Sensationalised reports have surfaced again recently regarding the possibility Liverpool could suffer a 9 point deduction if the club is forced into administration this week. In this article, I’ll look at the legal basis for that possibility, and explore whether it is actually likely to happen.
Media reports arguing that Liverpool now face a possible points deduction are based on speculation, not fact. If you've read any of the reports, you'll see that the majority contain sources such as 'An Insider', or 'A well placed lawyer' etc. In other words, no credible source at all.
The guidelines governing a potential points deduction are set by the Premier League. Before I outline the relevant rules, here is a brief overview the legal process facing LFC should the High Court rule against the club this week:
INSOLVENCY
A company will become insolvent if it is unable to pay its debts as they fall due (s123 of the Insolvency Act 1986). In Liverpool’s case, money is owed to Royal Bank of Scotland (RBS), and if that debt is not paid - either by sale of the club or payment by Hicks and Gillett - the club will become insolvent.
ADMINISTRATION
This is a rescue mechanism for insolvent companies and allows them to continue running their business (Introduced by the Insolvency Act 1986). RBS can and probably will follow the Administration route if the debts associated with the club (through holding companies set-up by Hicks and Gillett) are not cleared.
Under Premier League rules, there are (potential) consequences for a football club that enters into Administration. The gravest penalty is a 9 point deduction. Before I get to that though, it is important to appreciate the overall structure of LFC.
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.
WHICH COMPANY WILL BECOME INSOLVENT?
Kop Football Ltd (KFL) – Liverpool FC’s Parent Undertaking (means the same as parent Company/Holding Company) - will suffer the Event of Insolvency, NOT the CLUB (LFCAGL). The acquisition debt (i.e. debt incurred as a result of originally buying the club), was placed on KFL, NOT the club. As such, it is KFL that will not be able to pay its debts, and will consequently be placed into Administration.
PREMIER LEAGUE RULES
You can view the 2010-11 Rules of the Premier League below:
POINTS DEDUCTION?
Below is the relevant Premier League rule:
s67. Upon a Club or its Parent Undertaking suffering an Event of Insolvency the Board shall have the power to impose upon the Club a deduction of 9 points scored or to be scored in the League competition.
When it comes to which company goes into administration, the fact that the Premier League makes a distinction between the CLUB and its Parent Undertaking is very important, and should be remembered. Note also that s67 is a discretionary power; it is not mandatory, which means the Premier League has a CHOICE whether to impose the deduction. I personally believe they will choose NOT to impose the deduction.
RIGHT OF APPEAL
In the worst case scenario, if the club IS docked 9 points, then an appeal can be lodged within 7 days if:
69.1 - The Event of Insolvency was caused by and resulted directly from circumstances, other than normal business risks, over which it could not reasonably be expected to have had control; and
69.2 - Its Officials had used all due diligence to avoid the happening of that event.
These two provisions are important: It could definitely be argued that LFC could not reasonably be expected to have control over the actions of Hicks and Gillett. It is also beyond question that club officials have used all ‘due diligence to avoid Insolvency taking place.
The ultimate proof of this is Broughton, Purslow and Ayre working against Hicks + Gillett to try and sell the club to NESV (i.e. exercising due diligence to avoid entering Administration). If this had gone through without interference from the Owners, the debts owed to RBS would’ve been wiped out by now.
SUMMARY: WHY LFC WILL AVOID A POINTS DEDUCTION
Taking everything discussed above into account:
Record Turnover/Good financial management
Liverpool FC (LFCAGL) is a solvent business (Record turnover for the last 3 years), with a long history of being well run and free of financial problems. Basically, but for the actions of Hicks and Gillett, LFC would be a well-run, financially solvent company.
Negligent Parent Company
It is the club’s parent company that will go into administration, NOT the club itself.
Financial mismanagement by H+G
Any Insolvency would NOT have been caused by the club, or the management of the Club; it will have been caused by Hicks and Gillett.
Premier League discretion
The Premier League has discretion NOT to impose a 9 point penalty. It has exercised this discretion in the past.
Persuasive Precedent
Hansa - West Ham United’s Parent company - went into Administration in 2008. The Premier League decided not to impose a points penalty because the club itself was well-run, and free of financial problems. If Liverpool (i.e. LFCAGL), was actually in debt, and was financially mismanaged, then there would be a much stronger possibility of points being deducted. This is not the case.
Liverpool's situation is NOT different to West Ham's when it comes to interpretation of the PL rules. The details leading to administration etc may be different but the fact remain that:
a) West Ham's holding company went into Administration.
b) This triggered section 67 of the PL rules, i.e. the question of whether to deduct points.
c) The PL took the decision not to deduct points.
The West Ham case is not a binding precedent, but it is persuasive, and if the PL ignores it (and docks points) Liverpool would have a very strong case on appeal as there is (essentially) no real difference between West Ham and LFC’s situations.
Implicit support of LFC by PL
In a recent statement, the Premier League approved LFC’s sale to NESV:
“The Premier League is satisfied, with the information provided, that the individuals NESV intend to put in place in the event they complete their takeover of Liverpool FC meet the criteria set out in our owners' and directors' test”.
Why would they approve it, and then potentially dock the club 9 points, which could then scupper the deal? The PL will be aware that if KFL enters administration, RBS will probably sell to NESV anyway. It’s just a roundabout way of achieving the same objective. As such, it is clearly not in the best interests of the PL to dock Liverpool points.
The PL didn’t need to release a statement so early about the approval of NESV; it is possible to infer from their actions that the PL is in support of LFC. And why wouldn’t it be?
FINAL NOTE
I just don't see any logical reason why the Premier League would dock Liverpool points. There is no automatic need to do it, and a deliberate CHOICE would need to be made to make it happen. As I've argued previously, it is not in the best interests of the PL, or English football for Liverpool to be penalised in this manner.
Damage Liverpool (or any other high-profile successful English club), and you damage English football - I think the Premier League is acutely aware of this. I say that because this principle is enshrined in the PL's own rules. When a club goes into Administration, the PL can suspend it from matches if it likes. When considering whether to suspend, the Board will take certain important things into account, as provided for by section 65:
s65. The Board shall have regard to all the circumstances of the case and to:
* 65.3 the interests of the insolvent Club’s Officials, Players, supporters, shareholders and sponsors;
* 65.5 the need to protect the integrity and continuity of the League competition;
* 65.6 the reputation of the Company and the League and the need to promote the game of association football generally; and:
Clearly, the PL takes the reputation of the club AND football in general into account before imposing sanctions; imposing such a devastating penalty on English Football's most successfull club would do nothing for the allure and prestige of the English game, would it? Why would the PL cut off its nose to spite its face here?
Having said that, there is a slim possibility that the Premier League may try to save face by imposng the penalty whilst privately having an intention to overturn after an (inevitable) appeal.
One final thing: I think Martin Broughton's contention that Liverpool going into Administration would be 'catastrophic' is slightly overstating the issue (!). It's easy to see why he would exaggerate slightly, but the truth is there is a deal on the table, and RBS will surely resurrect the deal with NESV if Liverpool loses the High Court battle this week.
A 9 point deduction would make the deal less attractive to NESV, but as I've argued, I don't think that is a realistic possibility. And Christian Purslow seems to agree. In an interview today, he emphatically stated:
"I'm not even contemplating administration and nobody should be"
Amen to that.
Jaimie Kanwar
Media reports arguing that Liverpool now face a possible points deduction are based on speculation, not fact. If you've read any of the reports, you'll see that the majority contain sources such as 'An Insider', or 'A well placed lawyer' etc. In other words, no credible source at all.
The guidelines governing a potential points deduction are set by the Premier League. Before I outline the relevant rules, here is a brief overview the legal process facing LFC should the High Court rule against the club this week:
INSOLVENCY
A company will become insolvent if it is unable to pay its debts as they fall due (s123 of the Insolvency Act 1986). In Liverpool’s case, money is owed to Royal Bank of Scotland (RBS), and if that debt is not paid - either by sale of the club or payment by Hicks and Gillett - the club will become insolvent.
ADMINISTRATION
This is a rescue mechanism for insolvent companies and allows them to continue running their business (Introduced by the Insolvency Act 1986). RBS can and probably will follow the Administration route if the debts associated with the club (through holding companies set-up by Hicks and Gillett) are not cleared.
Under Premier League rules, there are (potential) consequences for a football club that enters into Administration. The gravest penalty is a 9 point deduction. Before I get to that though, it is important to appreciate the overall structure of LFC.
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.
WHICH COMPANY WILL BECOME INSOLVENT?
