Reds ownership ruling set for Wednesday

October 12, 2010

The future of Liverpool hinges on a ruling by a British judge after a High Court hearing Tuesday that exposed the sharp divisions over the proposed sale of the Premier League club to the parent company of the Boston Red Sox.

Royal Bank of Scotland, which holds the bulk of the club's debt, is seeking a court order to back an agreement that gives three Liverpool directors the power to go through with a 300 million pound ($476 million) sale to New England Sports Ventures.

In new twists to the boardroom battle Tuesday, a Singapore billionaire raised his offer for the club, and a lawyer for current owners Tim Hicks and George Gillett Jr. said Mill Financial, a U.S. hedge fund, also is making a bid.

After nearly 5 hours of court arguments, Justice Christopher Floyd said he will issue his ruling on Wednesday.

The judge must decide whether two Liverpool board members should be reinstated after being ousted last week by Hicks and Gillett because they were going to accept the bid from John Henry's NESV. The owners claim the Boston offer undervalues the club.

If the judge backs RBS, the sale to NESV should be able to proceed. If the sale is blocked, the club could fall into financial administration, a form of bankruptcy protection, and face a nine-point penalty in the Premier League standing.

NESV has a takeover agreement with Liverpool that can be terminated by either side on Nov. 1.

"Everyone is hoping for the best," Henry said in a message to Liverpool fans on his Twitter account before the hearing. "There have been enough twists and turns. Hopefully all gets sorted out soon; LFC moves forward."

While Broughton and Purslow attended Tuesday's hearing, neither Hicks or Gillett were present. A few Liverpool fans were inside the court in replica team shirts and there were dozens more outside the building chanting protest songs against Hicks and Gillett.

Lawyers for Hicks and Gillett told the court the duo were excluded from parts of the sale process and there are other more lucrative offers for the 18-time English champions that should be considered.

Singapore businessman Peter Lim, whose first bid was turned down last week in favor of the Boston offer, announced he was raising his offer to 320 million pounds ($507 million), with an additional 40 million pounds to buy new players.

Lim issued a statement saying he would not need any financing to fund his offer and that all the money would come from his cash reserves.

"I will be injecting 40 million pounds in cash into the club for (manager) Roy Hodgson to bring in new players during the upcoming transfer window," Lim said. "Liverpool needs to start winning again."

Liverpool, which won the last of its 18 English league titles in 1990, is off to its worst start since 1953 at 1-3-3 and is mired in the relegation zone.

Inside the court, a lawyer for Hicks and Gillett revealed that Mill Financial put in a bid that also pledges to wipe out the debts and would provide up to 100 million pounds to fund a new stadium.

Mill Financial technically controls Gillett's 50 percent stake after he defaulted on the loan used by Gillett to fund his part of the leveraged takeover in 2007.

It is the owners' inability to repay around 285 million pounds ($453 million) of debt that led RBS to instigate a sale process in April and revamp the board to ensure the two no longer had a majority.

While RBS originally set a Friday deadline for the repayment of the owners' debt to them, a technical breach of the April refinancing agreement already has given the bank the power to demand instant repayment or take control of the club and place it in financial administration.

"There are serious doubts about the solvency of Messrs. Hicks and Gillett," the court was told by Anthony Grabiner, who is representing the non-owner board members - chairman Martin Broughton, managing director Christian Purslow and commercial director Ian Ayre.

Richard Snowden, a lawyer representing RBS, accused Hicks and Gillett of a "calculated breach of contract ... to frustrate the sale process" by trying to fire Purslow and Ayre.

"It is breathtaking arrogance on the part of Mr. Hicks and Mr. Gillett," Snowden told a filled court room, claiming later that "Hicks and Gillett are seeking to profit from the confusion."

Hicks said in a witness statement that the English directors tried to keep the owners out of the loop and were "running the negotiations themselves."

Hicks said he received an e-mail from Broughton on Oct. 4 regarding Lim's bid and was accidentally also forwarded a message originally sent to the other board members - but not the Americans.

"The e-mail chain confirmed to my mind that the other members of the board ... were acting without involving Mr. Gillett and me, and keeping us properly informed," Hicks said.

"I was very concerned about a reference to a "home team." It appeared to me that the English directors regarded themselves as being in a position of hostility or competition with me and Mr. Gillett, and that we were no longer considered to be on the same side, and therefore not involved in the decision-making processes."