand' as long as to do so would not make the company insolvent.


What are the financial details of the NESV sale?


After the sale was announced earlier today, NESV revealed the following in their statement:

"The transaction values the club at £300m and eliminates all of the acquisition debt placed on LFC by its previous owners, reducing the club's debt servicing obligations from £25m-£30m a year to £2m-£3m"

In an interview on 6th October, Martin Broughton revealed how the £300m would be utilised:

"[The sale price is] £300 million effectively. £200 million in writing down all of the acquisition debt, taking on some of the additional working capital debts etc and other liabilities. So it’s £300 million all together".


In another interview, Broughton stated:

"All of the acquisition debt that was involved in the current owners acquisition will be removed completely. We'll still have what we call normal working capital debt and there's a facility there for the new stadium which will remain in place, but to all intents and purposes all the major debt that has been causing our problem has been paid off"

So:

* £300m purchase price from NESV (Confirmed by both Broughton + NESV).

* Acquisition debt of £200m (i.e. RBS loans used by H+G to buy the club) to be paid off.

* Some other working capital debts/liabilities to be paid off.

* Stadium 'soft cost' fund will remain in place.

Which company currently holds the acquisition debt of £200m?

Kop Football Ltd, as illustrated below:



This will paid off by the NESV as part of the purchase process.

What other working capital debts might be paid off?


I believe the remaining £100m could be used to pay off the following debts currently on LFCAGL's books:



* Trade creditors - £35.5m
* Taxation + Social Security - £13.8m

The bank loan of 36.5m highlighted above is the stadium facility referred to by Broughton in his comment above. This will be kept.

TOTAL: £49.3m

Trade creditor liabilities of £7.6m could possibly also be paid off as part of the purchase process, as illustrated below:



What about the £25-£30m worth of interest mentioned in NESV's statement?


As a result of the aquisition debt, LFCAGL and KFL have a combined interest burden of between £25-£30m:



It breaks down as follows:

* KFL - £21.9m (Payable to KFHL)
* LFCAGL - £6.3m (Payable to KFL)

TOTAL = £28.2m

Clearly, once those debts are paid off, LFC's interest burden will plummet.

Summary of debts to (potentially) be paid by NESV

DEFINITE: £200m of aquisition debt
VERY PROBABLE: £43m.1 trade creditors debt
QUITE POSSIBLE: £13.8m Taxation + Social Security debts

GRAND TOTAL = £256.9

This leaves approximately £43m, which will probably be used as working capital.

Based on what has been stated by both NESV and Martin Broughton, I believe what I've outlined above is very close to how NESV will proceed with the payment of LFC's debts and liabilities. This constitutes my opinion based on the evidence available right now. Further (as yet unreleased) details may come to light in the future that may cast a different light on certain points. We'll wait and see :-)

Jaimie Kanwar





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104 Comments :

Guest said...

Wow, tedious!

Why should anyone care? Main thing is that Hicks & Gillett are gone and it's cost them £144m in the process

Jaimie Kanwar said...

You are clearly another person who just believes everything they read in the press.  H+G have not 'lost' 144m at all.  The most they will lose is 100.8m, and even then, they have the right to claim that money back as it was LOANED to LFCAGL, and a loan agreement is in place.

If you think important issues about how the purchase money is spent is tedious, then I suggest you don't really understand the issues.

And if you post pointless comments like that again, I'll just delete them.  If you have something to add to the debate then please do.

Jordan Boynton said...

It's not tedious... It's informative.

A lot of fans had no clue what the debt situation was beforehand and just took what the media said as Gospel. To be honest, it was a pain in my ass having to read all the deluded, moronic fans for the last few years on a daily basis. If anything could be described as tedious, that can.

anteater said...

So, if the various holdings are not bought by NESV, I assume that they pay the debt in the books of KFL (?) because the club itself is secured against that debt, right? And the 140ish million one holding owns the other holding is, more or less, G+H's loss, as it is not secured against the club and therefor irrelevant to any further proceedings of LFCAGL.

What has happened to the 40m owed to Wachovia? Thought the club was security for that loan too.

And another question for you, Jaimie. You probably know all those figures better than any of us (I mean that), so, how much more money will the club have to spend on it's proceedings now that most of the debt and G+H are gone?

Epic Swindell said...

Broughton has stated in the media that they stand to lose about 140 million.

Jaimie Kanwar said...

No, he has not stated that.  Find the evidence that he has.  An interviewer stated that, and Broughton responded 'about that', which was probably a rote response as the alternative was to spend 20 minutes explaining the complex intricacies of the 4 separate holding companies involved in the ownership of LFC.  As I said, please show the evidence where Broughton 'stated it in the media'.

Snots said...

I read your previous piece regarding the actual money lost. But I don't understand, who can they claim that money back from? Do you see much money being invested in the next transfer window?

Jaimie Kanwar said...

Once NESV pay off the outstanding RBS loans (200m on KFL; 36.5m on LFCAGL) that's it - NESV will have nothing further to do with KFL.  the company will probably be dissolved (if it hasn't already.

The thing about the alleged 140m is this: 100.8m of it was loaned to LFCAGL; that's real-world money, i.e. cash that exists, and has been used over the last 3 years.

KFL loaned LFCAGL that money, which means KFL's 'loss' is, in reality', only 45m approx (145m minus 100.8m).  It's not really accurate to say that the 145m owed by KFL to KFHL is a 'loss' - only 100.8m of that 145m is a loss as it's out there in the world being used.

According to the 2009 accounts, RBS and Wachovia refinanced H+G's loans together, when NESV pay back RBS, I imagine they will give Wachovia their share.

Steve Erino said...

Jaimie, pretty impressive breakdown.  However you are wrong on one point.  Hicks & Gillett acquired the share capital of the previous shareholders for £174m.  This is not a loan and H&G have absolutely no chance of getting it £140m back - unless the courts back their next challenge against Broughton & Co.  This is very unikely after rthe ecent court decisions.  It simply therefore represents a capital loss. 