Kop Football Ltd (KFL) – Liverpool FC’s Parent Undertaking (means the same as parent Company/Holding Company) - will suffer the Event of Insolvency, NOT the CLUB (LFCAGL). The acquisition debt (i.e. debt incurred as a result of originally buying the club), was placed on KFL, NOT the club. As such, it is KFL that will not be able to pay its debts, and will consequently be placed into Administration.
PREMIER LEAGUE RULES
You can view the 2010-11 Rules of the Premier League below:
POINTS DEDUCTION?
Below is the relevant Premier League rule:
s67. Upon a Club or its Parent Undertaking suffering an Event of Insolvency the Board shall have the power to impose upon the Club a deduction of 9 points scored or to be scored in the League competition.
When it comes to which company goes into administration, the fact that the Premier League makes a distinction between the CLUB and its Parent Undertaking is very important, and should be remembered. Note also that s67 is a discretionary power; it is not mandatory, which means the Premier League has a CHOICE whether to impose the deduction. I personally believe they will choose NOT to impose the deduction.
RIGHT OF APPEAL
In the worst case scenario, if the club IS docked 9 points, then an appeal can be lodged within 7 days if:
69.1 - The Event of Insolvency was caused by and resulted directly from circumstances, other than normal business risks, over which it could not reasonably be expected to have had control; and
69.2 - Its Officials had used all due diligence to avoid the happening of that event.
These two provisions are important: It could definitely be argued that LFC could not reasonably be expected to have control over the actions of Hicks and Gillett. It is also beyond question that club officials have used all ‘due diligence to avoid Insolvency taking place.
The ultimate proof of this is Broughton, Purslow and Ayre working against Hicks + Gillett to try and sell the club to NESV (i.e. exercising due diligence to avoid entering Administration). If this had gone through without interference from the Owners, the debts owed to RBS would’ve been wiped out by now.
SUMMARY: WHY LFC WILL AVOID A POINTS DEDUCTION
Taking everything discussed above into account:
Record Turnover/Good financial management
Liverpool FC (LFCAGL) is a solvent business (Record turnover for the last 3 years), with a long history of being well run and free of financial problems. Basically, but for the actions of Hicks and Gillett, LFC would be a well-run, financially solvent company.
Negligent Parent Company
It is the club’s parent company that will go into administration, NOT the club itself.
Financial mismanagement by H+G
Any Insolvency would NOT have been caused by the club, or the management of the Club; it will have been caused by Hicks and Gillett.
Premier League discretion
The Premier League has discretion NOT to impose a 9 point penalty. It has exercised this discretion in the past.
Persuasive Precedent
Hansa - West Ham United’s Parent company - went into Administration in 2008. The Premier League decided not to impose a points penalty because the club itself was well-run, and free of financial problems. If Liverpool (i.e. LFCAGL), was actually in debt, and was financially mismanaged, then there would be a much stronger possibility of points being deducted. This is not the case.
Liverpool's situation is NOT different to West Ham's when it comes to interpretation of the PL rules. The details leading to administration etc may be different but the fact remain that:
a) West Ham's holding company went into Administration.
b) This triggered section 67 of the PL rules, i.e. the question of whether to deduct points.
c) The PL took the decision not to deduct points.
The West Ham case is not a binding precedent, but it is persuasive, and if the PL ignores it (and docks points) Liverpool would have a very strong case on appeal as there is (essentially) no real difference between West Ham and LFC’s situations.
Implicit support of LFC by PL
In a recent statement, the Premier League approved LFC’s sale to NESV:
“The Premier League is satisfied, with the information provided, that the individuals NESV intend to put in place in the event they complete their takeover of Liverpool FC meet the criteria set out in our owners' and directors' test”.
Why would they approve it, and then potentially dock the club 9 points, which could then scupper the deal? The PL will be aware that if KFL enters administration, RBS will probably sell to NESV anyway. It’s just a roundabout way of achieving the same objective. As such, it is clearly not in the best interests of the PL to dock Liverpool points.
The PL didn’t need to release a statement so early about the approval of NESV; it is possible to infer from their actions that the PL is in support of LFC. And why wouldn’t it be?
FINAL NOTE
I just don't see any logical reason why the Premier League would dock Liverpool points. There is no automatic need to do it, and a deliberate CHOICE would need to be made to make it happen. As I've argued previously, it is not in the best interests of the PL, or English football for Liverpool to be penalised in this manner.
Damage Liverpool (or any other high-profile successful English club), and you damage English football - I think the Premier League is acutely aware of this. I say that because this principle is enshrined in the PL's own rules. When a club goes into Administration, the PL can suspend it from matches if it likes. When considering whether to suspend, the Board will take certain important things into account, as provided for by section 65:
s65. The Board shall have regard to all the circumstances of the case and to:
* 65.3 the interests of the insolvent Club’s Officials, Players, supporters, shareholders and sponsors;
* 65.5 the need to protect the integrity and continuity of the League competition;
* 65.6 the reputation of the Company and the League and the need to promote the game of association football generally; and:
Clearly, the PL takes the reputation of the club AND football in general into account before imposing sanctions; imposing such a devastating penalty on English Football's most successfull club would do nothing for the allure and prestige of the English game, would it? Why would the PL cut off its nose to spite its face here?
Having said that, there is a slim possibility that the Premier League may try to save face by imposng the penalty whilst privately having an intention to overturn after an (inevitable) appeal.
One final thing: I think Martin Broughton's contention that Liverpool going into Administration would be 'catastrophic' is slightly overstating the issue (!). It's easy to see why he would exaggerate slightly, but the truth is there is a deal on the table, and RBS will surely resurrect the deal with NESV if Liverpool loses the High Court battle this week.
A 9 point deduction would make the deal less attractive to NESV, but as I've argued, I don't think that is a realistic possibility. And Christian Purslow seems to agree. In an interview today, he emphatically stated:
"I'm not even contemplating administration and nobody should be"
Amen to that.
Jaimie Kanwar
Been on this website a couple of times and found it to be too argumenative thus quickly losing credability. However this piece is by far the best most insigtful piece you've done.
ReplyDeleteMore of this, less of the other.
Well done.
The fact that the Premier League makes a distinction between the CLUB and its Parent Undertaking is very important, and should be remembered.
ReplyDeleteWhy? You state this but never give any explanation?
To be fair, it's hard to give much credibility to anything on this site. For ages, you were telling us it was all Benitez's fault and the owners have done no wrong and I'm sure when they are booted into touch, you'll be the first to claim you said how bad they were all along. Your pieces claim to be critical, but they are generally just going along with media spin and claiming to be original. It has been clear for 3 years that Gillette and Hicks only aim was to run the club into the floor and not support the manager. They have raped and pillaged and, if justice exists then they will leave with a flea in their ear and a huge loss. But apologists in the media have allowed them to be there as long as they have. Even now idiots like Piers Morgan and Harry 'Wheeler Dealer' Redknapp are still claiming that the 'owners have done no wrong'. And that's why the club is beyond wrecked. Everytime someone sticks up for them, it gives them more opportunity to cause damage.
ReplyDeleteUnfortunately in this case liverpool falls into the same category as Pompey.
ReplyDeleteWest Ham were performing on the pitch and were posting profits, hence the PL decided to avoid punishing them. Liverpool (like Portsmouth) are haemorrhaging cash, not performing in the league, and show no visble sign of recovery.
Due to this the premier league will enforce the rules fully to avoid backlash from other clubs and the fans, who will call it favouritism if one of the PL founder clubs gets spared the punishment.
It will be unfortunate, but the PL need to show that if you live beyond your means and break the rules you will suffer the consequences.
You state the club has not been mis managed, but if you take into account the 144mill the H&G have given the club over the last five years (more debt than Prthsmouth) than this should be concidered mis management as the same persons can't pay the rest of their debt.
ReplyDeleteAs Liverpool supports you have taken from H&G and now the moneys gone you want a new sugar daddy. You can over come a 9 points deduction so just take it and get on with life.
You state the club has not been mis managed, but if you take into account the 144mill the H&G have given the club over the last five years (more debt than Prthsmouth) than this should be concidered mis management as the same persons can't pay the rest of their debt.
ReplyDeleteAs Liverpool supports you have taken from H&G and now the moneys gone you want a new sugar daddy. You can over come a 9 points deduction so just take it and get on with life.
At last, an article from you that I don't find offensive ;)
ReplyDeleteI think your conclusion is right, despite your analysis being completely wrong.
