Wednesday, August 04, 2010

Investors Deem Liverpool Shares ''Worthless''

Liverpool's potential investors, a Far East Sovereign Wealth Fund that includes Kenny Huang, are looking to secure a takeover of the club at a knockdown price.

The investors intend to use their funds to pay for the new stadium and new players rather than line the pockets of owners George Gillett and Tom Hicks as the shares are "worthless".

"The owners will be a Far East Sovereign Wealth Fund of which Kenny Huang will be one of two main partners and owners of Liverpool football club,'' a source close to the talks revealed. "The Sovereign Wealth Fund has been in touch with the Royal Bank of Scotland and the Liverpool board to inform them that they do not value the equity of the company higher than the debt.

"The debt stands at around £350 million and at the moment the valuation is based on between 80p to £1 in the pound, but no more. In layman's terms the shares are worthless, and therefore there is no offer to the current shareholders."

That means that the offer from the Sovereign Wealth Fund is to cover all of Liverpool's current debts, most of which are with the RBS at close to £240 million. A guarantee that RBS will get its money back is extremely appealing to the bank, but not to Hicks and Gillett.

"The problem for the bank is that if this offer is not accepted soon, then the value drops, it drops if it goes past the point where investment cannot be made in new players, and to persuade the best players to stay,'' the source added. "You can understand why Gillett and Hicks would say no, because they want some value from their shares.

"It has been suggested there are alternative bids, but from the Sovereign Wealth Fund's perspective, that's fine. If they do not materialize there is a danger that the financial crisis will depend upon the extent that Liverpool go into distress.

"The new chairman was appointed by the bank as part of their agreement to extend the loan facility, but it has now emerged that the bank can call in part of that loan in October. If Liverpool do not accept this deal which is on the table, then the alternative could be dire, if they cannot find an alternative buyer.

"The board is faced with a stark choice; they could be faced with a sharp dip in valuation of the company, top players leaving and little funds to buy new ones. What this takeover will provide is the funds to start construction on a new stadium which is long overdue. This is crucial. You are not in the game if you do not have a modern stadium.''

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