To be fair these two clowns deserve to walk away with this loss as they merely financed the purchase club with bank loans costing tens of millions per annum.  Its their debt after all.  Good riddance I say

growler said...

weren't broughton et al board members of kop, rather than liverpool fc? and agreed to sell Kop?

Epic Swindell said...

I heard it on Radio 5 live!  Broughton clearly stated that they would lose about 140 million!

Jaimie Kanwar said...

H+G should be able to claim the money back from LFCAGL (the club).  Even though they no longer own it, the fact remains that they lent it 100.8m of real money.  That was a loan, and as we all know, loans have to be paid back.

Jaimie Kanwar said...

Steve - with respect, the share capital was acquired via a loan of 183.5m from KFHL, not 174m. This is stated quite clearly in KFL's 2007 report.

In any event, the acquisition of share capital is not relevant to the article above.  The loans I refer to are loans from KFL to LFCAGL totalling 100.8m - these were provided for the purposes of working capital (mainly).  Hicks and Gillett should have a claim on that money.

Jaimie Kanwar said...

I don't believe that's accurate.  Please find some evidence.

Jaimie Kanwar said...

If Broughton et al were not on the board of LFCAGL then who was?   LFC obviously has a board of directors, and it comprised of Hicks, Gillett, Ayre, Broughton and Purslow. The amended articles of association were for LFCAGL too; I checked this personally; and there's a copy in one of the articles I wrote a few days ago.

As I said in the article: think about logically:

* H+G own KFL and KFHL

* KFL owes KFHL 145m

* If NESV buy KFL, they would assume that 145m debt

* NESV would then be in debt to H+G for 145m.

That makes no business sense.

bullermcg said...

jamie is it not possible that nesv bought the holding company that has lfc as a debtor? and hence they as new owners are writing off the inter company debt and as a previous poster stated it is a capital loss for gillete and hicks??

bullermcg said...

just to be clear i mean the holding company thats originally loaned the money and has filtered through to lfc

anteater said...

Ok, thanks for that. But, from reading all the other posts of this thread, we may have to pay back the 100.8m to them. Well, at least that is what you say. But this does not fit with what Mr. Broughton has said (300m, no aquisition debt left). Could it be that NESV indeed bought all of the holdings so the money one of them (KFHL) lent LFCAGL would never be paid back? Otherwise you would be damn right. If G+H still own KFHL and LFCAGL owe that holding 100.8m, then we'd have to pay it. This whole set-up with all of those holdings is pretty complicated.

Guest said...

Hicks interview on SSN....
"Me and George have put $270m dollars into the club, but you never hear that in the media"

How much cash are they getting back from the NESV deal... nothing.

Therefore they 'lost' $270m (actually £168m at current exchange rates, but let's call it a more generous $2-to-the-pound which equals...... £135m)

Guest said...

Hicks just admitted it himself.... "Me and George put $270m into the club."

There is some pretty strong evidence (not he used the word 'club', not Kop Holding, or Kop Football or Kop Cayman but the club: <span>LFC & Athletics Ground plc)</span>

anteater said...

Broughton et al were members of the board of KFL and KFHL, too.

NESV bought KFL.

Source: http://clients.squareeye.com/uploads/oec/Royal%20Bank%20of%20Scotland%20%20v%20%20Hicks%20%20Ors%20%20_14%2010%2010__jud_.pdf

anteater said...

Well, Jaimie, as you worked through all the figures, it is only fair if I put my findings from Mr. Justice Floyd's judgement on here as I have worked through that.

In that judgement dated 14th of October it says that "[...] the first application was for a mandatory injunction to restore the composition of the boards of KFL and KFHL [...]" which was granted.

"The second application was an application made by the owners, the target of which was to prevent the completion of a sale of KFL to NESV." As we know Justice Floyd refused that application.

Tilly said...

What’s the difference between LFC and Man Utd ?

Liverpool don’t have to worry about Owen anymore. :)

Jaimie Kanwar said...

Hey anteater - thanks for that. I did say in my article that it could be possible that kfl could also be bought as partvof the deal. Anyway, according to the latest article from THe Guardisn on the issue, KFL has been dissolved after the sale, so I'm not quit sure what the point is/was. It's also true to say that the petition filed by hicks states clearly that he wanted to prevent the sale of LFCAGL to NESV. I think we need further details to make a conclusive judgement on the issue.
Sent from iPhone
On 15 Oct 2010, at 22:11, "Echo" <js-kit-m2c-1hn7v1urs4irk0qp64vuqidq3ccs9hdmv1iqei7imq23ojm5qfj0> wrote:
</js-kit-m2c-1hn7v1urs4irk0qp64vuqidq3ccs9hdmv1iqei7imq23ojm5qfj0>

anteater said...

What Hicks says is bollocks. His attorney, and he surely was speaking on behalf of Mr. Hicks, said after todays court hearings in Dallas:

"Mr. Hicks and Mr. Gillett wanted to position this club for the future, but others have a different agenda," said Stodghill. "In truth, there is nothing positive from these events for Liverpool Football Club. That is exactly the opposite of what my clients wanted to achieve."

If you believe that Hicks put 270m into the club you probably also believe what his attorney said. Then this must be a sad day for you.

By the way, source of my quote:
http://blogs.dallasobserver.com/unfairpark/2010/10/live_from_the_george_allen_cou.php#more

Stell said...

the anti-suit judgment suggests that it is kfl that was sold. see paras 2 & 10:

http://clients.squareeye.com/uploads/oec/Royal%20Bank%20of%20Scotland%20%20v%20%20Hicks%20%20Ors%20%20_14%2010%2010__jud_.pdf

Guest said...

OK, we'll completely disregard what owner Hicks ("We put in $270m") and chairman Broughton ("Hicks & Gillett will lose about £140m") even though they are best placed to comment and, shock horror, actually agree with each other.

If you ignore quotes straight from the mouth of the people in charge, what other sources are permitted as valid??!!

anteater said...