ReplyDeleteYou are relying on essentially soft issues (the club being well run, profitable etc, and the directors having exercised due diligence to protect the club from administration) being sufficient to persuade the League to exercise its discretion. There is no evidence of these ever being enough to stop a club suffering a points deduction, or are you saying that all the boards of all the clubs that have entered administration in the past have negligently failed to exercise due diligence? If that were true we would have seen a lot of high profile court cases over the years.
The exception was West Ham where the League did exercise its discretion. But far from being indistinguishable from Liverpool's situation, it is in fact crucially different. The WHU holding company had a large number of operations other than the football club. It was an investment company entirely separate from the club. In Kop Holdings' case, it has only one investment, the club. There is no real distinction between the club and its holding company. The insolvency of the holding company is essentially the insolvency of the football club.
The reason they won't make the points deduction is that any administration will simply be a tactical step in the completion of the club's refinancing. If the court decides that Hicks was entitled to reconstitute the Board, then the administration will be a necessary technical step to allow the sale to take place. The company will be in administration for a matter of minutes only while all the paperwork is signed and witnessed. In these circumstances I am positive the League will discount the technical fact of administration and exercise its discretion not to impose a points sanction.
Oh, one other thing. Usually administration goes hand in hand with the company's creditors not receiving their due in full or at all. The planned sale will not result in any of the club's creditors (except RBS, which is essentially behind the sale) having to accept less than they are owed.
ReplyDeleteYorkie - The main point is not 'negligent due diligence' - it is the fact that the PL has discretion on whether to deduct points. Many people seem to think that the points deduction is automatic upon entering administration (and the press report it this way regularly. For example, check out this article from the BBC: http://news.bbc.co.uk/sport1/hi/football/teams/l/liverpool/9074311.stm)
ReplyDeleteLiverpool's situation is NOT different to West Ham's when it comes to interpretation of the PL rules. The details leading to administration etc may be different but the fact remain that:
a) West Ham's holding company went into administration
b) This triggered section 67 of the PL rules, i.e. the question of whether to deduct points.
c) The PL took the decision not to deduct points.
That's the similarity. The fact that WHU's holding company had a large number of other interests is irrelevant when it comes to deciding if the points deduction should apply. Show me a statement from the PL that states the aforementioned was important; you won't find it because it's just press speculation.
I agree with you re your refinancing point, and said as much in the article. And It's obvious that the other reasons I give are my opinion. You may not agree, but you cannot prove that such things won't be taken into consideration.
Haemorrhaging cash ? That's rubbish - posted net profits last year
ReplyDeleteIt's important because it's the parent company that goes into administration, not the club. I said that in the article.
ReplyDeleteLiverpool are not in the same situation as Portsmouth at all. Performance on the pitch is not an issue. And liverpool are not losing money - the club has posted record profits over the last 3 years. interest payments have to be made, but the CLUB (i.e. LFCAGL) is solvent, and profitable.
ReplyDeleteLiverpool's situation is nothing like Pompey and you would be thick to see it that way, we are exactly the same as West Ham and they got no points deducted. There in no a chance of administration happening as we have the club sold and the board have H+G by the goolies, Purslow is an expert in mergers and aquisitions and he had legal advise all the way and is supported by the RBS.
ReplyDeleteThe RBS have contacted NESV about financing a new stadium and want to remain as Liverpool's chief banker, no way would they risk that business by forcing any administration. Liverpool are in a very strong position and i have seen no legal expert suggesting H+G can win this battle, this will go to an appeal a few days after Tuesdays court date.
H+G are believed to want an out of court settlement with our new owners, i.e. a bung. This will not happen as Liverpool are told by our legal team that we will win, the RBS will if they choose take the club off H+G next Friday. This won't happen as H+G are no threat and it will not be necessary to call in the loans, giving Liverpool until after the appeal to rubber stamp the takeover!!!!
Taken what? That £144m was a payment by Hicks and Gillet to pay off some of the debt that they built up to buy the club, we've not seen a penny of that money.
ReplyDeleteWe haven't been mis-managed at all and we haven't been given any money by Hicks or Gillet. We are making record profits and increasing revenues year on year and we've also been making a net profit in the transfer market. Where do you believe this £144m has gone? Buying Poulsen, Konchesky and Brad Jones? It went straight to the banks.
Liverpool's situation is nothing like Pompey and you would be thick to see it that way, we are exactly the same as West Ham and they got no points deducted. There in no a chance of administration happening as we have the club sold and the board have H+G by the goolies, Purslow is an expert in mergers and aquisitions and he had legal advise all the way and is supported by the RBS.
ReplyDeleteThe RBS have contacted NESV about financing a new stadium and want to remain as Liverpool's chief banker, no way would they risk that business by forcing any administration. Liverpool are in a very strong position and i have seen no legal expert suggesting H+G can win this battle, this will go to an appeal a few days after Tuesdays court date.
H+G are believed to want an out of court settlement with our new owners, i.e. a bung. This will not happen as Liverpool are told by our legal team that we will win, the RBS will if they choose take the club off H+G next Friday. This won't happen as H+G are no threat and it will not be necessary to call in the loans, giving Liverpool until after the appeal to rubber stamp the takeover!!!!
Liverpool's situation is nothing like Pompey and you would be thick to see it that way, we are exactly the same as West Ham and they got no points deducted. There in no a chance of administration happening as we have the club sold and the board have H+G by the goolies, Purslow is an expert in mergers and aquisitions and he had legal advise all the way and is supported by the RBS.
ReplyDeleteThe RBS have contacted NESV about financing a new stadium and want to remain as Liverpool's chief banker, no way would they risk that business by forcing any administration. Liverpool are in a very strong position and i have seen no legal expert suggesting H+G can win this battle, this will go to an appeal a few days after Tuesdays court date.
H+G are believed to want an out of court settlement with our new owners, i.e. a bung. This will not happen as Liverpool are told by our legal team that we will win, the RBS will if they choose take the club off H+G next Friday. This won't happen as H+G are no threat and it will not be necessary to call in the loans, giving Liverpool until after the appeal to rubber stamp the takeover!!!!
Liverpool's situation is nothing like Pompey and you would be thick to see it that way, we are exactly the same as West Ham and they got no points deducted. There in no a chance of administration happening as we have the club sold and the board have H+G by the goolies, Purslow is an expert in mergers and aquisitions and he had legal advise all the way and is supported by the RBS.
ReplyDeleteThe RBS have contacted NESV about financing a new stadium and want to remain as Liverpool's chief banker, no way would they risk that business by forcing any administration. Liverpool are in a very strong position and i have seen no legal expert suggesting H+G can win this battle, this will go to an appeal a few days after Tuesdays court date.
H+G are believed to want an out of court settlement with our new owners, i.e. a bung. This will not happen as Liverpool are told by our legal team that we will win, the RBS will if they choose take the club off H+G next Friday. This won't happen as H+G are no threat and it will not be necessary to call in the loans, giving Liverpool until after the appeal to rubber stamp the takeover!!!!
Liverpool's situation is nothing like Pompey and you would be thick to see it that way, we are exactly the same as West Ham and they got no points deducted. There in no a chance of administration happening as we have the club sold and the board have H+G by the goolies, Purslow is an expert in mergers and aquisitions and he had legal advise all the way and is supported by the RBS.
ReplyDeleteThe RBS have contacted NESV about financing a new stadium and want to remain as Liverpool's chief banker, no way would they risk that business by forcing any administration. Liverpool are in a very strong position and i have seen no legal expert suggesting H+G can win this battle, this will go to an appeal a few days after Tuesdays court date.
H+G are believed to want an out of court settlement with our new owners, i.e. a bung. This will not happen as Liverpool are told by our legal team that we will win, the RBS will if they choose take the club off H+G next Friday. This won't happen as H+G are no threat and it will not be necessary to call in the loans, giving Liverpool until after the appeal to rubber stamp the takeover!!!!
I have to say that this article looks like you're clutching at straws.
ReplyDeleteFirstly the West Ham part is rubbish. As far as I'm aware the League exercised their discretion as this was partly if not wholly down to the collapse of the Icelandic banking system, therefore out of the control of West Ham. Totally different to Liverpool's scenario.
To say that Hicks and Gillett are seperate from Liverpool is also somewhat desperate. Regardless of how many parent companies are set up, Hicks and Gillett are very much a part of Liverpool. I'm certain the league will see this.
And the most infuriating point is this "Damage Liverpool (or any other high-profile successful English club), and you damage English football". THIS IS RUBBISH RUBBISH RUBBISH!!! It's also the reason that the 'big' clubs become so detested by other supporters. "We are Liverpool therefore we should be exempt from the rules". Get over yourselves.
