• NESV has paid off £200m 'acquisition debt'
• Henry emails Guardian to say how £218m was raised
John W
Henry, Liverpool's new owner, has not given any written guarantee
that he will not offload his costs of taking over Liverpool on to
the club.
Henry and his 16 partners in New England Sports
Ventures made that commitment verbally before the
takeover, to clear the £200m "acquisition debt" loaded on to the
club by the previous owners, Tom Hicks and George Gillett, and not
burden Liverpool with servicing their own purchase.
However in a detailed email Henry sent to the Guardian this week
answering questions about the takeover, he said the Liverpool
board, chaired by Martin Broughton, never asked for a contractual
commitment from NESV not to load any of their acquisition costs on
to the club in the future. "I don't remember anything being
discussed along these lines," Henry said, "except that there was a
desire for all of [Liverpool's] debt to be removed except stadium
debt."
A spokesman for Broughton and the former managing director
Christian Purslow, who voted to sell the club to NESV based largely
on Henry's assurance that no "acquisition debt" would be loaded on
the club, said they had not asked for written guarantees because
such future commitments are not strictly legally enforceable.
Hicks and Gillett said in their own official offer document when
buying the club in February 2007 that the payment of interest on
their £200m borrowings "will not depend to any significant extent
on the business of
Liverpool". But subsequently they did make the club pay the
multi-million pound interest costs.
Henry told the Guardian that he and his partners have, as they
agreed before the takeover, paid off that £200m, and not
substituted it with their own borrowings. "The simplest thing to
say is that we removed all debt but the stadium debt," Henry wrote.
"LFC is not servicing debt other than stadium debt."
Royal Bank of Scotland, to which £150m of the £200m was owed –
the other £50m was owed to Wachovia – confirmed that it has now
been repaid. That leaves Liverpool with a remaining debt to RBS of
£37m, incurred on the plans to build a new stadium on Stanley Park,
which NESV is now reviewing.
In his email Henry, who was in Liverpool today to meet Roy
Hodgson, players and club staff and officials, declined to explain
how NESV raised the £218m total cash required to buy Liverpool, and
whether any of it was borrowed.
"I have certain obligations to my partners regarding
confidentiality of a private company and in not disclosing our
financials publicly," he said. "LFC discloses its financials
annually, so monies going in and going out are disclosed. But I'm
not going to disclose NESV financials or financing
information."
However, detail in his email, and answers he gave to a Liverpool
fans' website, www.redandwhitekop.com at the weekend,
suggest that NESV did borrow some of the money to buy Liverpool. He
suggested to Red and White Kop that the £218m was partly raised
from the NESV partners personally and partly from borrowing.
"We have some very successful partners – some of whom are big
[Premier League] fans – and we are well-financed internally," he
told the website. "But NESV has always had debt, from the first day
we purchased the Red Sox."
He added that seeking a financial return is part of NESV's
business culture, and the partners can make a greater profit – the
Internal Rate of Return – if they do not make the initial
investment wholly with their own money, and instead borrow part of
it. "We have some partners who look at Internal Rate of Return," he
explained, "and almost demand that we have debt as a consequence.
Debt increases IRR."
Henry, though, clarified this with the Guardian, saying only one
NESV partner "is driven by" IRR, and "always sought higher IRR
through borrowing". But he said that partner has been overruled:
"The rest of us have preferred paying down debt."
Although he has given no written guarantee that NESV will not
saddle Liverpool with the cost of their own takeover, Henry pointed
to their ownership of the Red Sox and other sporting ventures since
2001, saying they have taken no dividend out and paid no financial
return back to partners.
Describing Liverpool as a "big challenge," he said they were not
seeking to take regular cash profits out of the club, but could
make money "some day (hopefully a long time from now)" if they have
done "the right things day-to-day" and the club becomes worth more
as an asset to own