True, they tried to prevent the sale of Liverpool FC to NESV. You own Liverpool FC if you have the shares. The shares were with KFL, I think. Well, they must have been with KFL, otherwise it wouldn't make any sense to buy KFL. The point is whether there is anything (100.8m) LFCAGL has to pay to G+H. They probably still own KFHL, a company with no assets at all. And Cayman, another company without assets. As the 'home team' had a whole group of lawers working for them, we must assume that somehow the money loaned from G+H has been deleted.

anteater said...

NESV at least bought the holding that held the shares of LFC. That holding has been dissolved in the process. I still can't figure out if all holdings were bought, but you may well be right that the inter company debt has been written off. Makes perfect sense to me.

anteater said...

You are right.

Sunny said...

Good Article!!!

Stell said...

just noticed that you'd already made that point... seems pretty clear to me and the pleadings before the high court are as concrete an indication as is likely to be available at this stage

longchalk said...

westham,southampton, and now us a feckin circus act

hopefully mb and the others have covered all the bases

im glad its movin on
sick of all the bs
the tedious comment is right - howver it will not be tedious if to  gillets puppets?

are some here in cognito with gillet?
hicks has been a dead guy floating for a while

let us joe six packs not forget gillet and hicks are not best pals now or before!

this site stinks of something and its not good

all will come to the surface after the wash - its better than some on this site but still lacks clarity etc..

jesus wept - this week has been tedious to the max

im more concerned with aggers injury

cant wait for sunday

Voland said...

Jamie,

I am still a little confused by your admittedly valiant attempt to sort out the maize constructed by H&G.

I am clear on who the buyer is (or at least I think I am), NESV - but who is the seller and what exactly is being sold? You suggest above that what is being sold is LFCAGL - but who is selling it?

Also, I simply cannot imagine NESV taking on the debt of £100 million LFCAGL owed to "group undertakings", which you suggest is a debt to H&G. This leads me to think that NESV are actually buying KFL, which owns 100% of the shares of LFCAGL. If the £100 million loan was in fact from KFL to LFCAGL, this means that NESV can go on to convert it into equity - so that LFCAGL no longer owes anything to KFL. Since NESV and Broughton have emphasised that the deal effectively wipes out the debts of LFCAGL, this would appear to be the only way that the could have gone about it.

Voland said...

Ah, and one more question - given the enormous time you obviously spend on this site (for which I and I am sure many other LFC fans are most thankful), how do you actually finance yourself? Not many ads on this site, so are you really doing all of this in your free time?!

Stell said...

this seems like a reasonably likely scenario and accords with the court judgment

anteater said...

Have you read what Hicks had to say today after the sale of the club? Do you also consider that as true, because it came out of Hicks' mouth?

I think Jaimie argues somewhere else that the former owners will not lose 140 but 100m and that Mr. Broughton has never said 140m. You can find it on here. And yes, I don't trust what Mr. Hicks says, even though he may tell the truth sometimes. That's the problems with people who lie to much.

Anyway, in front of a court they may somehow prove that they have put in 140m. The counter-argument would be the interest the club had to pay on debt that wasn't there before they bought the club. This probably evens itself out.

ZZZZZZZZZZZZZZZZZ said...

HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA. YOUR YANK MATES HAVE GONE NOW JAAIIME, YOU WONT BE ABLE TO GO TO ANFIELD NOW.    OH,  YOUVE NEVER BEEN ANYWAY.  YOU WEIRD LITTLE MAN.

Jaimie Kanwar said...

$2 to the pound?!  When has the exchange rate ever been that (consistently) high?!  It works for your argument, but it's not reality.  There's obviously some creative 'accounting' going on by Hicks there as the accounts directly contradict what he's saying.

Jaimie Kanwar said...

Hey Voland - The 100m loaned from KFL to LFCAGL is a loan, and this is explicitly stated in the accounts.  It also states that the loan is 'repayable on demand'.  Sounds like a loan to me! As you suggest, it's possible the loan was converted into equity, but there's no direct evidence of that yet, which is why it's not an avenue I've explored.

Also, I don't see we can dismiss Hicks' petition, in which it is clearly references a 'scheme' to sell the 'iconic' Liverpool Football Club and Athletics Grounds Ltd (Please look at the snippet in the article).

Are we just supposed to dismiss that?  I can't understaand why everyone is willing to just accept what the High Court says and dismiss the legal petition filed by hicks' lawyers

The High Court says KFL; Hicks' petition says LFCAGL.

The possibilities seems to be:

a) Both LFCAGL and KFL were sold
b) The High Court got the terminology wrong
c) Hicks' lawyers got the terminology wrong

B and C are highly unlikely, so it must be A that's correct.

Also, when Broughton highlights the fact that LFC debts are wiped out, he is referrinf to acquisition debt only, i.e. the RBS loans used to buy the club in the first place.  he is not referring to money put into the club by H+G.  This is clear from Broughton's interview on 6 October (link to the video is in the article).

Let's keep discussing it though, and maybe we'll get to the bottom of it.

Jaimie Kanwar said...

Hicks and Gillett's loans to the club for working capital etc are not aquisition debt; AD is the loans from RBS used to finance the purchase of the club.  I cannot see how the money loaned by H+G can just be written off like that.  These are loans we are talking about; and 100m in loans is a high amount of money!

Dan said...

Now that it's over, maybe we can now laugh about it.  Here a Downfall parody I wrote about it.  http://www.youtube.com/watch?v=SMoHvAIHWOE&feature=youtube_gdata_player

Jaimie Kanwar said...

Also, Hicks said that 300m had been spent on players (!).  Quite a bit of money has been spent on players but not 300m.  Re creative accounting: Hicks is probably including contract extensions, signing on fees and any other monetary amount related to transfers (however loosly) to justif that figure.

Voland said...

Jamie, I was suggesting that NESV is buying KFL (and hence automatically is also acquiring its subsidiaries) and then converting the liability of £100 m. on LFCAGL's balance sheet (which figures as an asset on KFL's balance sheet) into equity.

