Topic: Financial Results these are a year old

[Keens]

If the banks loan and credit agreements are being met how can we be technically insolvent? IF a sub-ordination agreement is working, it works, and we are solvent. It doesnt matter how you do it.

However I agree that if G&H remain, and there is no fresh cash, Administration is the inevitable consequence in time.

You are technically insolvent because if there is no sub-ordination agreement, regardless whether the bank lends.....YOU ARE INSOLVENT! (The agreement is the only things restoring solvency, because you are back-ranking your claim, as it now becomes a residual claim)

A back-ranking agreement (sub-ordination) means in core. I (the creditor) will not claim repayment of my loan account until such time as the company's assets fairly valued, exceed its liabilities)
So if the liabilities are more than the assets, you ARE INSOLVENT!

[Keens]

Also the bank WILL NOT lend anymore because that is reckless lending practise and I will report them! They can only re-negotiate the terms of the original agreement (extend short term facilities) and in the country I live in that is "deemed" to be an "ACT" of insolvency!

[Keens]

Its actually pointless arguing with a fellow red because we are all hurting at this ridiculous situation. I wish I had never seen those accounts as they make for depressing reading!

[silver 5 star]

I don't believe that the power of the LFC brand is "meaningless" as was said earlier.

There are very few global clubs and while nobody has yet managed to tap in to the millions of fans worldwide in terms of revenue generation that's not to say it won't happen in the future.

My guess is that if anyone is likely to come in and buy us it will be again be an oil rich Arab investor or possibly wealthly individuals from India or China, keen, like Abramovich was, to raise their own profiles in the West.

Football may well not be the most profitable form of investment but if you want to invest at the top level and acquire a major name in the world game, then Liverpool will be right up there.

And groundshare? No.

If there is one sure fire way to dilute the brand - of both clubs- then sharing an identikit stadium with no history to celebrate or call upon is it.

[Keens]

I was actually thinking about something, I think Purslow mentioned that subsequent to these accounts, part of the refinancing of the debt, the owners had to reduce the loan, unless additional shares were issued all it possibly means is that there is no change in the debt structure because all that would have happened, is that the RBS loan would have decreased and the shareholders loan account increases. The actual consolidated liabilty would not have changed.

Purlows has also said that the loan had to be reduced by an additional 100 mil (RBS condition) which the owners do not have hence they where willing to dilute their shareholdings because additional equity or an outright sale is the only way we can come out of this...

[TSC]

Based on some of the answers from the finiancial experts, G&H will surely not let the club go into administration if it means they'll get so much less for it than theyre hoping.  It's not like they haven't got cash to put in should the worst come to the worst.  They are just avoiding putting any money in for as long as they can. 

Hicks has gone into default in the states re payments of loans.  He'll never use his own dosh to prop us up - it's not the way he does business.


More likely to meet short term commitments through 'loaning' the club money from one of his other companies and then charging the club interest on the loan, thereby growing the debt on the club.

[Alan_X]

I don't believe that the power of the LFC brand is "meaningless" as was said earlier.

There are very few global clubs and while nobody has yet managed to tap in to the millions of fans worldwide in terms of revenue generation that's not to say it won't happen in the future.

My guess is that if anyone is likely to come in and buy us it will be again be an oil rich Arab investor or possibly wealthly individuals from India or China, keen, like Abramovich was, to raise their own profiles in the West.

Football may well not be the most profitable form of investment but if you want to invest at the top level and acquire a major name in the world game, then Liverpool will be right up there.

And groundshare? No.

If there is one sure fire way to dilute the brand - of both clubs- then sharing an identikit stadium with no history to celebrate or call upon is it.

I didn't say it was meaningless per se - it's just not the big deal that people make it out to be and is therefore irrelevant to a buyer looking for investment.

The major income streams for Liverpool are gate money, tv revenue, prize money and merchandising. The majority of overseas money is from Premier League tv sales. Global merchandise sales are peanuts.

