Topic: Administration - what are the likely scenarios?

[SmallwoodRed]

For a while my anger at the state of the club finances combined with the seeminly imposible task of shedding Hicks and Gillett
(due to a combination of the RBS renewing finance and the ludicrous asking price for buyers) has led me to wonder whether we
would be actually better off going into administration.

Its a view based upon ignorance (I have no real knowledge about the financial implications of this) and a desire to 'take down' Hicks
and Gillet with us if we are to go down in flames also.

The current situation at the club has been described as 'death by 1000 cuts' which couldnt be more accurate.
Compound interest leading bleeding the club dry of resources for players leading to deteriorating performance on the pitch leading
to lower revenues from Europe leading to less money for players leading to players leaving leading to deteriorating performance on the pitch leading
to lower revenues from Europe  etc. etc

A slow downward spiral that is now well underway

We could continue for some time yet like this but still operate as a club.

So could Administration be the best thing for us long term?

What would the implications be for us if we were to go into adminstration?

I would be interested to know if anyone on here who has knowledge of the likely outcomes, has actually set out a likely scenario of what would happen
if say we went into Administration this Summer?

I am not saying its a solution but its something we should consider might be the best way of bringing to and end this nightmare.

What are peoples views?

[Effes]

led me to wonder whether we would be actually better off going into administration.

I am not saying its a solution but its something we should consider might be the best way of bringing to and end this nightmare.

What are peoples views?

So to bring in an end to "this nightmare" you'd accept armageddon?

Have you taken many drugs in your lifetime?

[reds88]

I don't think it's something the fans can force.  The club will go into administration when there is no money left for the club to fulfill their obligations.  In simplest form is able to field a team to complete the fixtures in the league and other competitions.  Of course there should be money to pay wages, operating expenses etc.  I don't think there's immediate danger of that but it could be real if the club is unable to refinance whatever loans at the facility maturity date and/or the club remains unsold.

Should the club go into administration there'll be the deduction of points which could mean the club being in relegation danger, missing out of Europe, players wanting to leave, clubs offering fire sale prices etc.  The club will be deeper shit.

[SmallwoodRed]

So to bring in an end to "this nightmare" you'd accept armageddon?

Have you taken many drugs in your lifetime?

If you read the read the OP instead of trying (and failing) to be a smart arse you will have noted I asked the question of what the implications are with Administration.

You would also have noted that I was not saying it was better simply asking people who may know better than me what could happen.

Its funny - when i posted this I wondered how long it would be for a bell end to come up with something like you did instead of reading and answering the post.

Congratulations. You won.

[xerxes1]

The short answer is that it does get rid of G&H. But the turmoil which would affect the footbaling staff both in terms of those who are got rid of, and those who go because they want no part of a collapsed regime, would set the club back several years. The points deduction would be the least of our worries.

I think we are a long way from Administration. The senior debt to RBS at £237m is manageable. Our income over the past couple of CL years has been around £168m. Newcastle's income in their last PL season was around £105m, which gives you some idea of where our new reduced level of income is likely to sit. We simply don't know what the loan terms with RBS are. But it is possible that it could be extended again.It is also possible that another Bank could take on those terms. Furthermore G&H's maladministration of our Club is as much won't pay, as can't pay. They are still both very rich men. The problem is that they let the businesses they own stand or fall on their own merits. No bail outs. IF we were teetering on Administration, and their reputed £130m personal stake in the Club was at risk, that might be enough for them to change their ways.

Now when I refer to the senior debt as being manageable. I do not mean with the current structure. The accounts show that we are haemorrhaging cash. It assumes that we cash in our chips, sell our stars, and reduce our debt. As it stands, we can still do that to avoid the sceptre of Administration.

The immediate challenge is this. We have in Torres / Gerrard/ Masch/ Reina , the spine of a Title winning side. But we cannot afford to provide the supporting cast to mount a serious campaign now. And there is Man City fielding players who in normal times would have played for us, and a resurgent Spurs with a new stadium coming down the track. If we sell them the dream is over, but the club, and G&H are safe. But if we don’t, they may leave anyway, and in a few years time we are still debt ridden – but with nothing to sell.