I also realised that Stell and anteater (lovely name btw) have already made a similar point earlier.

Voland said...

And, btw, I still don't understand who they are acquiring the KFL shares from....

James said...

You claim that Broughton never said that H&G would lose 140m and that a figure was put to him and he said ' about that' .

<span>Broughton gave an interview to Bloomberg on 06 Octobe (which was widely covered in the media) and said' They’ve (H&G) invested about 140 million pounds of their own money in this and they’re losing it all'</span>

I think that's pretty conclusive

James said...

You claim that Broughton never said that H&G would lose 140m and that a figure was put to him and he said ' about that' .  
 
<span>Broughton gave an interview to Bloomberg on 06 Octobe (which was widely covered in the media) and said' They’ve (H&G) invested about 140 million pounds of their own money in this and they’re losing it all'</span>  
 
I think that's pretty conclusive <span></span>

Voland said...

OK, now I think I finally understand who was the seller, courtesy of Stell (who kindly supplied the link to the HC's judgement: http://clients.squareeye.com/uploads/oec/Royal%20Bank%20of%20Scotland%20%20v%20%20Hicks%20%20Ors%20%20_14%2010%2010__jud_.pdf)

H&G, Broughton, Purslow and Ayre are Directors of the Boards of both KFHL and KFL. As Directors of KFHL, the 3-man majority of Broughton, Purslow and Ayre approved the sale of KFL (a 100% subsidiary of KHFL) to NESV.

Thank you Stell for illuminating the matter for me!

Guest said...

Well we need to clarify when we do believe Tom and when we don't.

When he was whispering in Jaimie's ear over the last 18 months, everything that was passed down was sacred.

Now that Tom is saying things Jaimie doesn't agree with, we have to ignore him.

Either Hicks is a compulsive liar and Jaimie has been swallowing it for ages... or he's telling the truth and really has lost £168m (with George).

My money, for what it's worth, is on the former assessment and I'd argue it's the reason that so many people attack this site because they saw through the BS while Jaimie continued to peddle his pathetic PR.

Jaimie Kanwar said...

There are no ads eat all on this site - the google/newsnow images are reciprocal links as these sites carry my posts.  I've never had advertising on here because I feel it cheapens the site a little.  Given the volume of visitors here, i could make quite a lot of money if I wanted to; I get advertisers making requests all the time, but it just doesn't sit comfortably with me.  I'd feel like I was somehow profiting from LFC, and I don't want to do that.

I fund the site myself, and yes, I run it in my spare time.  Having said that, I'm fortunate enough to have a job where I run my own schedule, work the hours I want, and spend 95% of the time working from home.  This means it's easy to dip in and out of the site whenever I want 8-)

Jaimie Kanwar said...

Hey there - thanks for the kind words :)

There are no ads on this site - the google/newsnow images are reciprocal links as these sites carry my posts.  I've never had advertising on here because I feel it cheapens the site a little.  Given the volume of visitors here, i could make quite a lot of money if I wanted to; I get advertisers making requests all the time, but it just doesn't sit comfortably with me.  I'd feel like I was somehow profiting from LFC, and I don't want to do that.  
 
I fund the site myself, and yes, I run it in my spare time.  Having said that, I'm fortunate enough to have a job where I run my own schedule, work the hours I want, and spend 95% of the time working from home.  This means it's easy to dip in and out of the site whenever I wan

Jaimie Kanwar said...

Yes, I've never denied that they were Directors for both KFL and KFHL - in fact, I've made that several times in various articles.  The point still remains though that LFCAGAL must have been sold as part of the deal; it's the club!  It must have been.

Hicks' petition directly refers to it; and when H+G bought the club in thr first place, they bought LFCAGL (i.e acquired the shares). It then stands to reason that LFCAGL would then come under the ownership of NESV; it has to, as KFL is now (reportedly) dissolved.

Voland said...

I was not suggesting you denied it, just trying to understand who carried out the sale - and of what. If you sell a company, you sell its assets and liabilities with it. Since LFCAGL was a subsidiary (and therefore an asset) of KFL, it was clearly sold together with it. 

H&G bought LFCAGL from Moores and others using this convoluted legal structure (for what reason I cannot fathom).

The one thing we need to confirm - and you probably know the answer to it already - is that the debt of £100 m. indeed was due to KFL from LFCAGL.

What is quite amusing in the whole story is that it is actually the convoluted legal structuring of H&G which allowed Broughton and RBS to bring their reign to an end :)

Voland said...

Well, I'm impressed - now that's pretty dedicated. All the same, I think you should try and make the site earn some money, so you can spend more time on it and less on your day job!

Jaimie Kanwar said...

Hi James - thanks for that.  I honestly don't remember seeing that interview.  It was only reprinted in 2 other online websites. 

I think there's a slight misunderstanding of my position on this: My argument has always been that media misrepresented how much money was loaned to LFCAGL by Hicks and Gillett.  The figure is 100m, but it's been repeatedly stated as 144m, which is the amount loaned to KFHL from Kop Cayman. 

I've argued that H+G will almost definitely lose the 100.8m (unless they can claim repayment of their loans), but I didn't believe they would lose the other 45m that remained in KFL.

If I was wrong about that then I hold my hands up and accept it.  However, until I see documentary evidence showing that H+G actually lost all that money, I won't believe it 100%.  Saying it is one thing; proving it is another.

I think like that because there have been many occasions in the past where the board/manager etc have said things in public that were later contradicted by the official accounts.

Since the accounts showing how this situation played out will not be publicly available until 2012 (!), pretty much anything can be said publicly now as there is no way for anyone to verify anything (unless official documents are released, but that rarely happens).

It seems I was wrong about Broughton making that statement, but that doesn't change the fact that the 144m figure for money loaned to LFCAGL was wrong, and *is* wrong.

And as for the total loss of 144m; I'll believe it when I see it :-)

Thanks for providing the link.

