By Nick Harris
22 September 2010
Liverpool’s managing director Christian Purslow has today attempted to reassure fans that the club is not in danger of administration and won’t go bust next month; that the board won’t support attempts by the owners Tom Hicks and George Gillett to stay in control; and says there are still “potentially interested parties working seriously and privately” on possible moves for the club.
A full transcript of more than 3,000 words from 21 questions and answers given to Liverpool TV on a variety of club issues and especially the ownership and finances, is online at this link.
Here, sportingintelligence examines key questions and answers here. (Question numbers as in the full transcript on the Liverpool site.)
Q4: What happened to the significant investment that you said was likely to be in place ‘by Easter’?
Christian Purslow: “By Easter there was at least one investor ready to invest in the club, but not on terms that were acceptable at that time to the owners. I think it’s fair to say that precipitated a further series of changes; the appointment of Martin Broughton as the new Chairman, pretty dramatic changes to the Board of directors where George and Tom’s family came off the Board and essentially the Board was re-jigged and, most importantly, the owners agreed they would seek a sale of all of the club rather than what we had been working on up to Easter, which was a partial investment, which I don’t think was ever likely to be the optimum outcome for anybody. So I think that was a positive development in April and since then we have been working hard to try and find somebody to buy all of the club.”
SI analysis: Rhone Capital offered £110m for 40 per cent of the club. Hicks and Gillett wanted much more. RBS flexed their muscles. Hicks and Gillett’s days became numbered (albeit painfully slowly numbered).
Q6. We keep hearing about how well Liverpool are doing commercially but it’s not much good if all the money we earn goes to paying off debt, is it?
Christian Purslow: “It is true we are doing well commercially. Our business is continuing to grow and our revenues to July 2010 were a record for the club, despite it being a very disappointing year in football terms, which has its own effect on our financial performance. Despite a disappointing year on the field, off the field commercial activity was sufficiently strong that our revenues and profits were very healthy. We’re very proud of that and it’s very important when attracting investment and new ownership.
“Equally it is true that far too much of that benefit currently services loans, interest costs and bank charges. Can we afford to meet them? Just about. Do I wish that every penny spent on interest was available to spend on players? Passionately, and every minute of my working day I look for the day we are able to reduce our debt, freeing up our profits to be able to invest on players.”
SI analysis: Even without a bigger, swish stadium Liverpool fare pretty well, with turnover of £164m in 2007-08, rising to £184.8m in 2008-09. Now, according to CP, revenues (as yet undisclosed) in 2009-10 are “record”, so must be close to £200m. With no debt that would mean good profits for players, wages etc. The 2007-09 are figures from Kop Football accounts. BUT. Interest alone payable by Kop Football in 2007-08 was £36.5m, in 2008-09 was £40m, and in 2009-10 almost certainly won’t be less than £40m. Even allowing that Hicks and Gillett have met some of this cost with external cash, insiders say the cost to LFC has been c.£24m per year directly in interest and other Hicks / Gillett costs.
Q7. Can you update us on what’s happening with the sale of the club?
Christian Purslow: “The process remains underway and there are a small number of potentially interested parties working seriously and privately – doing what is called due diligence – looking at the business in detail from a financial and legal standpoint. My hope is that one of those parties steps forward with a proposal to buy the club which is attractive to the Board and which would be good for the club. I must say that the single most important aspect of the possible sale of the club – and I consider it the most important thing I will ever do in my business career – is to make sure that if we’re going to sell the club we get the sale right. The only thing worse than no sale is the wrong sale.
“If I bring anything it is the ability to understand in great detail the questions that need to be asked of potential buyers, to find out what they’re really about and where the money really is coming from, what their intentions for the business are strategically, operationally and, yes, financially, and so I urge all our fans and all our stakeholders to take one message from me and that is I will not make the mistake of sanctioning any transaction that puts the club in a worse position. I know the questions to ask.
“Do I know whether any of those parties are going to get over the finishing line? No. Can I make someone write a cheque? No. My job is to present the club to possible investors in the best possible light because I passionately believe it’s a fantastic opportunity for investment and new ownership. It’s as good as you can find in the world of sport anywhere and my job is to present that in the best possible light, but I can’t make people write a cheque, nobody can. All I can do is make sure when they are willing to do so that I can say hand on heart that these are the right new owners for the club. I assure you I consider that to be an awesome burden of responsibility but I am very well qualified to do that properly.”
SI analysis: Some undisclosed parties are nibbling at the edges. Nobody truly serious has come forward yet with a funded offer. Due diligence does suggest serious interest ahead, maybe. CP’s message: “I really don’t want to cock this up . . . but I’m baffled by the lack of takers.”
Qs8 to 12: [Paraphrased summary] The board has been too quiet. What the hell is going on? Will the board do everything it can to make sure Hicks and Gillett leave soon?
Christian Purslow’s replies summarised: Various bidders looked like they were the real deal, and we wanted them to be, but they weren’t. And yes, we want Hicks and Gillett out.
Qs20 to 21: [Paraphrased summary] Will Liverpool go into administration or go bust?
Christian Purslow’s replies summarised: No.
SI analysis: Liverpool won’t go bust. A chunk of the debt is H&G’s responsibility as opposed to LFC’s and they’ll go bust before Liverpool, who, fundamentally, despite the lack of firm offers, are a good proposition for someone with a few hundred million pounds.
People act in self-interest. In whose interest is it to let the club go bust?
It’s not in Hicks and Gillett’s interest because they’d get nothing (rather than merely little) of what they invested.
It’s not in RBS’s interest for the same reason.
It’s not in LFC’s interest because although it might allow for a fresh start it would bring massively damaging sporting penalties.
It’s not in Purslow or Martin Broughton’s interest because that would be one major blot on their CVs that would haunt them forever.
The only parties with an interest in Liverpool going bust are potential buyers wanting a bargain. Which is probably why they’re holding off; the more they wait for something to give, the cheaper they’ll believe they can get the club.