from the Montreal Gazette

Original Link: http://www.montrealgazette.com...r/3515037/story.html




George Gillett Jr. made a lot of money when he sold the NHL Canadiens and the Bell Centre. It appears he'll lose plenty when Liverpool soccer club is finally sold.

Gillett and partner Tom Hicks have been skating on the edge of the financial abyss since they bought Liverpool just before the world-wide financial crisis hit. They promised to build a new stadium immediately, but the first shovel has yet to be put into the ground and they've tightened the purse strings as the team plunged in the standings.

They've been the target of abuse from fans, angry that they weighted the cub with debts to finance the purchase.

Now those debts have come back to haunt them. Reports in the British media last week said the Royal Bank of Scotland, which is owed close to $350 million Canadian by Gillett and Hicks, has placed the loan into its toxic-assets division. That's a strong indication the bank won't agree to refinance the loan when it comes due.

The due date is Oct. 6 and if the loan isn't extended, and Gillett and Hicks can't repay it, the bank would take over the club and sell it, possibly at a knockdown price, as soon as possible after Oct. 6.

Gillett and Hicks have put the club on the market, but their asking price, believed to be more than $1 billion, is wildly optimistic. It's obvious there are no buyers at that price and recent negotiations with a couple of groups came to naught.

So the owners are caught between a rock and a very hard place. Do they wait until Oct. 6 and hope to refinance the loan somehow, or try to make a quick sale at what is sure to be a massive loss?

The Guardian newspaper quoted one source as saying: "If (the loan) has been taken out of the hands of the corporate banking department, they'll have a much more ruthless approach on Oct. 6."

The minimum sale price the bank would accept would be enough to ensure the repayment of its debt. That would mean Gillett and Hicks would make nothing from the sale.

They could use the cash. Hicks has already sold baseball's Texas Rangers and the NHL's Dallas Stars in an attempt to raise money. It's pretty obvious Gillett had to sell the Canadiens and hope that money would enable him to hang on to Liverpool.

We all know how that worked out. The fans have made no secret of their joy at seeing Gillett and Hicks being forced to sell the club. The Kop Faithful group wrote an open letter to the bank last week saying Gillett and Hicks have "proved to be no more than a pair of liars," and likening their purchase of the Liverpool club to the Glazer family's purchase of Manchester United, which weighted that team with massive debts.

But in contrast to United, which makes so much money it has been able, so far, to repay the loans, Liverpool is saddled with a much smaller stadium and is unable to generate enough cash to lessen its debts.

"The promised 'no Glazer-style buyout,' " the Kop Faithful's open letter noted, "was all of a sudden (a leveraged buyout, enabling) -a club ($500 million) in debt to effectively buy itself, when it had effectively been sold for less than $300 million (to Hicks and Gillett) in what seemed no time before."

But Liverpool fans should be careful what they wish for. There are plenty of cases of last-minute sales failing to work out. Heck, they have only to cast their minds back to Gillett and Hicks's purchase of the club.

Promises -as Gillett and Hicks proved -are easy. It's performance that's hard.