If you want to raise your profile by being attached to Liverpool why buy the club? Stadium naming rights or shirt sponsorship will be much more high profile.

[xerxes1]

So if the liabilities are more than the assets, you ARE INSOLVENT!

If they were, we would be. But they are not, so we are not. The club should be worth at least £250m.The playing staff another £200m. The RBS debt is £237m. The £130m G&H put in is their problem. Even next year our income should exceed £80m. Although it is true that player sales would further reduce the value of the club, the debt is proportionately reduced too.

We are in serious trouble, but save the phrase insolvent for when we are.

[silver 5 star]

The point I suppose I am trying to make is that in terms of profile LFC are still one of the biggest names in world football. Not a Spurs or a Villa or a Man City. Bigger in name than Chelsea, Arsenal.

With that in mind we must still be a good option for the right investor.

A much as Moyes was in the papers today taking up everton as am investment , they are literally not in the same league as us in terms of profile and revenue potential.

There will be buyers out there, the sticking point will be the price.

Hopefully Broughton can strike a deal at the right price and get shot of the septics.

[mccred]

Really struggling to understand the financial talk and dont understand how its become this bad? Am I wrong in assuming that if we go into administration then the club is only liable for the 237 million owed to RBS? H&G can whistle for the rest cause its just money they've put in thats unsecured against the club?
Where's the money gone? Its not like we have no income. If the interest is 40 million, we still lost ten million on top.  If this refi is for another year then are we just going to be another 50 million further in debt in a years time.
Obviously dont want the club to go into administration but are we not reaching the point where that is our best option? Wouldn't it be less painful now than in a year or two's time, cause some of the figures that are being quoted means there is no chance were going to be sold. RBS most know this and seem to be sucking as much money from us now that they can, knowing when we go bust, their first in line for payment, so can't lose?
I think if I had H&G and the piece of scum Mackenzie in a room and a gun with two bullets, Mackenzie would get away with just a pistol whipping.

[Lush is the best medicine...]

Really struggling to understand the financial talk and dont understand how its become this bad? Am I wrong in assuming that if we go into administration then the club is only liable for the 237 million owed to RBS?

of that money £110m of that is guaranteed by H&G

not entirely sure if kop holdings is liable for the clubs debt - if it isnt i wouldnt be shocked if the club was sold for around £300m and they defaulted on the rest of the money

A much as Moyes was in the papers today taking up everton as am investment , they are literally not in the same league as us in terms of profile and revenue potential.

not to mention we have 2 of the most marketable footballers on the planet, a world class coach and some of the top players in the world in their position (reina, masch, ngog) then it doesnt seem like that bad of an investment really, think there will be people just the price will be the sticking point

[El Rey, por favor]

of that money £110m of that is guaranteed by H&G

not entirely sure if kop holdings is liable for the clubs debt - if it isnt i wouldnt be shocked if the club was sold for around £300m and they defaulted on the rest of the money

not to mention we have 2 of the most marketable footballers on the planet, a world class coach and some of the top players in the world in their position (reina, masch, ngog) then it doesnt seem like that bad of an investment really, think there will be people just the price will be the sticking point

N'gog? Is that a fishing attempt?

[ttnbd]

So if the liabilities are more than the assets, you ARE INSOLVENT!

Only technically, as it assumes that the value of the clubs assets are as stated on the balance sheet.  That is not the case, and it would require all liabilities to be called in immediately.  £100m of this cannot be done as per credit agreements to prevent insolvency.

If any of the companies in the group were to be made insolvent it would not be the club, but the higher group companies.  The club would be sold as a going concern on it's own.

[LiamG]

I fear for our future yaknow, Theres no many people these days willing to splash that much cash on a football club!

[El Rey, por favor]

Just Pray, that's all we can do. That we get new owners by September.

[BobbyDavro]

Just Pray, that's all we can do. That we get new owners by September.

Praying is pointless.   There is no god and even if there was, there's no way he'd bend the laws of the universe to accomodate your prayers.

