Liverpool FC are in real financial trouble as the clubs holding company Kop Football Ltd posted a £42 million loss last year.
Kop Football Ltd was setup as the parent company of Liverpool FC who’s debt doubled to £82 million only last week.
When Liverpool owners bought the club from David Moores and the other shareholders they didn’t fund it with their own cash. They decided to take out a loan of £350 million split between the football club to clear debts and the rest in to Kop Football Holdings which was supposed to begin building a stadium. However, as we predicted, the interest payments would be crippling and far more than LFC could afford. £36 million in interest in one year alone is plunging the club in to more and more debt.
The clubs owners have effectively handed over £40 million a year for nothing. Out of their own desire to avoid investing a single cent in to the football club THEY were supposed to be buying.
KPMG, the accountancy firm has certain legal obligations so that lenders are aware of financing difficulties, and said:
The following is from Bloomberg:
Liverpool Football Club’s parent company had a full-year loss of 42.6 million pounds ($69 million) because of interest payments on loans taken out by American co-owners George Gillett and Tom Hicks.
Kop Football (Holdings) Ltd.’s loss in the year ending July 31, 2008, widened from 33.1 million pounds on interest charges of 36.5 million pounds, the company said in a Companies House filing. The owners have a July 24 deadline to refinance or pay off a 350 million-pound credit facility with Royal Bank of Scotland Plc and Wachovia Corp.
The interest payments wiped out the 8.37 million pounds of net income reported by the Premier League soccer club, which benefited from player trades and increased broadcast income. That compares with a 20.6 million-pound loss a year earlier, the club said in a separate filing. Sales rose 19 percent to 159.1 million pounds.
“Any company, never mind a sports company, which is not able to cover interest from operating activities has three options: refinance, get new equity investors, or sell it to somebody else who’s prepared to absorb the debt and start from scratch,” said Sean Hamil, a lecturer at the University of London’s Birkbeck Sport Business Centre.
With the debt issue unresolved there is the “existence of a material uncertainty which may cast significant doubt on the group’s and parent company’s ability to continue as a going concern,” the club’s accountant KPMG LLP wrote in the filing.
Even more worrying is the following:
Liverpool said it had been granted a license to play in next season’s Champions League, access to which is contingent on proving the business is a “going concern.”
The owners say they have no plans to walk away from the 18- time English champion. Instead, they have held talks with potential investors about acquiring an equity stake and are in discussions with their bankers to extend their loan.
On July 24th, £350 million must be paid back to RBS and Wachovia, the two banks.
Where that money is going to come from God alone knows.
Not only will UEFA kick clubs out of competition for financial impairments but the Premier League can impose significant points deductions.