It was supposed to be the American dream - a
takeover of Liverpool that promised massive investment from two
generous billionaires which would finally enable the great club to
compete at the top again.
Fast forward 12 months, and that dream is turning into something of
a nightmare, with no end in sight to the lurid crisis that has
gripped Anfield in recent months, culminating in confirmation
yesterday that Rafael Benitez's job was casually offered to Jurgen
Klinsmann.
Such a revelation from owner Tom Hicks, which fatally undermines
Benitez's position at the club, should be just about as bad as it
gets at an institution better known for its dignity in the face of
adversity down the years.
But the Americans' relationship with their manager - and the
implications of employing a lame duck boss over the next four
months - are just about the least of the worries facing Hicks and
his co-owner George Gillett.
Liverpool are in a mess. In fact, prefix that with an expletive,
and you begin to understand the sort of mess they are in. They are
a club beset by financial concerns and political infighting, and
one whose prospects look bleak for at least the next four to five
years.
When they bought Liverpool, Hicks and Gillett explained that they
were very different from the Glazers at Manchester United,
promising they would use their own money to finance the deal, and
not borrow against the club. Depressingly, that promise has been
broken, with the pair spending the last six months attempting to
arrange finance that will ultimately put Liverpool in debt to the
breathtaking tune of around £600million.
Because of the global 'credit crunch' however, banks are nervous of
lending money without security, and they have demanded that both
Hicks and Gillett provide personal guarantees and letters of credit
to cover the loans.
Gillett has been either unwilling or unable to provide such
guarantees, which has caused a major delay in finding the money,
and led to speculation that the Americans would be forced to sell
their stake. Hicks insisted yesterday that neither he nor his
partner have any intention of selling - but he did reveal recently
that the plan now is to borrow the money in two stages over the
next 12 months.
If they can appease the banks then they will borrow £300m to pay
for the purchase of the club and other related costs, and get the
'new Anfield' stadium build underway. In a year's time, they will
borrow another £300m to pay for the stadium.
Such massive levels of borrowing means that the interest on the
loan will be around £35-40m every year.
Last year, Liverpool's operating profits were in the region of
£30m, meaning the loan would be almost 20 times operating profits.
In comparison, Manchester United's are eight times, and Arsenal's
just four.
Such financial talk is above the heads of many fans, but the bottom
line for Liverpool is that at current levels, any profit will be
wiped out completely by the interest on loans - which means there
will be little or no money for transfers.
The Americans plan to increase profits, but until the new stadium
is built - which won't be until at least 2012 - their only real way
of doing so will be to increase ticket prices dramatically, another
Glazer route they promised not to follow.
To this heady mix of financial worries must be added real problems
in the relationship between the two Americans. There are clear
indications that the pair simply no longer trust each other, and
certainly, both appear to be briefing frantically against each
other.
Hicks was supposed to be the silent partner providing the financial
muscle in the deal, with Gillett the dealmaker who handled the
public relations. Now Hicks seems to have taken over, and Gillett
to have disappeared.
There is also disharmony within the Anfield boardroom, with former
chairman David Moores and chief executive Rick Parry uneasy about
the level of borrowing against the club, and the lack of financial
progress that has been made. Which all leaves the situation with
Benitez as a puzzling sideshow. In their current financial
situation, Liverpool desperately require stability and guaranteed
income.
Benitez has not only qualified his team for the Champions League
every season, but reached the final twice in three years, providing
desperately required revenue. But there is a real danger now that
by undermining him so badly, the effect on the team's morale will
cost them a Champions League place this season, which would be an
unmitigated disaster.
By replacing him, the Americans are merely opening up the
possibility of spending even more money they haven't got, because
his successor would demand funds to get rid of Benitez's players
and bring in his own.
Logically, the Americans would be best served by backing a manager
with a good track record, in the hope that he can get the best out
of a squad that will not be added to in any significant way over
the short to medium term.
But logic has long flown out of the Anfield window. Benitez knows
that his only chance of survival now is if the Americans sell
before they can sack him.
While that seems a remote prospect, it is not impossible. DIC, the
investment arm of the Dubai government, lurks in the background,
still interested in buying the club they believe they were cheated
out of a year ago.
Hicks revealed yesterday that in October, Liverpool were in talks
to sell DIC a stake - but they stalled over the Americans'
valuation of £1billion for a business they paid only £180m for just
eight months previously.
If borrowing costs get any higher, then the Americans could yet be
forced to lower their valuation, and sell not just a stake, but the
whole club to the Arabs. A mess it certainly is.
