15 Oct 2010

RBS + Liverpool FC vs. HICKS: FAQ - Who has the right to do what?

The ongoing saga of Liverpool's ownership situation has reached fever pitch today! The deadline for LFC's loan repyment to RBS is fast approaching; the Texas injunction filed by Hicks and Gillett has been (allegedly) overturned; and there are rumours that Tom Hicks is trying to sell his shares in the club to Mill Financial. Lots of questions swirling around, but what are the answers? What follows is an FAQ featuring the key questions of the day.

Q. Where does the RBS debt currently lie

The outstanding 200m debt is held by Kop Football Ltd (KFL):

Q. Which company holds Hicks' shares?

Shares are held by KFL, which is owned by Hicks and Gillett:

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

Q. What was the point of the Texas injunction.

It seems clear that the injuntion was a delay tactic designed to give Hicks the time to strike a deal with Mill Financial.

Can Hicks actually sell his shares to Mill Financial?

I don't see why not. Hicks selling his shares is NOT him selling the club. There is no legal bar to stop an individual selling his shares to another company. Neither of the High Court injunctions specifically b ar Hicks exercising his right to sell his shares. Additionally, why would Hicks persist with trying to sell them if there was no prospect of it being successful? He will have taken legal advice on this; the mere fact that he is (allegedly) desperately trying to sell to Mill must mean there is a chance that it could go through.

Q. What are the details of Mill Financial's takeover deal?

Mill has offered to pay off all outstanding debts, and put up 100m to go towards a new stadium. It could be argued that the deal is (financially) preferable to the NESV deal, which does not include cash to be put towards a new stadium. I'm not saying I would take the Mill deal if it was down to me (I wouldn't!), just that it is not an ostensibly negative deal.

Q. is the board under an obligation to consider the Mill Financial deal?

The Companies Act 2007 stipulates that, the Liverpool board has an fiduciary duty to make decisions in the best interests of the club's shareholders. At first glance, the Mill deal seems like it would benefit the club, therefore the LFC board should really consider it.

Q. What happens if Hicks does sell to Mill Financial?
They would presumably become majority shareholders in LFC, thereby assuming the outstanding RBS debt.

Do RBS then have an obligation to accept Mill's offer to repay the outstanding LFC debt?

If the debt is not in default, then the loan agreement has not yet been breached. As such, RBS must have a legal obligation to accept repayment of the debt. It has been reported that RBS has already refused Mill's offer to repay the club's debts; if the shares have already been sold by Tom Hicks then it could be argued that RBS has acted unlawfully in refusing to allow Mill to repay the debts.

There are also rumours that Hicks is already in default, but there is no evidence to confirm this. If he IS already in default, then that would give RBS legal grounds to refuse to accept any offer from Mill. I have to say, it sounds like wishful thinking to me though.

Q. Does Mill Financial already own 50% of LFC?

There is no direct evidence available to suggest this is the case. George Gillett is in default on a £75m loan he took out to invest in the club, but that doesn't necessarily mean that Mill Financial has - as a matter of fact - taken over his shareholding at this time. However, it seems likely that may be the case, especially given Tom Hicks' alleged race to sell his share of LFC to Mill.

Q. What happens in the unlikely event that Hicks and Gillett raise the money themselves to pay off RBS?

The written undertakings agreed as part of the RBS loan deal (i.e Broughton's sole right to change the board), would no longer be in force, and Hicks would then have the legal right to fire other board members. Again, if there is no actual default on the repayment of RBS' loans yet, then Hicks still has the right to repay the loans. If RBS refuse, then it would technically be illegal, and Hicks would almost certainly pursue legal remedies against RBS and/or the club.

Q. What about the High Court injunctions?

They have no real relevance on what it happening now. The first injuntion basically confirmed that Martin Broughton was the only person with the power to change the board. This paved the way for the board agreeing to sell to NESV.

The second injunction basically decreed that the Texas restraining order filed by Hicks and Gillett had no application in the UK. Neither injunction is specifically about who has the right to sell the club, and to whom.

Does NESV have a binding agreement with LFC?