Sorry.

[El Rey, por favor]

Praying is pointless.   There is no god and even if there was, there's no way he'd bend the laws of the universe to accomodate your prayers.

Sorry.

[DonkeyWan]

Can I just get this straight. If we don't sell, are we then bankrupt. And if we do sell, are we asking the new owner to pay off £350 million worth of debt incurred by the previous owner? Who the hell would pay that?

[redprodigal]

Can I just get this straight. If we don't sell, are we then bankrupt. And if we do sell, are we asking the new owner to pay off £350 million worth of debt incurred by the previous owner? Who the hell would pay that?

1. No, we're not bankrupt but the owners might have to sell off some players to pay the debt when the re-finance deadline is up.
2. The Yanks' asking price would include the debt plus their profit so don't look at it like they are paying off the previous owner's debt, just think of it as paying the asking price.

[Ronnie1932]

Praying is pointless.   There is no god and even if there was, there's no way he'd bend the laws of the universe to accomodate your prayers.

Sorry.

That is the funniest thing I have heard you say my man. Killed me 

[Jack Slater]

The club would be sold as a going concern on it's own.

Even if that happens, the club still gets a points deduction.

I think the chances of the club actually shutting its doors are very remote.  It didnt happen to Leeds (even after the club company itself went under, let alone a parent company), and it shouldnt happen to us either.

However, if a parent company did go bust, then that company's administrator would be able to decide what to do with all of LFC, and could, of course, decide to sell players and then to acquire those funds BEFORE selling the club itself as a going concern.

I'm more optimistic than I havve been at any time since 2007 that this will NOT happen.  IMHO, RBS is playing it right, and G&H are bowing to the inevitable, and are going through with a sale before its too late for themselves.

I aint saying that we'll never go into administration,because the new owners are bound to struggle too.  But I dont think that RBS are going to have to use that weapon against G&H.

[Jack Slater]

... if we do sell, are we asking the new owner to pay off £350 million worth of debt incurred by the previous owner? Who the hell would pay that?

G&H will want a lot of things.  It doesnt mean that they'll get them.

They (especially TH) are good at talking up the price of things that they're trying to sell.  But there's no rule (obviously) that a buyer has to guarantee that G&H walk away with a profit.

I can't prove what G&H have actually put in out of their own money.  (Pretty sure it is zero).  However, if they sell for less than they've put in, then that just means that they've made a loss.

The one thing that the buyers and sellers have to do between them is make sure that the banks are satisfied.  If £240m is owed to the banks, then that either has to be cleared, or else the banks have to be content for the debt to be transferred to the buyer.  Ideally G&H would end up having to pay the 'buyer' to take over (although I dont think our price is likely to be that low.

[ttnbd]

Even if that happens, the club still gets a points deduction.

Not if the club gets sold before any administration of the holding companies.

[manifest]

Praying is pointless.   There is no god and even if there was, there's no way he'd bend the laws of the universe to accomodate your prayers.

Sorry.

well, except when stevie G is stepping up to take a pen......

[Lush is the best medicine...]

Ngog? Is that a fishing attempt?

big time

[Keens]

Only technically, as it assumes that the value of the clubs assets are as stated on the balance sheet.  That is not the case, and it would require all liabilities to be called in immediately.  £100m of this cannot be done as per credit agreements to prevent insolvency.

If any of the companies in the group were to be made insolvent it would not be the club, but the higher group companies.  The club would be sold as a going concern on it's own.

I'm not ofay with British or American law but the almost half of the debt is secured against the club just over 100mil so if Hicks and Gillet default RBS would call in that portion. In addition to this, though the shareholders claim is residual in nature, it is still a debt.

Looking at the AFS, the only solution is an outright sale. You cannot borrow further and if Hicks and Gillet put in more funds, their loan account just increases....

Anyway, its a bad situation

[Niru Red4ever]

G&H will want a lot of things.  It doesnt mean that they'll get them.