Personally I don't think you will be docked nine points. But that is based purely on experience. Most clubs get to somewhere near the deadline and are saved at the last minute. They rarely end up losing the points.
Errr.....except for the £144m owed to H&G.
ReplyDeleteWanting Liverpool docked points is not the same as deserving points docked, Liverpool are not going into administration. The Liverpool board are on very secure ground here, legally the board are very safe here as written under-takings were given to the RBS and Liverpool's Chairman.
ReplyDeleteThe RBS will give Liverpool documents to use to make their case, RBS and Liverpool's legal people are the best money can buy. Administration is down to the cut and paste, lazy journo's ranting on about rubbish, nobody in business or legal fields believes the club will not win in court.
'As far your're aware' - What does that mean? Provide evidence that 'the League exercised their discretion as this was partly if not wholly down to the collapse of the Icelandic banking system, therefore out of the control of West Ham'
ReplyDeleteThat is an interpretation peddled byt the media, it is not fact. The only fact here is that West Ham's holding company went into administration and the club avoided a points deduction. This could be *exactly* the same position Liverpool find themselves in.
And the point about damaging Liverpool is not rubbish - The Premier League state this (in a manner of speaking) themselves in their own rules! When a club goes into administration, the PL can suspend it from matches if it likes.
When considering whether to suspend, the Board of the PL will take certain important things into account, as provided for by section 65:
65. The Board shall have regard to all the circumstances of the case and to:
* 65.3 the interests of the insolvent Club’s Officials, Players, supporters, shareholders and sponsors;
* 65.5 the need to protect the integrity and continuity of the League competition;
* 65.6 the reputation of the Company and the League and the need to promote the game of association football generally; and:
This is very clear: why would the PL cut off its nose to spite its face?
The league performance has nothing to do with being placed into administration and how anyone can think that is beyond me. If rbs take control we will be placed into administration 100% fact. There is no way out of that no legal loophole it is a fact.
ReplyDelete<span>"Record profits/Good financial management</span>
ReplyDeleteLiverpool FC (LFCAGL) is a solvent, profit-making business (Record profits for the last 3 years), with a long history of being well run and free of financial problems. Basically, but for the actions of Hicks and Gillett, LFC would be a well-run, profit making company."
When you say record profits for the last three years do you mean the £14m LOSS in the last set of accounts?Liverpool FC are only solvent on a balance sheet basis due to the capitalisation of the new stadium development costs (circa £44m). Let's be honest - nothing has been happening with the new stadium and putting these costs on the balance sheet cant be justified forever. Take these away (as is likely to happen in the next set of accounts) by releasing them to the income stream and suddenly LFC has a negative balance sheet. So I think LFC are far from being solvent on a balance sheet basis (i.e. are technically insolvent).Furthermore, LFC owe KFL around £100m which they would be totally unable to repay on demand. If KFL goes down then it would surely come looking for it's £100m and LFC would be unable to meet its debts as they fall due.LFC are not as solvent as you make out in my opinion.No one cares about the history of how financially well managed the club has been - all that matters is the current situation.The last sentence is classic denial. H&G provided the money - other people used it. The blame for the mess you find yourself in falls squarely on LFC as a collective entity.
Has anybody seen or heard a legal expert suggest that H+G will win this case? no neither have i. The men leading the legal battle for Liverpool were present during the attempted boardroom coup last week, they told Liverpool that was a killer blow for H+G, go legal they said.
ReplyDeleteThey have broken the articles written into the refinancing deal, which are legally binding and allowed the board to remove them. This is in black and white and watertight, H+G know it's futile as time has run out for them. Purslow is a smart operator and has bought and sold companies all of his professional life, that's why Liverpool brought him in.
Terminology issue - I meant record turnover, not profits. LFC has had record turnover for the last 3 years, which suggests it is making money in the first instance.
ReplyDeleteIf Hicks and Gillet try and claim the money that;s owed it's not as if LFC have to hand it over. They can go to court to try and claim it but that could take years. LFC will not become insolvent at all. There is also a provision in the club's accounts that specifically states that KFL cannot call in their loans if it would make LFC insolvent. We have nothing to worry about here in that respect.
Another brilliant article, have enjoyed the previous few very much, if people decided not to believe the institutions that are more concerned with finding a story where there is none then you could be fully appreciated, you obviously have done your research and know full well what you are talking about, Sky Sports News, The Sun and other red tops on the other hand are always going to write articles that exaggerate the truth and put Liverpool FC in a bad light. Shame on the other supporters for not showing faith
ReplyDeleteYNWA
If RBS had to take over LFC then the sale will still go through. The EPL have realised this and they are on our side so there is no need to worry :-D
ReplyDeleteTo illustrate my point, here is a breakdown of LFC's turnover over the last 11 years:
ReplyDeleteYou simply can not separate out revenue streams and claim the club is profitable - it can not repay its debt.
ReplyDeleteAre you suggesting that the ground can be sold - and that Liverpool wont be deducted 9 points - but have nowhere left to play as it will have been sold under administration?
Please - your wriggling is embarrassing.
The fact is Liverpool was willingly sold by Directors to Gillet and Hicks - the fans rejoiced as Raffa signed flop after flop and they "bank" rolled debt on you - then you won a European Trophy - whilst not having the money to pay for it or the players you signed.
Everything that costs has to be paid for - and Liverpool havent paid for their signings or stadium. Thats the harsh fact - Liverpool fans backed Raffa while he decimated your club - you clapped like seals awaiting a fish supper - you just didnt see the big club about to cull you.
Football needs to learn a lesson - Liverpool should be foreclosed as a bad example to the rest of the world - you have to pay your way for what you buy. Contrary to popular belief in Liverpool - if you buy a player / a club / a company - you have t pay for it. Maybe its the thieving scouse way that thinks it OK not to pay for it ;)
West Hams parent company had other assets and they were the reason for the insolvency which is why the league did not impose a penalty upon them. Liverpool are the only asset Kop holdings have and the league will not look at the situation in the same light as West Hams plight.
ReplyDeleteLoki you said it 'If', If i had a million quid i'd be a millionaire but im not. Look at the court case and find a reason Liverpool will not prevail?. Even H+G don't see themselve's winning at all. If we went into administration H+G would have liabilities outstanding, were the NESV deal covers them fully.
ReplyDeleteAdministration is miles away from happening, I would say 80% likely not to happen. The buyer is there and the tax-payer gets their money back, everyone is happy apart from Liverpool haters. There is no evidence to suggest Liverpool won't win in court, end of!!!!
"If you've read any of the reports, you'll see that the majority contain sources such as 'An Insider', or 'A well placed lawyer' etc. In other words, no credible source at all.<span>"</span>
ReplyDeletehttp://www.guardian.co.uk/football/2010/oct/08/liverpool-nine-point-deduction-sale
However it emerged today that the Premier League's chief executive, Richard Scudamore, believes that according to the league's rules the holding company's administration cannot be entirely separated from the club, and the nine-point penalty would apply.
---
The only sure thing at the moment is nobody can be sure what will happen in the coming weeks!
It seems the Liverpool haters are very upset, they realise that Liverpool are going to be under new ownership on appeal as expected next week as H+G will want one. Nobody seems to believe H+G can win, only mancs....ha ha ha
ReplyDeleteThe only lesson football needs to learn is to ignore morons like you.
ReplyDeleteFair point, Omerta. However, you'll note that there are no direct quotes from Scudamore. If he thought what the Guardian is suggesting he would say it in public, would he not? Sounds like hearsay/made up BD to me.
ReplyDeleteJaimie
ReplyDeletePlease do not delete the post that I have replied to. It will just show what idiots we have out there!!! :-D
surely if you caught your arm in a machine at work and the following day the company has put up guards it's tantamount to them accepting that what was there previously , was unsafe and would actually leave them open to being sued ! so now by their own actions the EPL has brought in this owners credibility test ,although nothing was in place to protect LFC and several other previous/subsequent leveraged buyout clubs .
ReplyDeleteThe similarities between us and west ham must be that presumably they and definately us don't /didn't need holding companies to operate and the fact we LFC were lied to about having to sustain a debt we didn't need (maybe if a stadium had been built it could be argued we benifitted from the debt ) is proof that there was no 'negligence' by our board ?
Thanks for the kind words, Nick. And thanks for visiting :)
ReplyDeleteFolks make no mistake - I like Scousers and used to like liverpool - but this current stance of leveraging unaffordable debt onto a club - buying players that arent paid for (as the money is used elsewhere) HAS TO STOP - its killing football. If the best way for Football to survive is to have a high profile casualty so be it.