It should also be remembered that Administration is as likely to attract asset stripping bargain hunters as it is cash-rich saviours. There are no easy solutions I am afraid.

[SmallwoodRed]

The short answer is that it does get rid of G&H. But the turmoil which would affect the footbaling staff both in terms of those who are got rid of, and those who go because they want no part of a collapsed regime, would set the club back several years. The points deduction would be the least of our worries.

I think we are a long way from Administration. The senior debt to RBS at £237m is manageable. Our income over the past couple of CL years has been around £168m. Newcastle's income in their last PL season was around £105m, which gives you some idea of where our new reduced level of income is likely to sit. We simply don't know what the loan terms with RBS are. But it is possible that it could be extended again.It is also possible that another Bank could take on those terms. Furthermore G&H's maladministration of our Club is as much won't pay, as can't pay. They are still both very rich men. The problem is that they let the businesses they own stand or fall on their own merits. No bail outs. IF we were teetering on Administration, and their reputed £130m personal stake in the Club was at risk, that might be enough for them to change their ways.

Now when I refer to the senior debt as being manageable. I do not mean with the current structure. The accounts show that we are haemorrhaging cash. It assumes that we cash in our chips, sell our stars, and reduce our debt. As it stands, we can still do that to avoid the sceptre of Administration.

The immediate challenge is this. We have in Torres / Gerrard/ Masch/ Reina , the spine of a Title winning side. But we cannot afford to provide the supporting cast to mount a serious campaign now. And there is Man City fielding players who in normal times would have played for us, and a resurgent Spurs with a new stadium coming down the track. If we sell them the dream is over, but the club, and G&H are safe. But if we don’t, they may leave anyway, and in a few years time we are still debt ridden – but with nothing to sell.

It should also be remembered that Administration is as likely to attract asset stripping bargain hunters as it is cash-rich saviours. There are no easy solutions I am afraid.

Thanks Xerxes1 - puts things nicely in context.
As feared - H&G truly have us by the balls

[Alan B'Stard]

I always thought administration only comes into play when a team or company cant afford to repay their debt? If this is not the case then Man Utd would have entered administration years ago. 

[stockdam]

I always thought administration only comes into play when a team or company cant afford to repay their debt? If this is not the case then Man Utd would have entered administration years ago. 

It occurs when the creditors want their money back and there isn't enough money to pay it.
Normally the creditors will not ask for the debt to be paid if the interest is being paid.

If you can't pay the interest then the creditors get nervous and then they can ask for all of the money back.

[SmallwoodRed]

The most likely outcome of one of the parent companies going into administration would be that a buyer would have to "pay" an amount buy the club which entirely cleared the bank debt.  (Depending on identity and credit status, the bank might not insist on immediate payment, but might agree terms for interest, security, guarantees and timescale etc)

The costs of adminstration will, in principle, fall to be met by the new buyer too.  What I dont know is whether or not the banks would have the ability or inclination to rely on guarantees received from GG and TH in order to offset Kop's indebtedness, and thereby reducing the amount of debt that the new owner would have to take care of.

In addition, the buyer would have to make sure the club paid all "football creditors"  (players, other clubs, etc).  Failing to do so can mean severe penalties from UEFA and PL and Football League (coz that'd be where we might end up).

In LFC's case, it's likely that the other non-related creditors would also be paid in full; although that is unusual in an administration.   Obviously if our debts get much worse that they are now, then that might be different.

Related creditors, such as G&H, would not necessarily be paid.  Basically it'd depend on how much the club's buyer was willing to pay.  If a competitive auction took place, and the price was high, then maybe there'd be a few quid left for G&H.


IMHO, the banks have already decided that Kop has had long enough to put its affairs in order.  They've decided that if Kop was able to reduce the debt to a manageable level, by bringing in fresh investment, then it would have done so already  (having been attempting to do so for more than a year). 

The debt is not manageable; the interest payment caused significant losses for the UK companies in the year to 31 Jul 09.  Even though the debt is lower this year than it was for the bulk of last year, things are not going to improve sufficiently.  A higher income this current year is likely (being in 08/09 affects CL money for 09/10; semis of EL offsets leaving CL early) and so we may even show a profit for the year to 31 July 2010 (especially considering transfer fees).  However, the year to 31 Jul 2011 is when the effects would really be felt.  If G&H were to stay in charge, they'd have to seriously consider player sales and salary reductions to pay the bills.