They (especially TH) are good at talking up the price of things that they're trying to sell.  But there's no rule (obviously) that a buyer has to guarantee that G&H walk away with a profit.

I can't prove what G&H have actually put in out of their own money.  (Pretty sure it is zero).  However, if they sell for less than they've put in, then that just means that they've made a loss.

The one thing that the buyers and sellers have to do between them is make sure that the banks are satisfied.  If £240m is owed to the banks, then that either has to be cleared, or else the banks have to be content for the debt to be transferred to the buyer.  Ideally G&H would end up having to pay the 'buyer' to take over (although I dont think our price is likely to be that low.

But they are making profit right now from the interest they are getting from us.

[ttnbd]

I'm not denying the money loaned by the owners isn't debt.  All I am saying is that from a solvency point of view due to the clause in the credit agreement it need not be worried about as it cannot be called if doing so were to make the companies insolvent.

So from a purely solvency point of view it should, in my opinion, only be the other liabilities to be taken into account.  That isn't to say the inter-company loans shouldn't be taken into account when looking at the much bigger picture though.  So at present if the owners had borrowed that £140m they loaned the companies then if they default there's nothing they can do to force the companies to pay up if my understanding of it is correct.  It gives some protection to the club.  This should hopefully help the club be sold.

[ttnbd]

But they are making profit right now from the interest they are getting from us.

Of which nothing has been paid yet.

[Niru Red4ever]

Of which nothing has been paid yet.

and hence it shot up to some 145 mp, right? Sorry, got confused.

Anyway, if things do get so bad that we may enter administration; won't H&G try to save their money by selling major assets. Surely, they with all their cunning won't like to lose 145mp? Or are their hands tied in some way?

[Jack Slater]

I'm not ofay with British or American law but the almost half of the debt is secured against the club just over 100mil so if Hicks and Gillet default RBS would call in that portion.

I dont quite follow you (my fault, not yours).

However, to be clear, all of the debt is secured against the club in reality.  There's no such thing as default on a part of the loan which happens to be less than £110m, which results in the lenders being able to pursue G&H personally without triggering the lender's ability to rely on the security of the club and club assets.  (Sorry if that isnt what you meant).


As an aside:

According to the accounts, there is £110m in letters of credit and guarantees from G&H.

This is interesting because the Jan 2008 financing was "supported by a combination of owner cash, letters of credit and personal guarantees totaling £225 million."  [Source:  Official LFC announcement, as per website].

So, if we were to assume that the guarantees and letters of credit have not been reduced (not necessarily a safe assumption; they may have been time limited and G&H were unable to provide replacements) then that would imply there was £105m of "owner cash" which is no longer "supporting" the finance.  One might speculate that that is because that cash has had to actually be fed into the system, rather than kept outside it.  (Only a guess by me; can't comment on whether it really happened).

In addition to this, though the shareholders claim is residual in nature, it is still a debt.

Not disputing that.  However, I dont accept its practical significance in the event of either a sale or an insolvency.  In the former case, G&H could choose to write it off.  In the latter case, there'd be unlikely to be sufficient funds for them to to get much.

[Jack Slater]

But they are making profit right now from the interest they are getting from us.

What I was trying to get at is this.

Let's say there is a sale figure of £Xm, which means that GG and TH exactly break even.  ie they get back every single penny that they have genuinely put in of their own money.  But they do not make a single penny profit.

None of us know what "X" is.  However, in principle there is such a figure.

Some people are suggesting that we can find out what "X" is simply by looking at the outstanding debt.  Either the bank debt of the group..  Or the bank debt plus debt to group companies of the LFC company.  Or some other measure of debt in the accounts.  (In all cases, extrapolating from Jul 09 to the present day).

My point is twofold.

Firstly we cannot discover "X" simply by looking at the UK accounts.  There are too many unknowables.

