Tuesday, June 9, 2009

The Yanks set to Refinance their Loan

Liverpool's beleaguered co-owners, Tom Hicks and George Gillett, look set to refinance their £350m loan with the Royal Bank of Scotland and Wachovia from next month's deadline, the Guardian has learned. The extension could cost up to £3.5m for the arrangement fee, with interest payments – approximately 4% above the banking rate – similar to the terms on their current facility.

It was announced last week that Hicks' and Gillett's parent company, Kop Football (Holdings) Limited, suffered a £42.6m loss for the year ending July 2008 despite a record turnover of £164.2m. A Liverpool supporters group, Spirit of Shankly, has launched a protest campaign to dissuade RBS from extending the loan beyond the 24 July deadline.

However, the two banks are willing to extend their loan, given rising income at a club who finished second in the Premier League last season, qualifying for the lucrative Champions League for a seventh season in a row. "Banks won't want to jeopardise growth through taking control," a source close to the situation said.

Facing multi-billion pound losses, banks are pushing unprofitable companies into insolvency or demanding control through a debt-for-equity swap. In Spain the local savings bank Bancaja has practically taken control of Valencia, who have about £500m of debt. However, the source added: "It doesn't make sense to take control of a business that's performing well; this approach could be applicable to Liverpool."

The refinancing deal will buy Hicks and Gillett time as they attempt to avoid having to sell Liverpool, although their prospects of borrowing a further £400m to build a new stadium on Stanley Park have receded. Last week's accounts included a warning from the accountants, KPMG, that there would be "significant doubt on the group's and parent company's ability to continue as a going concern" without an extension to the £350m loan. A source close to Hicks responded that the Texan was "very relaxed" and "confident".

Liverpool's manager, Rafael Benítez, meanwhile, has confirmed that he has funds to enhance his squad this summer. "I won't talk about any figures and I can't say how much we have," he said. "Clearly we don't have too much to spend but I think we have enough money to add the one or two players that we need."

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