Monday, September 13th, 2010 « Untold Arsenal: Arsenal News. Supporting the Lord Wenger in all he does

By Tony Attwood

Before the round of games on September 11th I wrote in a semi-joking manner that both Tottenham Middlesex and Liverpool RBS would see the weekend as an opportunity to claw their way into the top half of the Premier League.  I have to say I am rather surprised to find my prediction coming to fruition.

In Liverpool’s case, perhaps there is an explanation as to their pitch troubles – they sold about £30m worth of players this summer, and bought in £20m with the money received.  A selling club if ever there was one.

But if Liverpool RBS are having a tough time of it on the pitch and are having to sell-sell-sell, that is nothing compared with what is happening financially, for this week, Liverpool’s  loans with Royal Bank of Scotland were placed into the bank’s toxic-assets division.

Basically that means RBS don’t see a cat in hell’s chance of getting their money back through the normal means of repayment by the owners, so they are now just going to do whatever is need be to get their cash, and let everyone else sink.

The deadline for action has been set for 6 October. If the owners have not repaid or refinanced the debt by then that’s it – the loans will not be extended, the owners will be in default, the bank sells the assets on its own terms to get its money back.  The owners can whistle for their money – but they won’t get it.

It was the likelihood of this move that always made the notion of six bids on the table, with lots of gents from China all getting ready to buy the club at a top price, so utterly unlikely.  Why pay the normal price when the bank is about to take it over and sell it off for a lower price, just to get its money back?  It was all a PR stunt.

Liverpool’s US owners owe £237.4m to RBS.  Hicks and Gillett separately owe RBS and the club in excess of £200m – possibly far, far more.  So a sale price of £500m might well allow RBS to take its money, and then also use the rest to pay itself the money Gillett and Hicks owe the bank individually.

RBS could put all the companies surrounding Liverpool FC (Kop Football Ltd etc) into administration.  But that means the club lose 9 points  and would currently be bottom of the league on minus 4 points.

A club in administration is worth less than a club without that handicap, so instead RBS will probably sell the club to anyone who can come up with £500m, or failing that £400m.

But there is a problem. For although such a sale gives the buyer the name of the club, its status, and the ground, and the club debt free, what they also get is a club is in a mess, with a first team in need of restructuring, a ground in very urgent need of (at least) overhaul (if not the building of a totally new stadium), a failure to sell all the season tickets, and a failure in income stream through an inability to get into the Champions League.

But the bank have no care about this.  They want their £500m back, and everyone else can go hang.  The EPL might tweet about a fit and proper person test, but RBS are only concerned with money.  If Jack the Ripper came up with the dosh, you can bet your life they’d sell.

As for the new owner, the total amount needed to make the club viable as a challenger for a European spot, is probably around £800m, with extra money needed to finance the new ground, rebuild the squad, rebuild the youth set up, and pay for the losses over the next couple of years while the rebuilding is going on.  Borrowing is going to be next to impossible in the UK as the reputation of football clubs is now at an all time low.

What’s worse, with the club not in the Champions League and its future looking uncertain, it is going to be hard-pressed to buy the players it needs to meet its fans expectations, unless of course it can find an oil sheikh.

But it has already been noted that Manchester City are unlikely to get their finances in order to qualify for Europe when the new regulations start to come in.  They may have stopped spending by then, but the amortisation of the funds will only just have started.   Further, any attempt to get around the problem by showing a profitable income from the club’s hotels and other facilities won’t be a starter either, since most won’t be built by then.

That’s the problem for Manchester City.  For Liverpool, the issue is worse since they will be starting three years later.   Thus Liverpool could be about to face a period of real pain.   If a buyer comes in and just buys the club, they will be a club without the ability to move back to what they consider their rightful position at the top of the league.   If a buyer comes in with say £800m, they could pull in some new players and get a stadium, but some of that money will count against them in the issue of who can go into Europe – and some players will not want to be there with the club so far off the pace in terms of getting into the Champs League.

In other words, having slipped out of the Champs League, unless they get back in this year (which seems unlikely) they are probably going to be out for a long time.

So really, the only bet is for a buyer to have £1bn, give half of it to RBS and for the rest build a stadium, and buy a new team, while just kissing Europe goodbye for a decade – but nevertheless challenging the big boys – who at that time might be Arsenal (no financial problems), Man City (money, money, money but not spot in Europe), and Chelsea (who may actually get their money issues sorted in time.)

Tough times.  Maybe a nine point penalty would be easier, just to get it all over with in one go.

Elsewhere…

Our match day coverage extends to five pieces – unbeatable journalism for the Arsenal supporter.  There’s the previews, the socialising report, the match report, the analysis of the ref, and the injury comparison.  A full index to the five-blog special on Bolton is on www.blog.emiratesstadium.info

While on the history site there’s a comparative analysis – have injuries always been this bad, or is it all Wenger’s fault.  Guess what?

Of course Making the Arsenal doesn’t change, but it has as much relevance now as it did last saturday.

As for Arsenal Worldwide, Walter promoted that enough in his referee’s report of the Bolton game so I am not mentioning it again.