Fortunately the bank seems to have decided that is not going to let this happen.  It is going to insist that its security (ie the club) is sold while it still can fetch a price higher than the debt.  This, if it happens, is a much better solution for LFC than adminstration.

Any administration means, at least, a 9 points penalty.

It can also mean:

- transfer ban
- ban from UEFA competition
- expulsion from PL and/or further points penalties if the adminstation fails to result in an agreement which is accepted by the relvant creditors, and includes full payment of all "football creditors"

Thanks for that - really useful info.

So from what you are saying this does seem to indicate that Broughton has been brought in to ensure a sale takes place i,e it is a forced sale?

[incredibleL4ever]

The short answer is that it does get rid of G&H.

Is this actually the case?
I read somewhere that if the creditors accept the voluntary arrangement in Portsmouth case the company will emerge from administration and Balram Chainrai remains as owner with reduced debts payable over (probably) 5 years. 
In many other administration situations however the administrator will sell the club to someone else and he can do this without reference to the current owners.  In the case of Pompey there were no buyers willing to take on the mess.

[incredibleL4ever]

The other point is administration is reached when you run out of cash.  Liverpool is not near that position yet. 

[Alan B'Stard]

It occurs when the creditors want their money back and there isn't enough money to pay it.
Normally the creditors will not ask for the debt to be paid if the interest is being paid.

If you can't pay the interest then the creditors get nervous and then they can ask for all of the money back.

Oh i see. If thats the case we are no where near that stage then. Having a high revenue stream wouldnt make them panic just yet.

[mccred]

Good thread.
Its something I've thought about but am also totally ignorant of the probable results. My logic being that these two c*nts are just trying to sit this out for as long as possible hoping a fairy god mother is going to come along and they walk away with millions. But back in the real world where the rest of us live, are situation just gets worse by the week and it would be better to get it out the way while owing 350 million, than in two years time when its 450 mil.
Losing the nine points would be the last thing I'd worry about. Short term loss for a longer term gain. But it sounds as though admin would be every bit of the lottery we've got now and things really could get one hell of a lot worse.

[Dr Cornwallis]

I always thought administration only comes into play when a team or company cant afford to repay their debt? If this is not the case then Man Utd would have entered administration years ago. 

In fact, I think administration comes when a club posts losses for three successive years?
Not sure who told me that, or why, but it was recent and I don't know who or why.  The rumour was that this was the sole reason that United accepted the Ronaldo bid from Madrid.

[Mackeroo]

In fact, I think administration comes when a club posts losses for three successive years?
Not sure who told me that, or why, but it was recent and I don't know who or why.  The rumour was that this was the sole reason that United accepted the Ronaldo bid from Madrid.

Well if that's the case we'll be in administration soon. Haven't we posted losses for two consecutive years now?

[Red_Isle_Chap]

I think we are a long way from Administration. The senior debt to RBS at £237m is manageable. Our income over the past couple of CL years has been around £168m. Newcastle's income in their last PL season was around £105m, which gives you some idea of where our new reduced level of income is likely to sit.

Just on the Newcastle point. I'm not sure you can actually say that, as what's the difference in average game earnings between Anfield and St James'? They hold 52,387 (according to wiki) whereas we hold 45,362 (I think) While it might not seem a vast difference, it'll make a dent on the figure i think.

Just thinking aloud really.

[RJH]

Is this actually the case?
I read somewhere that if the creditors accept the voluntary arrangement in Portsmouth case the company will emerge from administration and Balram Chainrai remains as owner with reduced debts payable over (probably) 5 years. 
In many other administration situations however the administrator will sell the club to someone else and he can do this without reference to the current owners.  In the case of Pompey there were no buyers willing to take on the mess.

It's happened before that a club goes into administration and then the club is essentially sold to the owner again, or to a consortium involving the owner.

In happened to Chester City with the Vaughan Family, and to Leeds with Ken Bates.