They claim this is the case, and if a contract of sale has been signed, then that would seem to be true. However, the Texas injunction - which prevented LFC selling to NESV, an American holding company - may have frustrated/rendered void the original sale contract (if there was one). In such circumstances, a new sale contract would possibly need to be signed, and I don't believe that has happened yet. It may have been due to happen during Wednesday night's board meeting, but as we know, that meeting was derailed by the Texas injunction.

John W Henry was present at the Wednesday Board meeting, and I would imagine the reason he was there in person was to sign a new sale agreement. Irrespective of everything going on at the moment, I still believe the most likely conclusion is the sale to NESV going through.

Q. Are Liverpool still at risk of going into Administration?

First of all, it would not be Liverpool going into Administration, it would be the club's immediate Holding Company, Kop Football. As I illustrated above, that is where RBS' loans lie. By the end of the day, it seems likely that the club will either be sold to NESV, or Mill/Hicks will have repaid RBS' loans, thereby avoiding the need for administration.

If, for whatever reason, neither of the above take place, I still can't see RBS putting the club into Administration; they still have the option to extend the loan deal, and I see no practical reason why RBS would not consider this route.

Ultimately, RBS is a bank. It has no personal allegiance to Liverpool FC. If Mill financial come up with the money to repay its loans, RBS will take it. There is no emotion here; it's business, and RBS is under no obligation to show preferential treatment to LFC.

Q. Are Liverpool likely to receive a 9 point deduction from the Premier League?

I do not believe this will happen at any point. I outlined my reasoning in an article a few days ago: LFC POINTS DEDUCTION: The legal position


1. Hicks sells his shares to Mill Financial. They then pay off loans due to RBS. Mill Financial effectively become new Owners of LFC. Admittedly, this possibility is fraught with complications, but it is not impossible.

2. Mill Financial lends Hicks money to pay off the RBS loans, and Hicks pays them off the before the deadline (RBS would have to accept his payment). Hicks remains in power at LFC. At this point, Broughton's power to change the board would lapse (as the undertakings agreed as part of the RBS loan agreement would no longer be in force). Hicks would then sack Purslow, Broughton and Ayre, and fill the board with his own people.

3. Hicks fails to reach an agreement with Mill Financial. The LFC board sells the club to NESV. I believe that this is the most likely outcome.

4. The Texas Court ignores the High Court's decision and grants another injunction barring NESV from buying Liverpool FC. At this point, RBS will have no real choice but to accept the Mill Financial offer to repay the club's debts (if they want to avoid putting LFC into administration, that is); and since RBS is a bank, and is only interested in money, I have no doubt that it would put its own interests ahead of LFC's interests.

5. NESV is a barred by injuunction, or pulls out of buying LFC. Mill Financial and Hicks fail to reach an agreement. RBS extends LFC's loan instead of putting the club into Administration.

6. If it transpires that a deal between Hicks and Mill (to buy the shares) is already done, but the deal does not go through due to paperwork not being completed/submitted in time, Mill loans Hicks money (see point 2 for what happens next).

More to come: I'll be updating this post again as soon as I've clarified a few more things!

Jaimie Kanwar


  1. Yanks destroy Liverpool.

  2. You have failed to mention, however, that any sale of shares by Hicks has only talen place after the board agreed a sale to NESV - which the High Court has subsequently ratified for all intents and purposes.  Therefore, the binding agreement which Henry refers to precedes this last ditch attempt by Hicks.  It may get more messy with Mill and NESV both claiming control of the club by the end of the day - in which case a further declaratory order may need to be obtained in court, which I pray will be the end of this disgusting human being.

  3. It makes no difference who owns what. The Liverpool board have agreed to sell the club by a vote of 3-2. Since the high court has already ruled the Broughton is the sole person who can change the board and, the way I see it, has no intention to exercise that right, then it doesn't matter who owns what percentage. The only difference in ownership is who is to receive the money from NESV when the sale is completed.

