All you need is loans
Narrowing credit acceptance critera, a stagnant housing market and rising food/energy costs are making us all spend frugally this late summer.
Cutting back on your weekly grocery spend and turning the thermostat down by a degree or two will help to alleviate the financial pressure, but unfortunately for Liverpool Football Club there may be no such quick fix when their request for a £350 million loan is rejected by RBS.
The troubled north west side, already rocked by a sluggish start to the season and internal wrangles between manager Rafael Benitez and co-owners George Gillett and Tom Hicks, desperately require the £350 million loan in order to complete existing debt restructuring plans. The loan is needed to cover the collapse of Hicks and Gillett’s original loan deal (£298 million) that financed their purchase of Liverpool FC, the collateral against which was business assets in America and Canada which have since been considerably devalued by the US sub-prime crisis.
RBS reported a pre-tax loss of £691 million in the first six months of 2008 and are therefore expected to veto Liverpool’s request.
So, as we turn into a nation of spendthrifts, has Liverpool FC followed suit and curbed its spending in anticipation of the seemingly inevitable RBS rejection? Not a jot.
Over £30 million has been spent by Liverpool this summer on French teenagers and Italian journeymen. £20 million alone of that budget was blown on a diminutive Irishman with no proven Premiership scoring record.
The spending doesn’t appear to have stopped either, with Benitez adamant he will land another £18 million transfer target, a midfielder who is essentially a facsimile of a player Liverpool already own.
Should the RBS loan deal fail, the only remaining option open to Liverpool FC is to borrow from elsewhere at a much higher rate. As a result of these short-term financing strategies, the club would tumble headfirst into fiscal meltdown and administration, possibly within 18 months.
On a positive note, the club could be bought by Dubai based investment firm DIC, although the new owners would still be required to manage the old debt.