[Redguard]

But upon that basis -  are G&H 'paying the debts on time' sufficiently to satisfy the banks, or will there come a time for remedial action?

[SmallwoodRed]

But upon that basis -  are G&H 'paying the debts on time' sufficiently to satisfy the banks, or will there come a time for remedial action?

I think thats the big question. Certainly from what Jack was saying yesterday it would seem the banks arent satisfied. Brings us back to the big question as to whether this really is a forced sale



Quote from: Jack Slater on Yesterday at 12:37:51 PM

IMHO, the banks have already decided that Kop has had long enough to put its affairs in order.  They've decided that if Kop was able to reduce the debt to a manageable level, by bringing in fresh investment, then it would have done so already  (having been attempting to do so for more than a year).

The debt is not manageable; the interest payment caused significant losses for the UK companies in the year to 31 Jul 09.  Even though the debt is lower this year than it was for the bulk of last year, things are not going to improve sufficiently.  A higher income this current year is likely (being in 08/09 affects CL money for 09/10; semis of EL offsets leaving CL early) and so we may even show a profit for the year to 31 July 2010 (especially considering transfer fees).  However, the year to 31 Jul 2011 is when the effects would really be felt.  If G&H were to stay in charge, they'd have to seriously consider player sales and salary reductions to pay the bills.

Fortunately the bank seems to have decided that is not going to let this happen.  It is going to insist that its security (ie the club) is sold while it still can fetch a price higher than the debt.  This, if it happens, is a much better solution for LFC than adminstration.

[incredibleL4ever]

But upon that basis -  are G&H 'paying the debts on time' sufficiently to satisfy the banks, or will there come a time for remedial action?

RBS will have to look at what is best for them. That is their only interest.  If they believe that they cannot get their money back in the normal way...i.e. the club paying the interest and ultimately paying down the capital, they could force Kop Holdings ltd and/or Liverpool FC Ltd into receivership or liquidation.  It is likely that H&G would move the club into administration prior that happening.

The legal point is that administration is an option for the club, not its creditors.  Administration give the company protection from legal action by the creditors for the period of administration.  The creditors can move to have the club placed in receivership or have it wound up (aka liquidation).  Administration prevents that happening for a while, IF the court agrees that administration is a better option. 

[xerxes1]

Just on the Newcastle point. I'm not sure you can actually say that, as what's the difference in average game earnings between Anfield and St James'? They hold 52,387 (according to wiki) whereas we hold 45,362 (I think) While it might not seem a vast difference, it'll make a dent on the figure i think.Just thinking aloud really.

Newcastle's matchday income will have exceeded ours. But I am assuming that we dont get relegated and we get more prize  and TV money from having finished higher up the league (hopefully). It was intended as a rough fix only.

[xerxes1]

If Kop Football Ltd or Kop Football Holdings Ltd went into administration, it is virtually certain that LFC will end up with new owners.  This is because KF and KFH have no assets apart from LFC.  So - almost certainly - the administrator, and cresditors, will decide that a sale of that asset is in the creditors best interests.  Theoretically a new company owned by GG or TH could bid.  But in practice, I dont anticipate such a company being the highest bidder.  There would be other obstacles too.

Jack, in the same way that I will correct you when you are wrong. Kudos when you are right. I had never considered this scenario.

G&H allow the Club to plunge into Administration, but buy it back again, shorn of its debts like Ken Bates did, because the club is in such a state that no-one wants to buy it. Grim indeed.

[Red_Isle_Chap]

Newcastle's matchday income will have exceeded ours. But I am assuming that we dont get relegated and we get more prize  and TV money from having finished higher up the league (hopefully). It was intended as a rough fix only.

Ahhh good points. Like i say, was just thinking aloud. Then again, doesn't getting relegated get you shit loads in "parachute" payments?

[Crackerjack Sam]

Administration would just perpetuate the donward spiral the clubs' falling down. What would it mean? We'd still have a debt to pay. Players would leave quicker than you could say exit and everything Liverpool FC was will be destroyed. This is sabotage of the highest order and there are 4 people to blame. Everybody knows how they are! If you don't, you should by now.