  4. Ziyaad - it's a little harsh to call Hicks a 'disgusting human being' don't you think?  This is not personal, and we should not make it personal.  It's business, and whether we like it or not, Hicks has the right to fight for his busines, and the money that he's put into it.  WOuldn't anyu of us do the same if we had 100m at stake?  Yes, he's gone too far, but in terms of playing the business game, he's done it well.  if his goal was to delay the sale long enough to get other things in place, then he has arguably succeeded.  This doesn't make it right or laudable in any way, but he's done everything in a legal manner.

  5. I take your point Jamie - but supporting Liverpool is very personal to me, and H+G have brought this club to its knees.  I just wish they would go away with even an ounce of dignity, but  Hicks will not go quitely and will use every dirty trick at his disposal.  I still believe that Broughton has alredy outfoxed him and that this is nothing more than a last-ditched attempt

  6. isnt it grand, isnt it wonderful, big licks hicks and flashy gillett beaten at their own game by smarter cookies and sorted out by the scousers, they were told that if they were phoney they would be spotted a mile off.
    all they had to do was start the new sstadium, if they had done that then come unstuckm they would have been backed but they never had any intention of building it only using it to extract money.

  7. I completely understand where you're coming from :)

    Let's hope the LFC board has some more tricks up its sleeve.

  8. No longer bored of Kanwar1:26 pm, October 15, 2010

    Just to confuse things a little further, the Metro are reporting that the Premier League have denied Mill Financing from taking the 'fit and proper owners' test and will continue to take direction from Liverpool football club. 

    If Mill finance have both Hicks and Gillett's shares (no one knows either way) then I don't how this would work. Would Mill Finance have to sell their shares as the Premier League would not allow them ownership or does it mean Mill Finance can't buy the shares, in which case the deadline passes.

    With all the court action and a buyer in place, will Liverpool avoid points deduction because Hicks and Gillett effectively blocked a legitimate sale of the club? Could RBS then simply step in, take ownership and sell to NESV?

    I'm not trying to blow my own horn here but I'm degree educated and I'm struggling to keep up - what a mess!

  9. How is the "Mill Financial offer arguably preferable to the NESV deal"? Preferable for whom? Is it just because they claim to have £100m cash for the new stadium? £100m doesn't build a stadium, and, anyway NESV have also committed to a new stadium or increasing capacity to 60,000- either way it includes £100m+. Mills Financial is simply a hedge fund for god's sake- they're not people who undersatnd sport and fans. They'll just sell the club onto to some other clown who's loaded (I have my suspucions they'll keep it in the hands of Hicks). All Liverpool fans can see that the Mills Financial offer is linked to Hicks and Gillett- how any deal that has any whiff of those two can be "preferable" for our Club, I don't know. 

  10. and Yes...

    For true Liverpool Fan, they should make it personal... It is their CLUB!

    Not some Business Man or some Bankers!

    Just remember that!

    and it is the fan business to remind the Purslow...the Murdocks....the Parry....
    Don't double cross or cross the line.... Or We will make mit personal!

  11. THough it is a reality, it is sad that we have been talking more about sales procedures, injuctions, lawsuits, etc than footy.  I love this club, its history and current players/staff are important to me.  All this nonesense is starting to make the traditions, the aura, the unexplannable mystic of liverpool into a joke.  I dont care if hicks and gillet had good intentions, I dont care if they have done good for the club or not, how this situation is playing out is unexpectable, and it would certainly erase any good, and only cast dark clouds of uncertantiy.  In the end, what prevails is that we love our club, and despite these jokers I will still chear on for 'Pool!!! YNWA!!!

  12. I think the PL has denied them the chance to take the fit and proper test because the LFC board did not request it.  I think the request has to come from the club, rather than individuals.

    If the Mill deal is somehow ratified, then the Board (and the PL) will have to accept that Mill have the right to take the test.

    If Mill end up owning all the shares then they would probably challenge the PL in court to either:

    a) Allow them to take the fit and proper test,

    or if they were deemd unfit owners:

    b) Challenge to justify their ruling.

