Liverpool To Be Bled Dry
An important article in the Telegraph today clarifies how much interest Liverpool are likely to have pay each year on the massive refinanced debt the club has taken on under the ownership of Tom Hicks and George Gillett: £30 million.
So it will cost them a Torres and a half every year, and don’t expect ticket prices to be anything short of extortionate in the coming years.
Liverpool fans often talk about bleeding red, and the owners will need to squeeze every last dollar out of them to keep the club solvent.
All just another reminder of why leveraged takeovers in football are a really bad idea for football.
Photo credit: ah zim
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AFC Liverpool to come next, then? I welcome it.
Did we learn nothing from Leeds example?
What do you do, though? Does it make sense for the FA or the League or the Premiership to set limits on clubs borrowing, perhaps in some form of debt-to-equity ratio? If so, what counts as equity, and are you deliberately hamstringing clubs that are attempting to compete and grow? (That’s what borrowing limitations are bound to do - restrict access to capital and you restrict growth).
The Premiership mavens will never agree to such a limit, because they will never voluntarily agree to limit their access to capital. So any such limit must come from the FA.
The sad thing is, borrowing limits might not only affect the Liverpools and the Leeds Uniteds, it may well prevent the formation of future AFC Wimbledons. AFCW have used debt pretty wisely and well so far, even if they were borrowing a lot to buy and revamp The Fans Stadium.
That is an excellent question, Tybalt. Regulation should include a deeper scrutiny of the ownership’s business plan and funding, which would help with the problem you raise regarding comparing Liverpool/AFCW (see Dave’s excellent point towards the bottom of this piece.
Here’s the thing nobody is talking about right now — Liverpool earned almost £30 million in TV revenue from the Champions League last season. It will have to keep earning that money for the next 2-3 years until the new stadium is built, just so it can make its interest payments.
Liverpool is 3 points adrift of the final Champions League spot after losing 1-0 to West Ham today. They have a game in hand, but guess what? It’s against West Ham.
What happens if the Reds don’t qualify for the Champions League next season? Where is that money going to come from?
This whole thing is a terrible gamble. Liverpool supporters better hope that new stadium gets built a lot more quickly than Wembley.
This is, of course, what happened at Leeds United. As soon as they failed to qualify for the Champions League, their world fell to pieces (you could plausibly argue that this hastened an already inevitable process, but I’ll disregard that for now). I don’t think that the immediate Liverpool prognosis for Liverpool is quite as bad - they’re a stronger “brand” than Leeds United, and they can’t possibly have signed the ridiculous contracts for players that Leeds did. Having said that, though, they’re far more exposed that Manchester United are - Manchester United were (and, indeed, still are) a global brand in a way that Liverpool still aren’t, and already have the additional revenue of Old Trafford. In that respect, Liverpool still have another £300m to borrow to catch up, if they desperately want that new stadium.
I take no pleasure in saying it, but I can’t see how this can end well.
http://news.bbc.co.uk/2/hi/business/7217238.stm
Liverpool supporters to make a bid to buy the club.
(Tom is there a way to insert hypertext in comments box, or will they automatically link? Also, Huddalis Utd tragically suffered our first ever loss Sunday. Your absence… a coincidence???)
Marc, thanks for the link (and it looks like it hyerplinked fine, however you did it). That is very interesting news — I’d heard bits and pieces, but this does seem to be a serious effort.
(And yes, I’m 110% sure my absence explains the loss…)
30 million is a huge amount in general but for a soccer team it shouldnt be that bad. I am afraid that the fans will end up paying at the end.
Marc, thanks for the link (and it looks like it hyerplinked fine, however you did it). That is very interesting news — I’d heard bits and pieces, but this does seem to be a serious effort.
(And yes, I’m 110% sure my absence explains the loss…)