Analyst: Bidders must invest heavily in Liverpool

October 6, 2010

The owners of the Boston Red Sox will struggle to restore Liverpool as a major soccer power unless they follow their initial purchase of the Premier League club with heavy investment, according to a soccer finance expert.

New England Sports Ventures' bid of $477 million for a team valued by its owners at twice that sounds like a bargain. But Joe McLean, a partner at accountancy firm Grant Thornton, said Wednesday that NESV will have to spend heavily if it is to make a return on its investment.

McLean said a new, larger stadium to replace Anfield would have to be a priority after co-owners Tom Hicks and George Gillett Jr. failed to make good their promise to improve upon Liverpool's aging 45,362-seat arena.

That could cost as much as $635.5 million but McLean said it is essential if the club is to start matching the likes of Manchester United and Arsenal in terms of match day revenue.

''It would only be a good deal if they could follow up their initial investment with more substantial investment,'' said McLean, who specializes in soccer finance. ''The problems didn't start with Hicks and Gillett. The whole structure is flawed. Manchester United, Chelsea and Arsenal are pushing ahead and Liverpool is falling behind with each game they play.

''You've got a stadium that is not fit for purpose.''

Liverpool chairman Martin Broughton said Wednesday that NESV had guaranteed a bigger stadium for the club, although that might be in the form of a redevelopment of the 126-year-old Anfield.

''If you look at the Boston Red Sox as a massive example of taking a major, historic team which had seen better days and restored them to glory, it is a parallel which demonstrates action,'' Broughton said. ''At Fenway, they chose not to build a new stadium.

''They will want to make sure that they do the right thing. We will have a stadium which holds sixty-odd thousand.''

Liverpool has debts of $453 million that must be repaid by Oct. 15 but Hicks and Gillett are attempting to block the sale in hope of finding a bigger bid.

Hicks and Gillett's 2007 takeover valued the club and its debt at $431 million. They borrowed with the club as collateral to fund their purchase.

''Hicks and Gillett will hold on for as long as possible in the hope returning Liverpool to the elite and getting a return on their investment,'' McLean said.

McLean said he expected top clubs to eventually participate in a world league, with revenue drawn from crowds of 80,000 spectators and pay-per-view levied at $10 to $15.

Despite a history including a record-tying 18 English league titles and five European Cup wins, Liverpool would struggle to gain admission on current form.

It failed to qualify for the Champions League after slumping to seventh last season and is mired in the relegation zone after two months of the new campaign.

If Liverpool fails to repay its debt to Royal Bank of Scotland or present the lender with a viable plan, the bank could take control or force the business into a form of insolvency known as administration.

The former option would leave Hicks and Gillett without any recompense and would be subject to normal Premier League takeover rules. The latter could result in a deduction of nine points, although the Premier League board would have to examine the case before deciding whether to punish the club.

West Ham escaped a points deduction in 2009 because its holding company was insolvent, rather than the club.

''The Premier League is important, but not as important as the bank is at this stage,'' McLean said. ''The bank could bring someone in and administration would then follow.

''I would expect the bank to wait until Oct. 15 and say to Hicks and Gillett, 'OK, show us your proposals.'''

Broughton said he was confident of winning any court case necessary to force through the sale against the wishes of Hicks and Gillett.

He pointed out that the pair attempted to breach a written undertaking to Royal Bank of Scotland that the chairman was the only person entitled to change the makeup of the board, and have gone back on an agreement not to frustrate any ''reasonable'' sale.

''Ideally, one would have had buyers who were not only the best buyers but also satisfied the owners. That's what we were looking for and we haven't managed to do that second piece of it,'' Broughton said. ''Has it been exhaustive? Absolutely.

''The media coverage has meant that you would have to be living on Planet Zog not to know that Liverpool was for sale and so if you had any interest in it you had the opportunity.''

Broughton, who is on the three-man board that has approved the sale to NESV, said the club will default on its debt if the takeover is blocked.

''We don't have the capacity to repay our loans,'' Broughton said. ''I don't want to speak for RBS and what they plan to do at that stage.

''It would be serious. The impression I get from the fans is they would actually swallow that to get rid of the owners, but we don't want to swallow that.''