Stell said...

fair play, some effort

Stell said...

purchasing kfl still has the effect of acquiring the club. the relevance might only now be in whether or not there is an outsanding debt due to hicks and gillett.

i think that it is safe to trust the approach adopted by the high court given the pedigree of those involved in the case. grabiner for instance who was representing rbs has an absolutely stellar reputation and would be extremely unlikely to have missed a fundamental point such as this. also if the judgment had got it wrong surely h and g wiould have latched onto that and requested an urgent permission hearing to the court of appeal. this would then have had a good chance of frustrating the prompt sale to nesv.

the fact that they sought their remedy elsewhere suggests that they didn't have faith in that approach.

having considered the petition to the texan court it seems fairly poorly drafted and was described as impoverished (specifically in relation to how it dealt with the english court proceedings) by mr justice floyd. i would imagine that the reference to lfc itself is really just a simplistic means of reference and does not reflect the actual structure of the transaction.

Stell said...

just saw that purslow also said that the club now has 'virtually no debt'. i don't think that he would be saying that if there was 100 million owed to hicks and gillet.

prenom said...

Thanks for spending your time doing this. it's fascinating.

martin luther king+dougal mcintyre=jamie kanwar

MackH said...

Come on, you seriously don't know who bank rolls this guy?

When will we see the following:

EXCLUSIVE: Why Hicks was right about Rafa and Ferguson

Get cracking Jamie. Don't disappoint.

anteater said...

You are entitled to believe whatever you want. And so am I.

Where I would like to disagree with you is you assertion concerning Jaimie. I have no connections to him whatsoever, just to make that clear. I think he did a great job over the past few years to bring a bit of perspective into some things. He is not always right, but who is. At least he worked through a lot of papers and statements to find out who owns what to whom and what we paid or received for a few players. I simply don't understand why people discredit him for that. Well, I do understand in a way. It is always easier to believe something the media says and not think for oneself. Take the Alonso transfer as an example. Today I read on some other LFC related website that we have received 30m Pounds for him. The books of Liverpool FC say something else about that, but hey, don't let facts get into your way. People often attack this site because they want to run with the herd and reply what someone tells them is the truth. Most knowledgeable fans in the world? I think not.

Ian said...

JK, good attempt to explain the next steps.  Quite interesting, but my only problem is that we still have to base our figures on accounts which are 14 months old, and therefore rather passed their useful date, for a type of analysis of this nature.

THis leads me to the other ongoing discussion on this set re the "£144m". 

I think it's worth considering a couple of things which no one can be sure of.  JK is correct to say only £100m is owed to H&G companies if NSEV by just LFCAL.  However, that is based on large assumptions.  We are basing this on accounts dated JULY 2009.  Admittedly the latest set filed, but NESV would have done due diligence on management accounts dated August/September 2010.  And no doubt the figures that Martin Broughton is said to be quoting will be based on the latest accounts not 15 months old financial statements.  

Secondly, I think it worth considering, when £140m is being banded about (which JK is still rightly asking journalists to confirm where this number comes from), one possibility I would like to factor is this.  The penalties owed on the RBS borrowing are in the region of £40m, so we're told.  These will not have been accrued yet on the July 2009 accounts.  It may be this added to the £100m that Broughton refers, although I cant see the penalty being imposed on LFCAL, but its a possibility.

In both cases it is clear we do not have the financial information available to confirm either £100m or £140m at the moment, so its a bit of pointless debate based on old facts.  And I'm not sure anyone (including JK) should be so sure on the position either way, unless new facts come to light.

j said...

Best factual article written so far and would probably be close to the truth.

Hicks is clutching at straws! Three quite obvious issues with his statements and actions. One, the Directors and RBS are very experienced and neutral advisors who would be aware of any legal issues arising from the sale and have been advised throughout by Slaughter & May and would realise the whole sale would be under scrutiny. I can't see them not being careful in providing the best sale for the club. Secondly, his actions to try stop and frustrate the sale were prevented by the High Court. Obviously, they would have heard a number of statements related to viable bids and conspiracy and have rejected those claims to allow the sale to continue. The High court would not have allowed the sale to go through, if there was evidence of foul play or conspiracy. Thirdly, $1.6 billion in damages - what planet is this guy from?

The sale would have been concluded to ensure their are no additional fees/loans to be repaid to hicks & gillett or their holding companies. All these things will have to be gone through with a fine tooth comb by highly experienced lawyers. Hicks argument seems to be purely with the under-valuation of the club but this was the current market value according to bids.

This will go for a while I think and H&G will get nothing- filthy blood suckers parasites!!

Matt said...

Bloody Hell Jaimie.  These articles about who owes what, structure of the club, etc are more boring than your Rafa bashing was. 

LFCforumCo said...

Once again, that isn't 'a loan agreement in place'. That loan (whether it was £144m OR £100m) was converted to equity wasn't it?

It is no longer payable is it?

Not impressed said...

How does this article compare with one of your previous 'exclusives' then that Liverpool don't pay interest in H&Gs debt?

The 'proof' you used then was completely flawed. Now you seem to accept the reality that LFC has been paying the debt and say it's debt obligation will 'plummet'.

The statement says the club's debt servicing obligations will fall from 25-30m to 2-3m, but you you have continually maintained (and have been totally wrong) that they never existed in the first place.

How can you be claiming that debt repayment will 'plummet' when elsewhere on this site you proudly claim (falsely) to have PROVED that LFC wasn't paying interest on H&Gs acquisition debt?

Jaimie Kanwar said...

@Guest - Hicks makes a lot of true statements in his comments (IMO), but there are a few things that are a bit exaggerated.  It's not all black and white as you suggest.  And like the past, I'v defended some of his comments/actions, and attacked others.  If I was like you, I would just attack everything, irrespective of truth or accuracy.

Anyone who *still* argues that I work for HIcks/always defend him etc just displays their massive ignorance.  I've criticised H+G as vehemently as everyone else (sometimes more so), whether it';s on here, on the facebook page, on twitter, or on articles/interviews on other sites. That's a fact you and others choose ton ignore.

