I subscribe to Zeb's view that in the search for answers we must ask questions and exploring different avenues is 'cool' - but we must be careful not to open ourselves up to accusations of 'doom-mongering' by failing to emphasise when a theory is merely a theory.
Bearing the above caveat in mind:
Has anyone else seen this theory which originated with a poster on RAOTL apparently? (Apologies if it's already been posted; don't remember seeing it.) I'm assuming the scenario outlined in point 14 - that Mid Ocean provided the credit for the RBS loan to LFC is speculation, but does it seem at all credible? (If so, more questions for CP and his arrival at LFC are engendered by this one.)
1. We've paid 85.3 mill in interest since Feb 2007.
2. During 08-09 financial year interest rate payments went up from 36.5 mill to 40.1 mill. That increase is due to further finance from Kop football (Cayman) limited - owned by Hicks and Gillett
3. Trading profit in that FY08-09 was 27.1 mill, but clearly that doesn't cover 40.1 mill owed in interest. Estimates for profits for FY09-10 suggest 30-35 mill. This will drop for 10-11, due to no CL football.
4. Net debt shot up by 51.6mill during FY08-09 to a total of 351.8 mill. Gross debt figure - 378.6 mill -
5. 234mill is owed to RBS and 144 mill is owed to Cayman Limited. Interest on RBS loan is LIBOR plus 5 per cent, Cayman interest is 10% a year.
6. Accounts say this interest has not yet been paid for FY 08-09 - but this is simply added to the growing debt.
7. Cayman limited loan owed to Hicks and Gillett is repayable on demand, but cannot be progressed if it would cause the company to become insolvent.
8. 110 mill of the total 297 mill credit facility with RBS is secured by letters of credit and personal gurantee from the owners, 187 mill is secured by the club's assets.
9. The RBS loans are extremely short term in nature and keep having to be renegotiated - refinanced. Some reports suggest 250 mill repayment is due September 2010, others suggest that they H+G managed to push this back to March 2011.
10. During 2009, RBS got H+G to pay back 60 mill in return for a 12 month extension. RBS insisted that Barclays capital were brought in to find a buyer.
11. It's possible that Purslow becoming de facto CEO was also part of this deal.
12. Purslow's principal business background - is founder and still a partner (non exec board member) in mid Ocean finance. They are a private equity firm that involved the manager's of Deutsche Bank's private equity arm setting up themselves - a spinout - (Purlsow was MD of DB capital partners). It was worth about 1.3 bill - one of the biggest private equity deals in history.
13. In 2009 they branched out and formed Mid Ocean credit partners and invested in bank loans. What seems to be a mid ocean trait is to pilot their people into the companies they invest in to secure their investments and revenue streams.
14. So Mid Ocean invested in and provided credit for RBS bank loans, including the credit facilities to Liverpool. This means that the principal creditor (Purslow) to the owners is now running the show and protecting his initial investments, managing LFC finances to ensure that the loans continue to be serviced in a fashion that most suits the creditors.
15. That means trimming the squad and expanding revenues, so as to value skim by stealth. It doesn't seem to mean outright drastic, panic driven asset stripping. To protect the total value of the club is in their interest, so the club will maintain a decent market value, while extracting the returns on their investment through debt re-servicing costs. In the meantime there doesn't seem to be much incentive for them (mid Ocean and Purslow) to rush to find a buyer - LFC is a nice earner. Concerns that LFC are not solvent and creditworthy don't matter so much if the lead creditor is at the helm, and is free to implement a value skimming strategy.
16. Meanwhile, as a one day a week chairman Broughton, who is supposedly in charge of the sale seems little more than a figurehead constitutional monarch.