ReplyDeleteAs I said many fans clapped like seals as their club was destroyed in front of their eyes. Even recently your fans campaigned to get Hicks and Gillet out because they would not buy any players and support Raffa and Hodgson. BUT YOU HAVE NO MONEY - your fans are campaigning to kill their own club by putting more debt on it.
And your fans may deny it but how many campaigned against them when they took over and you won in Europe? None! But you were still heading for financial suicide.
Man U are in an even worse position!
Well Put Rocket
ReplyDeleteTerminology? Come on lets be clear LFCAGL is LOSS making as is its parent undertaking.
ReplyDeleteAndy - and the idiot pundits like Shearer who demand clubs buy players - even knowing there is no money to do it.
ReplyDeleteFor example when Shearer was at Newcastle - he wanted Mike Ashley to gamble huge debts on supporting his pipe dream on a coin flip it would work - he didnt are long term if the gamble worked or not - he simply was looking for his ego to be massaged short term.
didnt "care" long term
ReplyDeleteLFC didn't make a profit in their last set of accounts - they made a £14m LOSS.
ReplyDeleteThe difference is that WHU did not owe a penny to Hansa / CB Holdings whereas LFC owe £100m to KFL. Being the sole asset of KFL (an insolvent comapny) and owing them £100m makes them inextricably linked and effectively the same entity. It is a very different situation.
ReplyDeleteAlso, I may be wrong but I believe that ownership of WHU was transferred to CB Holdings BEFORE Hansa went into administration.
No, that's not true. LFCAGL has record turnover for the last 3 years - any prospective buyer will see that. Losses are due to avoidable things. Once the new owners are installed, it won't take much to get the club making a profit again. Long term view is important here.
ReplyDeleteThat's one year. You have to look at things in the proper context. That doesn't change the fact that the club has record turnover, which means it's making money. That's what it's all about for these businessmen at the of the day. A few tweaks to the outgoing costs etc, and the club will be back in profit.
ReplyDeleteIt is an abolsute, stone cold fact recorded in the accounts lodged at Comapnies House. LFC lost £14,033,000 in the financial year to the end of 31st July 2009.
ReplyDeleteLFC are LOSS MAKING. Utterly undeniable fact.
Record turnover means absolutely nothing - I'm sure that Landsbanki and Lehman Brothers had turnovers which dwarf LFC's but that didn't stop either of them going bust.
ReplyDeleteIt is all about cash flow.
Yorkie - the reason that the 9 point penalty for administration was to stop clubs racking up debt and not paying it.
ReplyDeleteAre you honestly suggesting that the 100plus million owed to G and H is not worthy of been recognised as a debt!
Im a amazed that some folks have the blinkers on so tightly they can not see the wood for the trees
What an Icelandic banks collapse that was unforeseen is the same as spending a hundred million recklessly?
ReplyDeleteGood God
I don't know how you can tell me that my post was interpretation when you have taken point 65.6 and totally interpreted it to your own means!!
ReplyDeleteYou're arrogance absolutely astounds me. Most of the Liverpool fans I know hate Man Utd, not because they're fairly local and have been more successful in recent years but because of the arrogance of their fans and manager. I'm sure any Liverpool fan who reads this and sees that you are basically saying that the PL will spare you because you are a big club with rich history and that Liverpool are too important to be docked points will hang their heads in shame. If you believe that then you're sadly mistaken.
65.6
- Reputation of the company - Yeah the company looks good at the moment!!
- The League - Would the league show support to a team who spends money it hasn't got while FIFA are actively seeking to stop exactly that happening. I doubt it.
- Promote the game - If you're suggesting that the league needs Liverpool then you're sadly mistaken. It would miss you no more than it missed Newcastle last year. No club is bigger than the league, and Liverpool aren't even a top FOUR club this year.
So you agree then that LFC are loss making.
ReplyDeleteIt is about time that people started to call a spade a spade and stop coming out with this ridiculous assertion that LFC are making a profit. They simply are not.
Once again, I would reiterate that record turnover is meaningless - lots of companies with much,much lareger turnovers than LFC have gone to the wall.
Tweaks? Izzy wizzy lets get bizzy?
You do realise that £44m of stadium development costs are probably going to hit the income stream in the next set of account don't you?
It is going to take a lot more than a few tweaks to right the ship at LFC.
What is your point exactly anyway? So what if therre's a loss in the last financial year; that has no bearing on the high Court case coming up this week. It also made no difference NESV wanting to buy the club. So why does it matter?
ReplyDeleteTurnover DOES matter because it's an indicator of the club's earning potential. Focusing only on profit in a single year is taking an unduly short term view; certain things can take place that make that happen. As LFC'S profit history proves, there are ups and downs.
My point relates to the ORIGINAL VERSION of your article which you have now edited. Just to remind you of what you originally wrote it was this,
ReplyDelete--------------------------------------------------------------------------
"
<span>"Record profits/Good financial management</span>
Liverpool FC (LFCAGL) is a solvent, profit-making business (Record profits for the last 3 years), with a long history of being well run and free of financial problems. Basically, but for the actions of Hicks and Gillett, LFC would be a well-run, profit making company." "---------------------------------------------------------------------------If you claim that LFC will avoid insolvency because they are profitable it is pretty important to establish if this is actually the case.The fact that they are not kind of undermines your arguement.If you think the profitability of the club has no bearing on the High Court or NESV then why raise it in the first place?You ask why it matters - well it demonstrates the current ability of the club to extricate itself from its current position.
An Icelandic bank collapse that was unforseen? FFS, half the world saw that one coming. Even Alistair Darling about a month before but Brown told him to shut up. As far as the £100m is concerned I believe they can't recall that loan if it places the club in administration.
ReplyDeleteI think that what you have illustrated is that over the long term (11 years) LFC have LOST £37m. How can you claim that the club is profitable either in the short term (last set of accounts) or the long term?
ReplyDeleteAnd as I stated in an earlier comment, I used the wrong word. Sue me! That doesn't change the meaning of the article in any way.
ReplyDeleteAnd again, LFC making a loss has not made a difference in any way to anything, not least the sale of the club. So why should we care about it?
<span>The Truth but you will hate it </span>
ReplyDeleteI think you'll find that under Hicks and Gillette Liverpool have won NOTHING. The European cup you refer to which is the champions league was won in 2005 in Benetez's first season in charge. H&G bought the club in Feb 2007.
H&G made a lot of promises when they took over and yes we believed them as there was no reason not to. Since we have judged them on their actions and to say theve taken the club backwards is an understatement.
I would gladly take a 9 point deduction if it meant finally getting rid of the pair of them. I strongly believe that if we remove Hodgson we would have no issues staying up and to have a manager that says we are in a relegation fight after 7 games is in my opinion not good enough for LFC.
Roll on Friday when we will finally know our outcome....good or bad LFC for life
YNWA
JD above is right as i understand it. West Ham's parent company had a portfolio of different business interests of which the club was only one (a reasonably well performing one at that). Liverpool's parent company is concerned solely with the football club and this is a crucial distinction.
ReplyDeleteSadly our situation is more analgous to that at Southampton where a points deduction was imposed. Evidently not in the premier league but a worrying precedent nonetheless.
Well when we are discussing possible insolvency it is nigh on impossible to ignore profitability - to do so is ludicrous.
ReplyDeleteUsing the "wrong word" completely changes the strength of your arguement and therefore the value of your article. You may still mean to say that LFC will not be docked points but your reasons for reaching that conclusion are now so much weaker.
I don't think you will find many people who will agree with you that it makes "no difference in any way to anything" whether or not a company makes a profit. It will certainly have affected the sale of the club and the transaction price. You only have to look at Broughtons comments about how administration would be catastrophic to realise how future income streams and therefore profits / cash flows affect the selling price of the club.
No, our situation is NOT analgous to Southampton. And West Ham's portfolio of business interests makes no difference to question of whether points are deducted. The Premier League rules make no mention of other business interests being a mitigating factor; the rules do, however, make reference to the difference between holding companies and clubs. The idea that 'other business interests' is a reason used by the PL for not giving a points deduction is peddled by the media; it has no foundation in fact.
ReplyDeleteIt's an insightful article, and gives me more hope that the 9 point deduction won't occur, but can't say there's not one small sliver of worry left.
ReplyDeleteYou say in the article that if KFL cannot pay it's debts, then it would probably be KFL that goes into administration and not the club, because the debt is placed in KFL.