    I think LFC will avoid a points deduction because - within the meaning of the PL's rules - the club will have exercised due diligence in the management of the club.  Broughton et al have done everything possible to sell the club legitimately and avoid administration.  H+G actions have prevented that, which is not the club's fault.

    if no payment reaches RBS by the end of the day then they could conceivably put the club into administration.  This is not, however, a death sentence for the club by any means. 

    The question is *who* would RBS sell to? 

    We assume it would b NESV, but we have no way of knowing that's what will actually happen.

  13. This whole situation makes my brain ache too :-D

  14. I'm still not sure about the status of the sale to NESV! Once the deadline passes, RBS can effectively sieze Hicks' shares, and he will have to piss off. But up until then, as far as I can understand, he (or potentially Mill if he sells them his shares) can still pay off the debt and re-assume full power of ownership, the covenants he made with RBS would no longer be enforceable.

    So now even after the Texas restraining order has been lifted, I'm guessing that the LFC board and NESV have to wait for the deadline to pass in order to sign the sale agreement. But it seems that the High Court deemed RBS and Broughton had the right to finalise the deal. So what are they waiting for? Do they, or don't they have the right to sell the club before the deadline on the loan???

  15. <span><span>“</span></span>I do not understand how the shares can change hands without the acceptance of the board as the board has to be informed and as yet there is no paperwork loged with the board or company house to that effect and as yet MILLS do not have permission to become a Premier club owner without the FA approving them as owners.

    Read more: http://www.liverpool-kop.com/2007/10/comment-policy.html#ixzz12QnUfeVo

  16. Er, so I just heard they did have the right. It turns out that Hicks offered to pay off the debt and RBS and the board refused, preferring to sell to NESV. The more I hear, the more I suspect that H & G might actually have some sort of case for seeking damages. It just keeps getting worse.

    Not sure about you, but I find both Broughton and Henry deeply untrustworthy.

  17. Of course it's personal! Hicks broken promises to fans to whom the club is more important than life or death have made it personal. It may not be right, and it may not be something you agree with but it's damn well personal now for a hell of a lot of people!
    And by the way the High Court weren't too complimentary about Hicks actions - and that seemed to be on a personal level (<span>the British High Court described Hicks actions as "scurrilous, outrageous and grotesque")</span>

  18. Great article - thanks Jamie

  19. Hey lady Arsenal - I agree with you, and this is one of the things I've raised repeatedly: Unless there is a default in the loan agreement, Hicks has the right to pay it off right until the deadline.  it's just as if you or I took out a loan; as long as we paid it off before the loan was due, it would be okay.  If RBS has refused to allow him to pay off the loan, then that is clearly illegal.

    Having said that, I think it ultimately comes down to *how* Hicks wanted to pay it off.  it would have to be a cash payment coming directly from him; if the money was loaned to him by Mill Financial, that would still be okay as the money would still be coming from him.

    I can completely understand RBS's position; they seem to have taken a hit for the good ofLFC on this issue; but it could come back to but them on the a$$!

  20. Nice one Jaimie, keep it up. I for one have said I dont believe it will be possible, i've read today John wayne and his lover Gilly have admitted defeat in the sale but are still pushing forward with a legal challenge of 1 billion lol. Club is practically bankrupt and it does not have any assets worth that much so where he gets these figures is beyond me. 

    Anyway either way NESV should be announced as new owners by 7 if not tomorrow. Fingers X

  21. This is a bit of an off-topic question but can anyone explain why the ownership structure at Liverpool is the way it is? I mean how LFC have a parent company who has a parent company who has another parent company (etc).

    It just doesn't make any sense to me (though for all I know I guess many football clubs could be like this).

  22. <pre>Jaimie, I don't know what a CGLS is, but as far as I understand from this (http://clients.squareeye.com/uploads/oec/Royal%20Bank%20of%20Scotland%20%20v%20%20Hicks%20%20Ors%20%20_14%2010%2010__jud_.pdf) paper, # 26, second sentence, 'the sale process is a sale process to be conducted by the board of KFHL and not by anybody else'. The board of KFHL are Mr. Broughton et al, hence no sale to Mill possible, right? They sold to NESV on the fifth in order to give the PL the 10 days notice they demand. Any offer that was handed in after the fifth would have been too late, at least in theory, as RBS had the right to call in their loan (or rather their security) on the 15th.</pre>

  23. Jaimie

    Do you think the amount H&G want to sue for is a bit over the top? It seems a bit ridiculous to me.