Secondly, and more importantly, while G&H want to sell for a price that is greater than X, it doesnt follow that they will find a buyer at that price.  Nor is it necessarily the case that they can do an Ashley and take the club off the market if they dont get a buyer at their valuation.

ie G&H may be obliged to sell for less than X, thereby making a loss.

[xerxes1]

Secondly, and more importantly, while G&H want to sell for a price that is greater than X, it doesnt follow that they will find a buyer at that price.  Nor is it necessarily the case that they can do an Ashley and take the club off the market if they dont get a buyer at their valuation.

I agree. The concern is whether RBS is prepared, or able, to call in the debt. Just maybe, circumstances are such that G&H can hold out for a long time, so long as they can claim the club is up for sale.

[DonkeyWan]

According to a link in the other thread to the Times, Liverpool have been handed another loan extension until the end of next season. I'm presuming this is to give breathing space to find a buyer, but also means that transfer funds for the summer are unlikely.

[No666]

I'd like to know how the Times knows this; is it in the accounts, guys? Or is it from a source? - because the Times, especially their business section, has proved remarkably crap in the exclusives they've had on LFC's sale over the past few months and I see no reason to trust this titbit anymore (or less) than the titbit that rich Indians were battling to buy us. 

[Zeb]

I'd like to know how the Times knows this; is it in the accounts, guys? Or is it from a source? - because the Times, especially their business section, has proved remarkably crap in the exclusives they've had on LFC's sale over the past few months and I see no reason to trust this titbit anymore (or less) than the titbit that rich Indians were battling to buy us. 

It's not mentioned in the accounts (accounts only touch upon events up until late February 2010), so either it's from a club source or is the journalists making it up. It does seem to corroborate what Broughton has said from since he came in though - that the club is funded for a sufficient length of time to get a sale.

[redtel]

Jack S has quite rightly said we do not know the break even sale figure that would leave H&G with zero profit. Therefore we do not know a reasonable price that a buyer would pay.

I would like to understand what position RBS are in. They exist to lend money and make a profit by doing so. They have been loaning H&G vast sums for several years. Wachovia are now out of the picture.

RBS now want a sale and Broughton is the man to see it through. It would mean more profit for RBS if they did grant an extension to May 2011, but they are obviously concerned about the level of debt carried by the business.

At what point in time do they say enough is enough and call the loan in? Wachovia decided they had enough several months ago. Will RBS have access to our financial position as the months pass and no sale is concluded?


RBS are as much to blame as anyone for the debt we currently carry.It is exactly the sort of lending that led to the 2008 credit crunch.

[cambridge]

"RBS are as much to blame as anyone for the debt we currently carry.It is exactly the sort of lending that led to the 2008 credit crunch."

And that is part of the problem.......what's the old saying..........if you owe the banks a few grand they have you over a barrel, but if you owe them hundred's of millions, you have them over the barrel.

[OneKop]

So if over the last two years our debt has increased by over £95m {give or take a couple of quid} on average £45m+ per year,  then it would be reasonable to assume that by the time next years accounts come out we will be showing {probably} another £45m+ loss?

So if the clubs overall debt is now more than what the club is worth, and the debt rising every year {even more so without CL} at what point do H&G bite the bullet and take a loss? because the longer they hold out for top $$$$$ the more chance they take a bigger hit themselves.     If that make sense.

[Veinticinco de Mayo]

I'd like to know how the Times knows this; is it in the accounts, guys? Or is it from a source? - because the Times, especially their business section, has proved remarkably crap in the exclusives they've had on LFC's sale over the past few months and I see no reason to trust this titbit anymore (or less) than the titbit that rich Indians were battling to buy us. 

As I said in the other thread, it's more than likely just a logical extrapolation of the news that Broughton had been summoned to the PL and he had given them evidence that LFC could fulfil their fixtures for the coming season.  Clearly the only way that he could do that was if he had something from the bank agreeing to extend the current credit facilities until July 2011.

I wouldn't read much into it, once RBS agreed to extend the loan to facillitate a sale then that extension naturally had to be for a full year if required.