But I've heard mentioned that although they being separate entities, KFL's insolvency might affect the club because KFL and the other companies are solely concerned with the club, and it is said that this somehow makes the risk of administration carry over to the club.
Do you think there are any merits to this point?
This is perhaps the best and most well informed argument out there on the web so far. We've had people ranting on about how we will not get put into administration for reasons that only they themselves can understand and believe. The details of the docking of points and the reasoning behind why it is unlikely that we will be docked points is well presented here. Good article!
ReplyDeleteturnover = vanity
ReplyDeleteprofit = reality
"The fact is Liverpool was willingly sold by Directors to Gillet and Hicks - the fans rejoiced as Raffa signed flop after flop and they "bank" rolled debt on you - then you won a European Trophy - whilst not having the money to pay for it or the players you signed.<span>"</span>
ReplyDeleteOh dear - your ignorance on the basic history of the club over the last 5 years has just been exposed. You know absolutely nothing. The quality of our signings are not the issue. The fact is that the club has made profit on transfers alone for the last 4 transfer windows, the excess money left over was used to service interest on a debt which was not ours in the first place. You fail to understand even the basics of leveraging debt. Hicks and Gillett used borrowed money to buy the club. Then they reneged on every undertaking not to use the club as an asset on that debt. The club had to pay to be owned by those jokers, and also they used the stadium build as a means to launder money out still further by paying over £30 million on 'stadium development' to their associated companies in exchange for a 2 minute video showing a stadium design. Add to that the millions they charged to the club for their own 'expenses' which amounted to no more than a couple of transatlantic flights. David Moores made a catastrophic mistake, for which all Liverpool fans are paying, both emotionally and financially. We all know Hicks' history in 20/20 hindsight now - Corinthians, Cruzeiro, The Texas Rangers, The Dallas Stars - If you, like nobheads such as Piers Morgan and Harry Redknapp, still insist that Hicks is some sort of benefactor, instead of a bloodsucking vampire, then I should be hoping to god you get someone like him running your club. Except I don't want that. I want all football in this country to flourish, Luton, Chester, Leeds, Sheffield Wednesday, Nelson, Darwen - I have sympathy for any team at any level with money worries and insolvency issues, especially when those troubles are at the hands of an incompetent or malicious owner, and the actions of the club themselves are not the cause of their woes.
Have to agree with RedMist. These articles are some of your best work, excellent and insightful stuff.
ReplyDeleteIt's a shame you then diminish this with your more controversial and contentious articles.
Once again, more of this and less of the other.
taken from an lfc web fan base -
ReplyDeleteTo summarise a Rory Smith of the Telegraph quote recently:
“Broughton is trying to sell a club he does not own (but apparently has the power do to so) , Hicks is trying to hold on to a club he did not pay for and half of that club now belongs to a real estate company based in Arlington, Virginia, whose intentions are unknown” – its nice to keep things simple as they say.
its worth a read
see http://kopthat.co.uk/?p=845818057
i like most of us cant wait to get this clouded saga over
a tweety bird tells me the 'onside' board in which I trust as much as I can? have a darn good legal team .
tom and george can allways try -
http://www.claims4free.co.uk/
<span>www.nowinnofeeclaims-4u.co.uk</span>
and that old fave beuaty -
<span>www.100-compensation.co.uk</span>
go on tom u know u want too! give em a call its even a free number.
cant wait for the day they bleep ### the ###### off
id take the nine points if it could gtee a solid new set up but sadly in these times NO ONE KNOWS
Most of the Liverpool fans I know hate Man Utd, not because they're fairly local and have been more successful in recent years but because of the arrogance of their fans and manager.<span> </span>What a load of crap. Give me a break.
ReplyDeleteHoe is our situation NOT analagous to that of Southampton?
ReplyDeleteClearly i do not want a points penalty but to discount the possibility is naive in the extreme. You have stated that the premier league draws a distinction between the club and a parent company. This is not the case, in fact the premier league has amended the rules to specifically include parent undertakings. This can be seen from the previous incarnation of the rules, which does not mention parent companies:
<span><span>
</span>
</span>
<span><span>
Sporting Sanction
</span></span><span><span>
60.
</span>
</span>
<span><span>Upon a Club suffering an Event of Insolvency:</span></span>
<span><span></span></span>
<span><span><span><span>
60.1 the insolvent Club shall thereupon suffer a deduction of 9 points scored or to be scored
in the League competition; and
60.2 the Board shall forthwith give written notice to the insolvent Club to that effect.
</span></span><span><span>
This amendment is to our detriment as parent undertakings are now included in the provisions.
</span></span></span></span>
How not hoe - apologies
ReplyDelete<span>The<span> quote is </span></span>
ReplyDelete<span><span>"s67</span>. <span>Upon a Club <span>or</span> its Parent Undertaking suffering an Event of Insolvency <span>the Board shall have the power to impose</span> upon the Club a deduction of 9 points scored or to be scored in the League competition."</span></span>
<span>Both the club and the holding club are mentioned BUT there is no distinction made between which has to be the failing party .... the word OR (underlined in bold) makes this crystal clear!</span>
<span><span>
</span></span>
I can see clubs like wolves, west ham, others in the relegation battle, or man city, spurs if we do managed to finish in the top 4 saying we should be docked 9 points.
ReplyDeleteJust wait and see. LFC are like soton in that their holding company had only one business and that was the club itself. LFC situation is more like soton than west ham. Having points dock is a possibility in my eyes.
ReplyDeleteI do believe though that lfc SHOULD be docked the points but at the same time the FA should bear the blame to some extent for allowing clowns into taking over the club.
<span><span>The<span> quote is </span></span>
ReplyDelete<span><span>"s67</span>. <span>Upon a Club <span>or</span> its Parent Undertaking suffering an Event of Insolvency <span>the Board shall have the power to impose</span> upon the Club a deduction of 9 points scored or to be scored in the League competition."</span></span>
<span>Both the club and the holding company are mentioned BUT there is no distinction made in terms of which has to be the failing party .... the word OR (underlined in bold) makes this crystal clear!.... Unfortunately. The rest of the article is well researched & presented.</span></span>
the difference is he is interpreting league rules, youre interpreting..well, what are you interpreting actually!?
ReplyDeleteyou've not mentioned why you're aware "..the League exercised their discretion as this was partly if not wholly down to the collapse of the Icelandic banking system" ??
the big club arguement is dodgy, but hey, it got us in the champions league in 05/06! admittedly uefa that time!
Get over it already - you're just being pedantic now.
ReplyDeleteThe loss does not matter. Did the loss affect NESV's decision to buy the club? NO
Did the loss affect the club's ability to make record turnover 3 years in a row? NO
Tell: what IS the specific, measurable negative impact of the loss you keep going on about?
As I've said in another comment, you're fixated on the short term rather than the long term. The club's ability to make money is what attracted Hicks and Gillett; it's probably what also attracted NESV.
Once the dust settles, and the numbers are crunched, and the club because a more efficient enterprise, the losses will recede; the turnover, however, will keep rising. That's the future; that's why the loss doesn't matter.
Alothor - where have you heard this notion that LFC might be in trouble because KFL is solely concerned with the club? In the press, right? Go back to where you read that and try and pick out the facts upon which that contention is based. You won't find any because it's speculation; rumour; a chinese whisper based on nothing.
ReplyDeleteJamie, excellent article which sets out the truth about the situation. My concern is that the situation could turn out like Souhampton, I have family down there and my cousin insists the parent company went into adminstration not the club, which would be the situation with us if things come down to this, and they were punished because other clubs pushed for the points deduction. I know we're under a differing governing body (the FA not the Football League) but I can see seveal clubs demanding a points deduction if we enter administration. Best thing all round is if the legal 'experts' who've come out and practically all said H&G don't have a chance of winning are correct and the sale goes through before Friday
ReplyDeleteExcellent arguments everyone, not all accurate, but well thought out and stimulating! Jaimie, love the site. Don't necessarily agree with everything you say but appreciate the time and effort spent. It is nice to conduct a discussion bereft of derogatery innsinuations involving anyones mother! It seems we have some lfc detractors among your visitors on the best lfc site on the net. Would like to not get banned so the less said regarding them the better! Keep it up (you lot sound eventful to have a drink with).
ReplyDeleteLiverpool is unprofitable. Record turnover is matched by record costs, one negates the other. The only hope is wipe the slate on debt and run the club far more professionally and in the collective interests of all stakeholders. All stakeholders = the owners, the fans, the players and the staff. It's a question of balance, something we've not had for a long time.