  24. It's a laughable amount; and they will be laughed out of court over it.  Again.

  25. Hey anteater - any chance you can post your comment again?  It seems to have gone a bit haywire!  cheers, JK

  26. I suspect that Mill Financial now have a significant financial interest in this transaction since Gillett supposedly defaulted on his loan from them. It means they've got somewhere over 50 million quid of their money in the club which would be mostly (if not all?) lost if NESV get the club for 300 million. If I'm to be cynical then I'd suggest on that basis nothing they say can be trusted. They're doing and saying whatever they can to give themselves a half-chance to save the cash. No doubt they are capable of paying off the loan to RBS but what would that really mean? None of the money they would use is actually theirs, it's made up of other folks investments. Instead of having to pay off interest on a loan they would instead be obliged to maintain a decent rate of return. For me that doesn't add up, no hedge fund is going to see an English football club as particularly profitable. Throwing money at a new stadium wouldn't help either. Their most sensible course of action would be to on-sell at the best price which might not be such a terrible thing. I just wouldn't believe a word they say. 
    NESV are perhaps a better bet because instead of being an investment group they're actually just a bunch of super-rich dudes who fancy putting some money in an English football team. The difference is that they know the reality of buying a sporting franchise and when they talk about "winning" and "performances on the pitch" they can at least be partially trusted to be genuine about it. They did it once with one of the most revered baseball teams in the world and the results were pretty good. I certainly don't think you'll hear too may Red Sox fans complaining the way we complained about G+H.  
    Anyway, the three guys on the board who seem to have the club's interests at heart have given the green light to NESV and I'm inclined to go with their judgement at this stage. God only knows if they have deeper motives and how this might go in the future, for now it seems like a good deal and the only real court action we'll see now will come after the sale is ratified. Hicks will focus his law suit on RBS, Broughton, Ayre and Purslow, the notion that this will somehow effect the club is nonsense. They have absolutely no avenue to attack LFC, two high court rulings will back that up. I'll gladly allow their actions to slip into the background and if one day some judge somewhere decides that RBS acted inappropriately then it's not our concern. 

  27. So JK, was this what you meant by "the club will be sold and everything will be OK"?

  28. I think it's mostly talk. Is a bank really going to turn down someone who offers to immediately pay off the balance of a loan? No doubt Hicks made the offer but RBS would need to have something substantial. If he is really capable of paying off the loan then why has he not simply done it? What's more likely to me is that he's tried to convince RBS that he has re-financing from Mill in place and RBS have said "show us the cash". The simple fact that it hasn't just happened is enough to suggest that it's not even remotely clear cut. I don't think Hicks has the money and Mill are not willing to hand such a large sum over to the bank, instead possibly offering a different set of financing terms that simply aren't good enough. 

  29. No longer bored of Kanwar4:03 pm, October 15, 2010

    Can you do that though because is that not similar to paying credit with credit which I think you can't do. Its like with your credit card - you can't make a payment with another credit card, but you can transfer balances for a fee. Which I suppose is what would happen here.

    RBS are an international bank which I can't on the face of it believe they would operate in such an underhand manner especially as they are part state owned. Surely they could do without the bad press. I'd have thought with the debt being moved to their toxic debts team that they would just want their money back from whoever.

    Can't speak for Broughton and Henry, but given their standing in the business community would have a lot to lose reputation wise if they were being underhand too.

    Who will H+G be seeking damages from? Will it be the club, RBS or MB, IA and CB?

    (I'll be dropping my nickname to Dan from now on by the way ;) )

  30. Exactly.  The club has been sold (or will be very soon), and everything re LFC will be okay.  Yes, there were lots of twists and turns along the way but there was never any doubt (in my mind) that after all was said and done, the sale would go through and LFC would move forward.