I have also tried to be fair and tell the truth, which is that H+G did some good things whilst at LFC. No one wants to hear that but whether you like it or not, it's the truth.  If people want to get on my back for that then so be it!  Makes no difference to me.  I'd rather just tell the truth regardless of personal feelings than jump on some bandwagon.

Same goes for everyone related to LFC: I've criticised Benitez many times, but I've also prasied/defended him many times, and the articles on this site prove that.

And re the so-called 'many people' who attack this site - 2m people have visited since it began, and the numbers grow all the time.  Of that figure, probably less than 1% actually comment regularly, and of that 1% there is a vocal minority of regular detractors (which is fine); these same people pop up allover the net on various forums/twitter etc desperately trying to denigrate me/this site.  The majority who visit just read, sometimes comment, engage in debate and make up their own minds. It's always the usual suspects who turn up and attack in a personal manner; and usually it's the same people will multiple IDs.

Anyway, I welcome all criticism.  Many people who 'attack' this site do so in the right manner, which is great, and I wouldn't want to change that.

As Anteater says below, I don't get everything right; I've admitted on this thread already that I got it wrong about Martin Broughton's statement.  I see the site as a collaborative effort in many ways anyway - I might state something in an article but the issue is then explored in the comments, and the true picture of certain things is usually arrived at at some point, which is great.

Back to Hicks: He is not a compulsive liar - as ai said earlier, much of the stuff he said has some basis in fact.  And re the 300m for players - it depends whether he was referring to pounds or dollars (I'll have to double check) - if it's pounds then yes, he's way off base (!), but if it's dollars, then he's much closer to the true figure. Then you have to consider that Hicks might referring to everything re transfers in one pot: fees, agents fees, signing on fees, contract extensions etc.  Maybe that's how he arrived at his figure.

I'll be exploring that soon anyway - it's very easy to discover factually how much was actually spent.

anteater said...

I thought the penalty payment to RBS would have been payable only if the loan wasn't repaid by the 15th of October. All of this is kind of confusing, so I may well be wrong.

Jaimie Kanwar said...

You are misrepresenting my argument: At the time, the media was reporting that LFCAGL was 110k a day (40m a year) in interest payments as a result of the debt.  I argued this was false, which it was.  I showed that LFCAGL's actual debt burden to KFL was less than 10m a year.  So please don't lie and twist what I actually said.  Here is the article:

http://www.liverpool-kop.com/2010/05/liverpool-fc-interest-payments-media.html

anteater said...

Agree with you that all the lawyers will have done their work properly and there is not debt to repay G+H.

But concerning the High Court orders, well the first was to reconstitute the board and the second was to revoke the TRO. High Court didn't check the sale, they just confirmed that G+H were not allowed to change the board and they should not go to another court and get a TRO.

Jaimie Kanwar said...

Also, in an article last year, I explicitly stated that the *overall* interest burden was around 20m: http://www.liverpool-kop.com/2009/11/exclusive-real-level-of-liverpool-fcs.html - This info came directly from Tom Hicks.

As I said, my argument re interest payments was the media stating the LFCAGL was paying 100k a day in interest, which was completely wrong.

anteater said...

I think the answer to this lies in the complex structure of holding companies that G+H have put in place. According to the books LFCAGL didn't pay those 30m debt services, but one of the holdings did. If you see LFC as the entire structure of those holdings, then, yes, LFC serviced the debts directly, but if you treat each of the companies as 'independent' companies, the Jaimie was right. At the end of the day it will fall back on the Club in one way or the other.

ealingred said...

Just discovered this excellent site. Can you explain to an educated laymen;  if H & G have invested 108 mil, the club has been loaned 200 mil (ok this money went to H & G towards the purchase, but that's just like taking out a mortgage to buy your house), the net balance on transfer fees would seem to be less than 100 mil, the club is operating at a profit, why were the finances in such a mess? I realise it's down to the club having the loan placed on it, but what has happened to the 200 mil? Where did it go? 

Not impressed said...

Although you deleted my reply which PROVED you to be wrong.

Ian said...

Hi Anteater I think these were incurred at the point the extension was granted by RBS when was appointed. Although can't be certain. The calculation of what H&G will lose is complicated by the fact we don't know if Kop holding was sold or just LFCAGL. If just the club was the £300m would be as follows. £200m acquisition price paid to Kop. £100m injected as capital into LFCAGL. That £100 would then be paid to Kop to clear the intercompany loan. This leaves LFCAGL acquisition debt free. Kop Holdings then has £300m in the bank to pass back up the chain of holding companies and paid off the RBS and other bank debt. It's at this point that we need to look at what money has been injected by H&G via other loans either direct or from Cayman. If there's not enough left after paying RBS then obviously that a cost to H&G as there's little benefit being owed money by Kop holding companies who no longer own LFC and therefore no means to pay anything back.

Furthermore, one needs to look at what H&G paid Moores and what they now get. All of that needs to be taken into account before it's possible to know how much they ve lost. In my opinion it is more complicated than JK states (ie I don't think the £100m loan from Kop to LFCAGL is relevant when calculating H&G loss). But I've no idea how £144 is calculated so it's hard to comment on that.

Guest said...

I also saw that interview on Bloomberg were Broughton was saying contrary to what many people thought, the owners had put in their on money and stood to lose about £140m. Its a bit unfortunate many deny that simply because they may have missed it but Broughton is a top executive whose reputation rides on what he says especially on platforms like Bloomberg.

amer said...

hi, thanks for your articles. i have always enjoyed reading them.

i notice that your are making an analysis based on accounts which ended on july 2009. Could there been any changes between july 2009 to apr2010 when h&g had to refinance with RBS? I have no way of knowing the figues, but perhaps we would know more once the accounts for july 2010 released?

anteater said...