[fefs]

This is sabotage of the highest order and there are 4 people to blame. Everybody knows how they are! If you don't, you should by now.

so its Rafa, Lucas, Kuyt and who is the 4th???

[starskysdad]

Degan?

[McManamanamanaman]

Jack, in the same way that I will correct you when you are wrong. Kudos when you are right. I had never considered this scenario.

G&H allow the Club to plunge into Administration, but buy it back again, shorn of its debts like Ken Bates did, because the club is in such a state that no-one wants to buy it. Grim indeed.

Why is that legal??Like the whole leveraged buy out thing, I'm amazed they can get away with it. They would have some balls if they put us into administration and then bought us back on the cheap, they are unpopular enough as it is without ruining the club further simply to preserve their profit.
I can't see it happening for a while yet though, like Pompey there would be a firesale of players first before they considered that eventuality.

[xerxes1]

In any event, if administration occurs then SOS and other groups will have the opportunity to bombard the PL and UEFA with petitions to say that G&H are not fit and proper.  Almost certainly the PL would use its full powers (whatever they may be) to block G&H if necessary. 

G&H would still pass the fit and proper persons test now. Do not confuse a colloquial definition of the phrase "fit and proper person"with the FA rule.
http://www.thefa.com/TheFA/RulesandRegulations/~/media/Files/PDF/TheFA/FA%20Handbook%2009%2010/Fit_and_Proper_Persons_pg292-304.ashx/Fit_and_Proper_Persons_pg292-304.pdf

[west_london_red]

G&H would still pass the fit and proper persons test now. Do not confuse a colloquial definition of the phrase "fit and proper person"with the FA rule.
http://www.thefa.com/TheFA/RulesandRegulations/~/media/Files/PDF/TheFA/FA%20Handbook%2009%2010/Fit_and_Proper_Persons_pg292-304.ashx/Fit_and_Proper_Persons_pg292-304.pdf

But can you really see lenders ready to back G&H after another administration/default?

[xerxes1]

But can you really see lenders ready to back G&H after another administration/default?

No.

[toomanysteves]

I wonder though if administration may not actually, in the end, be the best possible solution for us as fans. If an administrator were to be appointed his function would be to asses the viability of the company whilst the company has court protection from creditors. During this period the interested parties would hopefully come out of the woodwork and put forward their bids for the club. I am working on a presumption that LFC is still a prized asset that would attract many investors who, to date, have been put off by H&G's ridiculous pricing of the club.

H&G would be out of this equation and the price would be set by the administrator subject to court approval. I think that the only boil to be lanced is H&G and can't see that any of the other creditors and issues (bar the 9 point deduction) would be a concern. Even then i reckon the vast majority of LFC supporters would take a 19 point reduction next season if it meant goodbye to H&G.

The problem of course would be the identity of the incoming party. We would be hostages to fortune on that one. As for a "fire sale", i do not see that happening in administration. In this particular case i would have thought  the administrator would be more keen to see a sale of the company as a whole rather than selling off individual assets. Transfer fees dont come in one lump sum so the idea of getting 120m for gerrard and torres is not viable for an administrator unless paid down immediately.

For administration to happen RBS would genuinely have to have lost patience with H&G. the Times reports today suggest that they are losing patience and that they assurances they gave Broughton about extending credit were verbal only. So, theoretically they could refuse to extend credit in July. H&G would then have 3 options:
1.put their hands in their pockets to pay off all/part of the RBS/Wachovia loan
2. sell; no longer being able to hold out for £600m or whatever ridiculous sum it is they are seeking
3. administration, allowing RBS to sell the club

Given that option 3 takes it out of their control i think they would have to opt for option 1 or 2. Which means administration is not going to happen unless RBS/Wachovia make a demand for repayment and either H&G can't/won't pay funds from their own resources or cant find a buyer.

[G1 Jockey 4(betfair)]

i think its time UEFA showed they were actually bigger than the g16 which they clearly are not at present.
time to stick by their guns and not allow any club with debt to play in their competitions.

[Dancingpants]

Realistically, how far are we from administration in our current position? 6 months? 1 year?

