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LFC, BarCap and Re-Financing

The Spirit of Shankly Supporters' Union have received information regarding Barclays Capital and the state of Liverpool Football Club's finances over the Summer of 2010. While the original copy document is not in the Union's possession, a full and accurate copy of it has been made.

The document throws up many questions about the public messages coming from Martin Broughton, the Club and Barclays Capital underlining again that Liverpool Football Club teeters on the edge of a financial abyss.

From the documents the Spirit of Shankly have gleaned the following main points:

  • Up until at least the beginning of August, if Barcap were indeed serious about seeking a buyer they had also been seeking to re-finance the debt. So much so that they refer to approaching around 25 potential investors.

  • The Executive Directors (Broughton, Purslow and Ayre) sought advice from Slaughter and May (a large international legal practice) concerning whether re-financing by RBS should be approved in light of their fiduciary responsibilities. Their duties as Directors are to act in the interests of the club. The club in this instance is Hicks and Gillett. There appears to be legal argument about how they can act in the best interests of the club and therefore the shareholders, considering the circumstances.

  • On the basis of Slaughter and May's advice, BarCap subsequently made an amended re-financing proposal. It is not clear from this document whether that amendment was sufficient for Slaughter and May to have since indicated that the changes were sufficient to allay the Executive Directors' reservations. 

  • The firms identified as being willing to be involved in re-financing the Club’s debt are identified as FBR, Beach Point, Halcyon, Blackrock, DK Partners, Stonetower, Trimaran, DE Shaw, Avenue, Centrebridge and GSO.

  • In the period July to August the Club’s debt was increased in the following sums:

15/07/2010         Ticking Fee: £5.0m

15/08/2010         Ticking Fee: £7.5m

31/08/2010         Ticking Fee: £7.5m

PIK Increase (Aug): £0.8m

 

            Total: £20.8m 

 

  • The sum currently required to re-finance the Club is £300m. However, this can be reduced to £187.5m through using the proceeds of a £75m loan to the holding company in Delaware and by rolling £37.5m into the proposed loan for the new stadium. This plan for securing debt against the as yet unbuilt stadium, means should the stadium finally come to fruition, revenue it generates would contribute towards the ownership debt as opposed to its construction.

  • FBR propose to lend £75m to Kop Delaware. Delaware is a "deregulated" haven in the USA, along the same lines as Cayman. As such, it would not be unreasonable to think that a similar mechanism to the Kop Cayman loan could take place in due course, i.e. Kop Delaware could "lend" this money to LFC. (FBR is a top ten rated US investment bank)

The questions that this document raises, among others, are:

  • Why did Martin Broughton say the club would be sold "before the end of the transfer season" when BarCap were proposing re-financing "solutions" until at least the end of July?

  • Did the changes proposed by BarCap , in line with Slaughter & May's advice, sufficiently address the Executive Directors' questions regarding their fiduciary responsibilities, and as a result prevent them from using this argument to continue to stop re-financing?

  • In light of the apparent position that the Executive Directors appear to have powers vested in them by means of conditions attached to the RBS debt, what would the position of the Executive Directors be if either or both of the owners could raise sufficient to debt to repay RBS?

  • Could they refuse to allow RBS to be repaid? Would RBS accept payment with the result of removing the current powers apparently held by the Executive Directors?

  • So, the major question to be answered is are Barcap currently engaged with any prospective buyers or is it pursuing a re-financing or both?

The document is clearly very technical and for Spirit of Shankly members and supporters it is another in a long line of pieces of information that make little sense to the average supporter. We feel it is in supporters' best interests to be aware of this information, and we will endeavour to keep you fully updated of any further developments, along with our plans for action to follow on from recent developments.

The Spirit of Shankly are urging the senior management of LFC to engage with the supporters in using the supporters who are the only solution to this problem. We will be ensuring that those at LFC are fully aware of our views and we will be planning for all potential outcomes.

RBS need to bring this issue to a close as far as they can, without leaving a vacuum behind. They will not be forgiven, after bleeding the Club for two years or more, if they do not also take steps to secure Liverpool Football Club’s long term future.

The Spirit of Shankly has proposed action by supporters following its EGM on the 25th September 2010 .

In addition Spirit of Shankly-Share LiverpoolFC are seeking to engage in the sale process and this information merely underlines again that it is the supporters and only the supporters who can solve this problem.

We urge the Club, RBS and Barclays Capital to recognise our solution and work together to save our Club.



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