ReplyDeleteI have been linked to this website many times through newsnow and most of the articles I remember seemed designed to cause an argumentative reaction but this is a great informative article, by far the best I have read by you. A serious amount of research and thought has gone in to it. Keep em coming
ReplyDeleteThat's how I read it - this is not really a "distinction" between the club and parent. The outcome is the same in either case. Which is why I asked Jaimie to clarify his thinking.
ReplyDeleteI'm an accountant from Australia and only jut read these comments. In these situations if a Bank, for example, wanted to know how profitable an entity or business was they ask for an 'ADD BACK STATEMENT'. This takes the existing net profit and adds back all financing costs, non cash expenses such as depreciation, to arrive at an 'ADJUSTED NET PROFIT'. This is the true indication for how profitable the business is - which excluds the effects of it's ownership because that has nothing to do with actual business!
ReplyDeleteIsn't the only reason they're making a 'loss' is because of money owed by H&G and the interest payments? Which are due to the holding company, so LFC are making a profit but because of huge debts of the holding company its a loss. So if you take the holding company away, LFC is a profit making organisation.
ReplyDeleteThat loss was after all costs and amortization of players? In other words I would suggest that all told apart from accountancy bullshit our main problem for a number of years has been responsible for servicing loans, big ones. You could easily make a case that the club can be profitably run. As for the assertion that the west ham precedent is the one the league will follow should the shit hit the fan, it's pure conjecture.
ReplyDeleteThere is a real difference between West Ham and LFC too. An Icelandic Bank is nowt to do with football and it can be argued that West Ham were viable in their own right.
ReplyDeleteEven though it is H&G's fault we are in debt, the only asset of the holding company (KFL) is Liverpool Football Club. To suggest otherwise is an example of Emperor's clothes. The two entities are inextricably linked. So even though <span>LFCAGL may be profitable the sins of the parent KFL will/could be visited on the club. </span>
<span>Let's just hope the lawyers can make the case against H&G and this becomes idle speculation. </span>
The fact that KFL is solely concerned with the club could very easily be deemed relevant in the context of the appeal ground highlighted at 69.1. West Ham for instance could not feasibly be held accountable for the performance of the other interests (Icelandic banking prominent among them) of the parent undertaking. It is more difficult to distance liverpool from a company set up solely for the purpose of governing the club.
ReplyDeleteAnother point of concern arising from the appeal grounds is that if a High Court Judge finds against Broughton et al a situation can certainly be foreseen where the clubs' officers are not deemed to have exercised due diligence in avoiding administration.
I'm not trying to nit pick but i really believe that your interpretation of the relevant clauses is a little hopeful.
this is all very good but one thing i would say is look at Southampton Football Club as an example of a parent company...
ReplyDeletethey went into Administration and went to court on the fact that it was not the club.... 9 point deduction followed and a further 10 the following season!
Just because you are Liverpool does not make you above hte laws of the league, Portsmouth tried to get away with it and fail, although i don't epect this to happen to Liverpool... if it does you will get the 9 points as if you don't the league would never be able to do it again and clubs like Portsmouth and Southampton would be off to court.
It is not being pedantic at all. A huge plank of your ORIGINAL arguement was that LFC are profitable - when they are clearly not.
ReplyDeleteYour own evidence above shows that in the long term, 11 years, LFC LOST £37m.
To claim losses dont matter is just bizzare - you do realise that the financial health of a company affects its purchase price don't you? If you think that a judge won't take into account the recent financial performance of LFC when determining if the club has been undervalued then you are living in a dream world.
NESV are already indicating that they will walk away from the sale if points are docked. Reports today suggest that NESV have inserted a clause in the purchase agreement which allows them to renegotiate the price should LFC go into administration. Why do you think this is? Answer, because CL and probably Europa will have gone for next season i.e. potential profits are down and are probably losses.
You asserted that one of the reasons that LFC will not be docked points is because the are a well run profitable club - this is not the case at all. In the long term LFC are loss making and have a vulnerable balance sheet. You are on dodgy ground with that one.
You see I also have a problem with this idea that the losses will go away when the debt is cleared. LFC made a loss of £14m in the last accounts and interest payments to group undertakings were only £9m. This means that when you disregard interest payments that LFC were still making a loss.
It would appear that NESV would have to do more than clear the debt to return LFC to profit.
Southampton is not relevant - the rules for football league are different.
ReplyDeletePortsmouth were a financial mess across the board; total mismanagement. That is not the case with LFC.
You *are8 being pedantic.
ReplyDeleteIt makes no difference whether I used the word profit or turnover! The concept is still the same: LFC is a money-making enterprise. That's what i meant, and the explanation in the article supports this. I just used the wrong word, and now you're pointlessly obsessing on that. I made a mistake. big deal! It's not a mistake that changes *anything* re the meaning of the article though. You keep going on about it because you\'re seemingly desperate to prove I made a mistake. get over it.
To claim losses dont matter is just bizzare - you do realise that the financial health of a company affects its purchase price don't you? If you think that a judge won't take into account the recent financial performance of LFC when determining if the club has been undervalued then you are living in a dream world.
Pure unsupported conjecture. The Judge will not take that into account at all. There's no precedent/legal reasoning anywhere to support that.
The jcourt case is NOT about value of the club; it is about whether Broughton et al had the legal right to sell the club. That is it. The court will look at the procedures/circumstances of the sale, not the value of the club and/or its losses.
Re alleged NESV clause about renegotiating the price - again, unsupported media conjecture. It makes zero sense anyway - NESV were fully aware of LFC's position when they offered to buy the club. All of a sudden things change?!
99% of what we read in the media re this situation is made up BS.
You asserted that one of the reasons that LFC will not be docked points is because the are a well run profitable club - this is not the case at all. In the long term LFC are loss making and have a vulnerable balance sheet. You are on dodgy ground with that one.
Again: I meant turnover. A well-run, money-making club with easy potential to be profitable. Long term loss-making is irrelevant. Did it stop Hicks and Gillett buying the club for the sole purpose of making money?! NO.
Did it stop NESV from wanting to buy the club? NO.
In this context, losses mean nothing, and the interest from investors proves this.
Your reasons for why the loss apparently matters are at odds with the reality that I've outlined above. if they mattered so much, no one would want to buy the club. there is much more to LFC than financial loss; and the bottom line is the great potential is there to make a profit.
Hi Mark - thanks for visiting :)
ReplyDeleteHey Yogi - I'm sure other clubs will push for a points deduction, but it will probably be the smaller clubs. Given Man United's situation, I can't see them pushing for a deduction as they could conceivably be in the same position at some point! I doubt Arsenal, Chelsea, Spurs etc would complain either.
ReplyDeleteGreg - you simply are talking tosh and assume quite wrongly that I do not understand high finance.
ReplyDeleteMy point is you, and or fans, cant claim your club is profitable on an "if only, if you ignore x as it shouldnt have been done like that basis" AFTER THE FACT that the Directors sold the club on the basis of it being a leveraged buyout.
They decided that it was in the best interests of the club.
You ignore timing and bit part select rationale. ONCE that Leveraged Debt was induced onto the club - it had no option but to service that debt. Thats the reality. Just because you dont like the financial set up doesnt mean you can ignore its existence - that debt is owned by Liverpool FC - The 130million spent on players should NOT HAVE BEEN SPENT as you were in horrendous debt Raffa should have searched for value in the market to help get the club back onto an even keel INSTEAD he wasted cash galore and the debt increased over time.
Until football managers and fans who know nothing about business - stop screaming for more and more money - irrespective of its long term cost - there will be many more casualties in the game.
Also its cringe worthy an amount that you say x and y shouldnt have left the club - all your current Directors supported that removal as in the best interest of LFC - for gods sake get a grip and accept your reality and deal with it.
Fans need to wise up to the realities of the corporate structures used for ownership - even now your fans celebrate as they are about to be taken over by a man who (history tells you) wants to make a profit out of you?
And you wonder why I am incredulous at the stupidity of some.
RBS will not do anything to reduce the value of LFC as they want repayment. The loans will be extended to allow the takeover.
ReplyDeleteLadjei
ReplyDeleteI am a Newcastle Fan - we have been through tough times but I actually support Mike Ashleys long term goals of making us self sufficient. He is one of the only men in our history NOT to have taken a penny out for himself and he has put in £300million - even then we were ran that badly in the past we still arent out of the mire but are getting there slowly with a realist manager and a realist owner.
That means even though we got relegated we have a long term future - long after those "renting like whores" trophies knowing that they have to be paid for at some point (Man U are the worst in the league for it) - whereas Man City seem to have a benefactor which is different (depending on the repayment mechanism of the debt)
The sad thing is I cant see FIFAs new fianncial regime changes making any difference. Owner X will set up a company outside of the football club which will "sponsor" the club - that shell will then owe a debt to the owner and so on - the mess will be perpetuated.