Hi Ian,

as far as I understand it, using the Judgment of Mr. Floyd and several articles on the Guardian as sources, KFL were bought and Kop Holding too. At least Kop Holding has been dissolved by now. What would make sense is that the top of the chain of companies was bought. The one owned by G+H, which owned the next holding and so on. In that case all the inter company debt would be irrelevant.

What I also assume from above sources is that 200m have now been paid to RBS and Wachovia to pay the loan there.

You are absolutely right. We would have to look into what G+H actually paid for the club and then deduct what they have put on the club as leverage. It is indeed very complicated. I wouldn't be surprised if Jaime right now worked on an article trying to find out whether and if yes how much of their own money G+H have put into the entire venture. If they'd put something in I would still contest it and calculate the interest the club or any of the involved companies/holdings had to pay on debt that wasn't there before the leverage against it.

In the end we may never find out. What Hicks surely didn't lose was credibility as he had lost all of it long before that. Yesterday I went through several reports from Dallas. He is a much hated figure there for holding back not one but two sports clubs. One piece I especially liked was this one:
http://www.dmagazine.com/Home/D_Magazine/2010/July/Can_Tom_Hicks_Make_Millions_Selling_His_Sports_Empire.aspx
Also has a nice picture of Hicks in it. They also have a feature called "34 great Dallas entrepreneurs" on their site. Hicks isn't one of them.

matt said...

what is important is, will the club be in a better position to compete now with out the huge interest repayments, that may or may not have been hanging over the club. suppose only time will tell

my problem with the hole thing is, when you have people who own the club and there first interest is making money and the second interest is success the fans are the ones to lose out. in my opinion the only good owners are the ones who support the club as a fan and are prepared to put there money in for the kudos of winning, and if it brakes even then thats good, if it actually makes mone then thats a bonus.

Guest said...

HI

You're obviously not an accountant!  The numbers you are talking about are July 09 - so large movement will have occured during the last year or so.

Trade creditors and bank overdrafts would not normally be paid off, they would be the working capital that had been talked about.

It is actually tax efficient to have some debt on the books, that is why some would be retained.

Jacques said...

Great article JK, this is why I continue to come on here. Whilst a lot of the editorial pieces don't always hit the mark, for me anyway, there is no doubting the strength of your statistical and financial depth of knowledge.

This site has had some of the most revelatory and well-researched articles around (often unusual with football sites which troll out lazy media clich├ęs and mistakes or knee-jerk journalism).

Certainly NOT tedious, very useful and well collated info.

Nice one.

LFCforumCo said...

CONVERTED TO EQUITY!!!!

anteater said...

Is that a fact or an assumption?

anteater said...

Well, I'll give you the benefit of doubt on this one. To me this sounds likely, too.

Ian said...

Hi Anteater.  You are right and thanks for the link.  And excuse the spelling on my last post (I was posting via my phone).  If they have bought KFL and Holdings the inter-company debts between them are irrelevant. Any debts owed to the H&G companies which are not bought will have been paid off as part of the £300m.  That could be done in a numbers of ways but the end result is nothing will be due to H&G (or H&G companies) from any LFC company owned by NESV.

As you say, it will be difficult to work out what H&G lost overall, but with a little bit of investigation it could be done, except the missing piece will always be what money did Cayman inject (and how), as these are non UK records and hard to get hold of.  I suspect it will be possible to put something together and JK might want to look into it once the dust has settled.

The point I wanted to make was that the constant arguing on this site about how much H&G lost, ie £100m or £144 (as stated in the papers) is a little pointless.  Either follow blindly what the papers say with no knowledge of how that numbers is made up or go with JK of £100m which I think is wrong because he is basing it on the £100m owed by LFCAGL to Kop, which irrelevant for this calculation.

Without knowing all facts a broad way to calculate what H&G lost is: 
a) What did they pay Moores (net of RBS and Waicova loans)? 
b) What have they invested as capital in LFCAGL or Holding Companies that NESV now own? 
c) What did they receive from NESV (nothing I suspect)? 
d) What money did they inject in the Holding companies that they still own that are now worthless as it was used to pay interest
e) Not to mention enormous legal fees for the last few day!

Broadly a + b - c + d + e = A big Loss.  Shame.

Boring said...

Quite <span>condescending and uncalled for</span>

Jaimie Kanwar said...

I'm sorry, but there *was* a loan agreement in place.   Whenever a a loan has been made (whether from KFCl to KFHL; KFHL to KFL, or from KFL to LFCAGL), the following has been stated in the accounts:

'...within the terms of the LOAN AGREEMENT [the company] cannot demand payment if to do so would cause the company to become insolvent. 

See the following image:

http://apture.s3.amazonaws.com/0000012b9d931b89f1a79c7a007f000000000001.KFHL%20loans%20outstanding%202009.png

Are you now going to argue again that there were no loan agreements in place?!

People keep saying that the loans have been converted into equity; we do not know that for a FACT.  It's supposition at this stage; just because some journo says it in an article doesn't make it true.  Until we hjave documentary evidence, we cannot say for sure.

The facts he do know are:

* KFL loaned LFCAGL 100.8m
* There was a loan agreement in place
* The money was repayable on demand unless it would make the recipient company insolvent.

Jaimie Kanwar said...

Exactly.  That is not a fact.  LFCforum - if it is a fact, provide evidence.  Loans (with loan agreements) wera, as a matter of irrefutable fact, made from KFL to LFCAGL. The question here is whether Hicks and Gillett can claim their money back.  Until it is confirmed as fact that their loans were converted into equity, it is just an assumption.

Jaimie Kanwar said...

Great stuff, Dan :-D

Jaimie Kanwar said...

of course the numbers are from July 09' - These are the only factualy figures available at this time.  Obviously there might me some movement in the figures over the last year but that is assumed - I don't need to insult peoples' intelligence by stating that in the article.  People know that already.

There is not usually a 'large movement' between years in the figures I've used.  The debt levels increase slightly, as does the interest, but as much as you seem to think.