What if the club gets 60m cash from this transfer window? (Gerrard to RM, Mascherano to Barca plus a few others) The yanks might just do that to secure more time to facilitate the sale of the club at the price they want.

All they need to do is to find a 'yes man' manager that would come out and say that Gerrard and Mascherano needs to go to give the club a fresh start and off they go. $ in the bank.

[shelovesyou]

Administration is a long long way off.
Our situation is shit and we need a new ground but we are a long way off administration.

[TheoRacle]

Administration is a long long way off.
Our situation is shit and we need a new ground but we are a long way off administration.

Lose the shirt sale income from Gerrard and Torres when they're sold, no CL Income for 2010/2011, no CL or Europa income for 2011/2012 +debts >40mill p/a = administration 2013/2014.

"Our situation is shit" is an understatement.

[incredibleL4ever]

Realistically, how far are we from administration in our current position? 6 months? 1 year?

What if the club gets 60m cash from this transfer window? (Gerrard to RM, Mascherano to Barca plus a few others) The yanks might just do that to secure more time to facilitate the sale of the club at the price they want.

All they need to do is to find a 'yes man' manager that would come out and say that Gerrard and Mascherano needs to go to give the club a fresh start and off they go. $ in the bank.

Currently we can pay the interest to the bank, pay the wages and other creditors.  The only thing that is not being paid is the interest on the loan from Kop Cayman which is about 15m per annum.

The isssue is if revenue starts falling without the CL, PL bonus and sponsorship bonus, faster than costs are cut then at some point we will not be able to pay our way.  But we are at least a couple of years from that.

Another possibility is that RBS would call in the debt, which would force H&G to go for administration (and maybe it would not be allowed by the court in such circumstances).  RBS would call in the debt if they felt they were not going to be repaid by the group and there was an alternative way they could get paid, i.e. a buyer.  A buyer who offers more than RBS and Wachovia are owed but less than the total debt would be unacceptable to H&G but acceptable to the banks as they rank first.
That would be a price of about 300m which is really what the club is worth.

[shelovesyou]

Lose the shirt sale income from Gerrard and Torres when they're sold, no CL Income for 2010/2011, no CL or Europa income for 2011/2012 +debts >40mill p/a = administration 2013/2014.

"Our situation is shit" is an understatement.

Yes it is a n understatement but nobody knows if we are going to sell Gerrard or Torres.
If we did the money earned would far outweigh the shirt sales.
But like I say nobody knows.

[Diomedieocre]

If You were one of the greedy c*nts that owned us and was looking to make money through the exit how would you do it? Im shit with money,thats why i get our lass to sort out the bills and what not.....but(im up for being told thats immpossible) this is what i`d do...

Hike the price up to something that nobody in their right mind would pay....then commense the asset strip, make 120m from player sales(Stevie,Nando,Mash,Benny?) pay off half the debt to RBS with that 120m..leaving what..another 120m owed to RBS. Then lower the price of the club...to say 200m...promising to pay off the other 120m to RBS out of the club sale money wiping that debt out and leaving me with 70-80m and leaving the new owner to pay me back my personnal loan and interest over a certain period....

RBS would be happy, i`d be happy with my half of the 70-80m and loan interest and the club will have been sold for a much more reasonable price than the initial 600m price tag. Does that make sense to anyone?, am i talking rubbish? would it be possible? Obviously that would only work if i could find a buyer, maybe thats what RBS are doing bringing in Broughton and Purslow?.

[Lush is the best medicine...]

Yes it is a n understatement but nobody knows if we are going to sell Gerrard or Torres.
If we did the money earned would far outweigh the shirt sales.

but we wouldnt be able to get any new sponsor deals and existing ones would be negotiated at a much lower rate with lucas and ngog as the guys selling the product instead of torres and gerrard

[west_london_red]

but we wouldnt be able to get any new sponsor deals and existing ones would be negotiated at a much lower rate with lucas and ngog as the guys selling the product instead of torres and gerrard

Its lots of things, the SkyTV money is partly based on how many games they show. The more we fall in to mediocrity (by selling our best players) the less games they will show. We would also get less PL prize money if we finish lower down the table. Obviously there is the CL money we definitly wont be getting again if we sell the stars too.