I read recently that KFL is indistinguishable from <span>LFCAGL </span><span>as it has no other business interests unlike the Icelandics who owned West Ham and therefore </span><span>LFCAGL </span><span>face the 9 points deduction should RBS place KFL into administration.</span>
ReplyDeleteHowever, I doubt RBS would weaken their return on the sale of the club and would extend the deadline to ensure a deal is finalised. So not too worried at the mo!
You *are8 being pedantic.
ReplyDeleteIt makes no difference whether I used the word profit or turnover! The concept is still the same: LFC is a money-making enterprise. That's what i meant, and the explanation in the article supports this. I just used the wrong word, and now you're pointlessly obsessing on that. I made a mistake. big deal! It's not a mistake that changes *anything* re the meaning of the article though. You keep going on about it because you\'re seemingly desperate to prove I made a mistake. get over it.
If it makes no difference then why edit your article to say turnover rather than profit?I'm not desperate to prove you made a mistake at all - you've admitted it. Now you change the wording to 'money-making' which is just another word for profit. LFC are not 'money-making' - they take in money and they spend money but they do not make money.I am not raisng the issue of profits / losses for the sake of proving you made a 'slip of the tounge' when saying profit rather than turnover. I am raising it because it is pertinent as to whether or not LFC / KFL will enter into an insolvent event. It is quite simply beyond comprehension that you believe that such an important financial yardstick can be ignored and that a much less relevant figure be used instead.The jcourt case is NOT about value of the club; it is about whether Broughton et al had the legal right to sell the club. That is it. The court will look at the procedures/circumstances of the sale, not the value of the club and/or its losses.
I don't know how you can make that claim since one of H&G main arguements is that the sale undervalues the club. The procedures / circumstances of the sale which you mention will no doubt address the issue of whether or not the sale price is reasonable. Or are you going to backtrack on what you wrote herehttp://www.liverpool-kop.com/2010/10/broughton-vs-hicks-current-lfc-legal.html"<span>Q. Is the sale to NESV 'unreasonable'?</span>
The reported sale price to NESV is 300m. Hicks could (and probably will) argue that the sale is 'unreasonable' by virtue of the sale price. If Liverpool is independently valued at a higher amount than NESV is offering, he could argue that the unreasonableness stems from selling the club too cheaply. And under the <span>2007 Companies Act</span>, it is the fiduciary duty of any director to obtain the best value for a company and its shareholders."" <span>Q. What will the High Court have to decide when considering if the sale is valid?</span>
<span></span>
6. Is the sale price for LFC unreasonable (within the meaning of the Companies Act 2007)?"
<span><span></span></span>
<span><span></span></span>
It seems to me that the recent financial performance of the company will be considered and that profits / lossess are important.
<span><span></span></span>
Long term loss-making is irrelevant. Did it stop Hicks and Gillett buying the club for the sole purpose of making money?! NO.Of course it is relevant it will have affected the purchase price they paid and hence the debt LFC currently find themselves in.Did it stop NESV from wanting to buy the club? NO.Again, the financial health and [...]
Oh and it is really hard to get this reply mechanism to put things into paragraphs! All formatting has been lost which makes it harder to read my response. :(
ReplyDeleteYour last two articles have been exceptional, Jaimie. Well done mate.
ReplyDeleteI agree that the Premier League is unlikely to regard such a profitable club (debt-free of course!) as insolvent, and also that they will take into account the low wage bill vs turnover and the precedent set by West Ham. I would suggest that even if the unlikely worst case scenario was to happen (Hicks wins the court case, RBS initiate administration proceedings etc.) then Liverpool would likely pursue an appeal and probably win it.
When did I complain about x and y leaving the club? Again the quality of our signings, or the current manager is not the issue. I'm not saying some better value signings could not have been made. That is clear when you look at the price of Keane, Aquilani and Johnson, but again - its a case of 20/20 hindsight, and the sales of Alonso and others still meant the club made a net profit on transfers alone. That Rafa and now Hodgson have had to operate a revolving door transfer policy to actually make profit in each window is the problem. Regardless of a 14 million loss last year, the club IS solvent - It is not badly managed, you assert we are badly managed due to the debt being piled on us, when financially I think the club has done as much as possible to manage that debt and keep the club running with minimal losses. There will be extra income this year from sponsorship deals which should compensate for loss of Champions League revenue, but the fact remains - yes we are responsible for servicing a loan we didnt take out. You seem to blame the club management for the unfortunate circumstance, but how could they have legislated for it, when specific promises were made that it would not happen?
ReplyDeleteThe main reason I said you know nothing is because you claimed we had success in Europe (2005) when H&G bought the club (2007) You may 'know high finance' but you didnt pay attention to club's timeline. The simple fact is that when that debt was put on us by the Americans, the club went into decline. But even then, if it was just a case of servicing debt then we would have been ok. But the charges then incurred for a non existent stadium (a scam from the americans to leech more money out of the club) were the tipping point. Hicks always intended to make it look like he was investing when in fact he was bleeding us dry.
"My point is you, and or fans, cant claim your club is profitable on an "if only, if you ignore x as it shouldnt have been done like that basis" AFTER THE FACT that the Directors sold the club on the basis of it being a leveraged buyout.
ReplyDeleteThey decided that it was in the best interests of the club. "
No they didnt!
My point is that specific undertakings were made to shareholders that the buyout would NOT involve leveraging any debt on to the club and that Hicks and Gillett were pesonal guarantors on the loan.
These promises proved to be utter lies, and they leveraged the debt on to the club anyway.
I am not saying Liverpool should not be responsible for these debts now we have them - I am merely saying that the situation as it stands now is nothing to do with the current or previous management structure of the club. It is simply a case of utterly corrupt ownership.
That Broughton and Purslow are now fighting the very men who employed them is testament to that fact!
I dont know why you guys are getting so wound up. Its a great article and looks quite clear to me.
ReplyDeleteAnyways, even if we do lose 9 points, it might mean Hodgson relaxing a bit and telling his players to go for it in the league. 31 games win 20 of them and thats 50 points which is midtable. Im pretty sure we can win 20 games this season. It might be the kick up the backside this team needs to get going.
Lets be honest, had we been top of the league after 7 games with say 18 points, noone would really give a damn. Its only because we are in the relegation zone that everyone is getting scared.
Nice article, its good to read a well researched piece now and then. However I have to disagree with some of your conclusions, although perhaps not the overall thrust of piece.
ReplyDeleteLFC and its parents are inextricably linked. The debts piled into the club are from the parent company who owes them to RBS. You cannot divorce the actions of the shareholder from the management of the club as the club accepted the debts.
If the parent company goes into administration then the FA will have no choice but to deduct 9 points from LFC.
However, I believe that RBS will not follow this course of action even if Hicks wins tomorrow. It would not be in their interests either financially or reputationally to force LFC into administration, so they would instead push for a resolution that is acceptable to Hicks & Co.
As to whether Hicks will be successful in court, I think he stands a good chance. You have already pointed out that the AoA are not explicit, and in addition the Board should always be acting in the shareholders interests. If they are acting in their creditors interests only then the club is already effectively in administration.
I would expect Hicks to win tomorrow, but also expect RBS to put more stringent terms in place to force a speedy resolution to their problem which will force a sale, and to be fair, Hicks might get a better price than that which is now on the table from NESV, indeed it might be NESV itself that is forced to up their offer.
This is quasi-equity. It is a part of the investment made by Hicks and Gillette constituted as a loan rather than as share capital. As owners, they must shoulder the risk of their investment falling in value, as it has done.
ReplyDeleteI'm not blinkered. I can see the truth (whether you hate it or not) that the value of H&G's investment in Liverpool (including the loans they have made to the club) has fallen below the total of the debt secured against it. How ridiculous is the idea that an asset must be worth at least as much as the money borrowed against it?
ReplyDeleteAnd Roy is only getting the wrong end of the stick because of the spanish hero not being here anymore...
ReplyDeleteIf Dalglish was given the job and found himself in the same position, would he have received the same treatment just as Roy is getting now?
Critical realism? Wishful thinking more like. I told a Liverpool fan three years ago that the elite of the EPL would change and that LFC would be the club making way. I got the same guff that you're now spouting about history and reputation. It's the future that counts not the past. Don't forget that the current top 2 in the league were scrapping in the second tier a few years ago.
ReplyDelete