6 October 2010
Legal opinions on the Hicks / Gillett / Liverpool situation. (More may follow)
Danny Davis, Partner, Mishcon de Reya
“Administration is an empty threat, as the bank will be eager to avoid the resulting public outcry. Should Gillett & Hicks go to litigation to fight the deal, it is likely that they would lose. RBS would impose a further £60m late payment fee and squeeze the club of cash, leaving the duo little room to manoeuvre.
“The situation is pretty straightforward for Gillett & Hicks. There are only 3 possible outcomes: they accept the deal and recoup some of their directors loans; the banks push them out, or; the club goes into administration. Accepting the deal is the best possible outcome for the American pair as New England Sports Ventures is probably the best option they will get now. The bank is in a strong position and will use this to force a deal one way or another. RBS will get its money back.”
Andrew Nixon, Partner for leading law firm Thomas Eggar LLP
“Although the deal to sell Liverpool Football Club to New England Sports Ventures (the company that also owns the Boston Red Sox baseball franchise) has been agreed, it remains subject not just to Premier League approval but crucially the outcome of a boardroom battle.
“The legal dispute that has erupted with Tom Hicks and George Gillet, the club’s current owners, has threatened to derail the deal and it could have significant consequences if it is not resolved. This week, Gillet and Hicks sought the removal of the club’s Managing Director, Christian Purslow, and the commercial director, Ian Ayre, to have them replaced by Mack Hicks (Tom Hick’s son) and Lori McCutcheon, who is currently a vice president at Hicks Holdings. The strategy behind the move was to regain boardroom control and to block the sale.
“If the deal proceeds, the funds will be sufficient to pay off the club’s debt. It would also free up funds to strengthen the squad as the burden of acquisition debt would be removed. If it does not proceed, the picture is considerably bleaker. Hicks and Gillet will ultimately seek to refinance . If they succeed in securing refinancing, that will do little for the club’s long-term prospects of stability. If they do not succeed, RBS, who are owed £237m look likely to call in the loan and charge a £60m penalty fee. That would lead to a situation whereby RBS would have control of the club, and administration would loom. The knock on effect of possible points deductions to compound the club’s current status in the bottom three of the Premier League would be disastrous. Equally, the clubs stock and value would drop considerably.
“It therefore looks inevitable that the club will have to launch legal proceedings in attempt to force the sale through and those legal proceedings will centre on what is best for the club and the duties of the directors and board members to secure the club’s future. The valuation of the club, which Hicks and Gillet believe to be £600m (far greater than the £300m offered by new England Sports Ventures) will also be a crucial element of the dispute. What is clear is that the outcome of this legal battle will be critical for the short term future of the Liverpool Football Club.”
Martin Broughton, Liverpool chairman gives his own views on Liverpool’s website here today including opinion on the legal case
Just to clarify, what needs to happen now for the sale to be finalised?
The key thing is the court case. We need to go to the court to get a declaratory judgement, which is for the court to declare that we did act validly in completing the sale agreement, and then the buyers can complete the sale. We have to get Premier League approval and I’m certain that’s not going to be an issue. There are one or two minor things like that but the key issue is the court, which should meet I would think next week sometime. That is the most likely time, in short order.
Can the owners block the sale of LFC to New England Sports Ventures?
Well, we have to win the court case. So effectively yes, if they win the court case they can block the sale. But then we may have one or two other thoughts in mind as well.
Could the sale process be dragged through the courts for months before a resolution is reached?
No, I don’t think so. We should get a declaratory judgement I would have thought probably by the end of next week, in short order. There is an appeal process but that is also very fast.
How confident are you that Liverpool Football Club will soon be officially under new ownership?
I am confident. I wouldn’t have taken the Board through that process yesterday if I hadn’t been confident. I wouldn’t have exposed everybody to that risk if I hadn’t been confident, but you can never be certain. These things are legal judgements. We have been properly advised and I am confident.