Why would trade creditors/bank overdrafts not be paid off?  You're wrong.  The 36.5m bank loans LFCAGL has are aquisition debt, i.e. the debt that NESV has promised to clear.  That 36.5m came from the refinancing that took place a while ago.  This is explicityly stated in the accounts.  Thus, as it's acquisition debt, it WILL be paid off.

Martin Broughton said that the AD would be paid, as well as some other debts and liabilities; trade creditor debts fall within that category.  And apart from the bank loans, there are very few other debts that fall within the meaning of what Broughton said.

The AD is definite - outside that, I merely made suggestions as to what debts *might* be paid off; and I am sure a bulk of the trade creditor det will be paid off.

Jaimie Kanwar said...

Hi amer - the 2009 accounts are all we have to work with right now.  There may have been some changes over the last year (interest accruing etc), but the changes will not be so significant as to make any current analysis void.

The aquisition debt of 200m has not changed - that's a fact; it has been stated as such by Broughton recently, and by one of the barristers in the High Court action.

That leaves 100m of NESV's purchase price to play with. 36.5m of that is more AD-related debt; the rest is supposition based on the last accounts.   Comparing the change in previous accounts (from one year to the next) seems to support the probability that trade creditor  and social security debt amounts will not have changed that much over the last year.

Jaimie Kanwar said...

Hi Ealingred - thanks for visiting. 

* KFL loaned 100.8m to LFCAGL (The Club)

* The 200m (Now being paid off  by NESV) was not a loan to the club; that debt is what remains from the money loaned to H+G to originally purchase the club in 2007.

* The money loaned to H+G to buy the club went on the purchase of the shares (i.e. the purchase of the club).

* That loan has been refinanced a couple of times over the last three years.

* The finances were not really in a huge mess - that's the spin that the media put on it.  Having debt is obviously not ideal but the club never had a problem covering the debt despite what people say.

* Hicks was right in his statement when he said fans weren't complaining in 2009 when we finished 2nd.  The finances had no negative impact then, did they?  The finances only become a stick to beat the owners with when we're doing badly.

* Money for transfers came a mix of turnover revenue and the money loaned to the club by H+G. We don't know exactly what money bought what player though as there is no breakdown anywhere for that.

Jaimie Kanwar said...

Nonsense.  None of your comments have been deleted.  And you have not proved me wrong; as I explained above, you misrepresented my argument.

Jaimie Kanwar said...

Hi Jacques - thank you for being so gracious.  I appreciate your comments, and I hope you continue to visit the site.

Andrew said...

We will still be paying interest of £2m - £2m per year, can you breakdown exactly what that interest will be covering?

anteater said...

"* KFL loaned LFCAGL 100.8m"

And NESV bought KFL and then dissolved it. If anything they paid back the loan from LFCAGL to KFL to then return it to the club immediately because KFL ceased to exist. I don't have proof for that, but to me this or something similar seems to have happened.

anteater said...

Didn't recognize any wrong spelling in your posts, Ian.

The amount they paid to Moores is somewhere out there on the web. It was mentioned somewhere, probably in one of the Guardian articles, the other day, but I can't remember. It was significantly less than 300m. But back then there was hardly any debt on the club and the club was qualified for the Champions League. If anything the whole club was sold much under value back than or over value right now. Well, our playing staff may be worth a bit more now. Or maybe not. No way to figure that out but to sell all the players. I think the price now paid was very much determined by the debt that had to be paid back. And one thing's for sure. G+H didn't sell with the huge profit they came in for in the first place.

anteater said...

Hm, well, I'd like to disagree to some extend here. The club itself (LFCAGL) didn't have to service 30m in interest a year, as the media tries to put it, but finally one of the holding company had to service it. And the club was the collateral for the loans. In that regard the finances were in a huge mess. Moneys not paid back in time and therefor growing due to penalties and interest in one of the holdings. The club collateral for those growing debts and no way it could grow at the same rate the debt grew. A set-up of holdings only business experts will be able to comprehend. No-one of us common people can make out what really went where and who owns what to whom. Now, that is what I call a huge mess.

anteater said...

Good question. There was talk about something related with the stadium. But how can that cost interest. It is not as if any loans have been taken to buy the material for the construction. Yeah, what for do we pay 2m a year. And why is there debt connected to a non-existing stadium?

Jaimie Kanwar said...

He Anteater.  Whether it's a huge mess is a matter of interpretation.  I don't see any negative impact on the club of the debt structure, hence I don't see it as a huge mess.  We finished 2nd in 2009 - did this so-called 'huge mess' have an impact then?  if the performance on the pitch was better, I doubt people would see it as a huge problem.  Benitez wasted endless amounts of money on poor players though, so things look worse than they are.

telaxa said...

i would like to know where you get your information from?.....and you know
as a scouser and a lifelong Liverpool fan i find your web site offensive
if you really are a Liverpool fan as you say you should watch Everton

Jaimie Kanwar said...

If you find this site offensive (!) then don't read it or visit. Problem solved.
Sent from iPhone
On 16 Oct 2010, at 22:04, "Echo" <js-kit-m2c-1hn7v1urs4irk0qp64vuqidq3c2apmadhfvmdrj4el73a11foakg> wrote:
</js-kit-m2c-1hn7v1urs4irk0qp64vuqidq3c2apmadhfvmdrj4el73a11foakg>

JM said...

If you knew about what Glazers did to United. Then you might say Hicks wasn't a really bad owner at all. <span>£</span><span>500m United Bond is somewhat a time bomb, within next five-seven years, they will be in trouble. The clock is ticking. </span>

<span>I will keep an eye on NESV, what are they going to do with </span><span>£</span><span>100.8M (</span><span>loans from KFL to LFCAGL). A</span><span>s I do really hope, NESV will covert this debt into Equity. NESV haven't mentioned about this figure before, so what is beyond this story?      </span>

Guest said...

You really have no idea what you are talking about, as they say a little knowledge is dangerous.

Stick to the knitting mate and talk about goalkeepers or something.

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