    If RBS have acted unlawfully then that's their problem, not LFC's.  As  you said in your other message on this thread, H+G have no avenue of attack against LFC.  The club is insulated.

  31. <pre>Jaimie, I don't know what a CGLS is, but as far as I understand from this (http://clients.squareeye.com/uploads/oec/Royal%20Bank%20of%20Scotland%20%20v%20%20Hicks%20%20Ors%20%20_14%2010%2010__jud_.pdf) paper, # 26, second sentence, 'the sale process is a sale process to be conducted by the board of KFHL and not by anybody else'. The board of KFHL are Mr. Broughton et al, hence no sale to Mill possible, right? They sold to NESV on the fifth in order to give the PL the 10 days notice they demand. Any offer that was handed in after the fifth would have been too late, at least in theory, as RBS had the right to call in their loan (or rather their security) on the 15th.</pre>

  32. My browser obviously has a problem with the scripts on your site.

  33. It must be a text formatting issue - perhaps post the coment into notepad then post it.  I'm sure this will resolve the issue.

  34. Jaimie, I don't know what a CGLS is, but as far as I understand from this
    paper, # 26, second sentence, 'the sale process is a sale process to be
    conducted by the board of KFHL and not by anybody else'. The board of
    KFHL are Mr. Broughton et al, hence no sale to Mill possible, right?
    They sold to NESV on the fifth in order to give the PL the 10 days
    notice they demand. Any offer that was handed in after the fifth
    would have been too late, at least in theory, as RBS had the right
    to call in their loan (or rather their security) on the 15th.

  35. well Hnery already won me a little bit by saying that he is going to listen to fan and if he has meetings with sos EVEN better as I know how much that would wind you up. lol

  36. WHAT DEBT ? all it needs now is for hicks to stop acting like a spoilt child and accept he is yesterdays man at liverpool and in business too. the credit crunch well and truely crunched him and gillett, in fact i think i'll have one of those crunchy nature bars to celebrate !
    i bet george would like to grab that spade of his and lamp big tom with it.

  37. Yeah, I was going off mere claims by Hicks' people (a bit like the Texas judge!). It would all depend on the circumstances of the case, whether RBS or Broughton made any mistakes. To be honest, it wouldn't surprise me that much if they had, they were under massive pressure to make it happen, and it seems to have become quite personal for Broughton in particular. Anything unreasonable on his or the board's part would be jumped upon by Hicks as claimant. Far from an interesting area of law, so don't ask me! Let's just hope the RBS lawyers were watching Broughton like a hawk throughout his tenure, making sure it was all ok. Anyway chaps, that's not LFC's problem! Here's to a future.

  38. And I for one hope he recognizes that SOS do not represent all Liverpool supporters, but have attacked Mr. Broughton and Mr. Purslow without real reason. There are quite a few people on the Kop who think that SOS take themselves more serious than they should and that they are a bunch of thugs.

    Anyway, one thing all of us should know by now: When somebody spends 300m on a sports team or anything else for that matter, they will want to see a return. Let's hope NESV know that they will only get that return if they run the club properly, unlike our previous owners. After watching the interview with Mr. Purslow, who is a dedicated Liverpool supporter, on the official site, I prefer to reserve my assessment on our new owners for a while. He may have been tired or something, but he didn't seem absolutely convinced that this move was the right one. It may have been the best move at this given time though.

  39. but george i shot them and they wont lie down, i know tom they wont play my game either so i'm taking my ball back. do you fancy a game of cowboys and injuns tom, yer george but i want to be the cowboy oh no tom i'm the cowboy or i'm not playing.

  40. One mistake, if he, himself could be able to pay all debts to RBS by borrowing a short term loan from any institutions or somehow mill financial?. If he could do that he still has a right to control the club.

    After being free from RBS, <span>then sacked the boards (he has right to do afterward). Following,</span><span> he could sell the club to Mill financial direct. Seemed he doesn't have much creditablily with Mill financial, or may be Mill never trusted in him, or may be Mill came too late to give him a good hope after he was suffering from standing head counts. </span>

    <span>He loosed all power ever since Mr. Broughton came in, the game was over a couple months ago. </span>