09 September 2007

Why Reds must count on success

by David Prentice, Liverpool Echo

RAFAEL BENITEZ used 18 players in the space of five days last week – and that with his most influential figures sat in the stand.
He still saw Liverpool score 10 goals without reply.
The impeccably polished performances against Derby County and Toulouse were not just easy on the eye, they highlighted one heartening fact.
The Reds now have a squad capable of challenging for trophies on all four fronts this season.
But it is a challenge they will need to maintain.
Not just this season, but for seasons to come.
Because according to a report published yesterday, Liverpool will need to generate every last cent of revenue from every competition they enter for the forseeable future – certainly if transfer market spending is to continue at this summer’s levels and massive hikes in ticket prices are to be avoided.
It’s no secret that Liverpool are playing catch-up with Manchester United in their new stadium ambitions.
And the Reds are certainly being ambitious in their level of borrowing.
Tom Hicks and George Gillett borrowed £298million when they bought Liverpool – a loan to be repaid by February 2009, and crucially a loan personally guaranteed by themselves.
It meant that they could boldly claim “We have purchased the club, with no debt on the club.”
But that position is about to change.
Now they are seeking to borrow £500m, over a much longer term, but this time secured against the club’s assets.
The new loan will pay off the old borrowing and finance the new stadium.
But the borrowing isn’t in place yet.
Originally Goldman Sachs were set to lend the money, but following a worldwide pinch on lending, that financial institution has revised its original offer, asking Hicks and Gillett to plunge in much more of their own cash, believed to be around £100m.
Before the Americans make a decision, other avenues are being explored.
But whoever lends the cash, it is still a phenomenal amount of borrowing.
A £500million loan is at least 16 times Liverpool’s current operating profit (£30m in 2007, thanks, don’t forget, to a run to the Champions League final).
To put that level of debt into perspective, Manchester United’s borrowings which forced a bitter backlash from some fans, are only eight times their operating profit, while Arsenal’s are four times.
The comeback from Liverpool’s financial adviser, Robert Tilliss of the New York based Inner Circle Sports, is that borrowings must be placed in the context of the increased revenues which will be generated by the new stadium.
Obviously a 60,000 seat stadium (possibly 76,000 in the future), will generate considerably more income than the present Anfield.
But so, too, will success in the Premiership, the Champions League, the FA Cup and the Carling Cup.
There was a time when challenging for trophies was merely about glory. That may still be the case for fans, footballers and Rafa Benitez, but for the men with the purse-strings the revenue streams those trophies provide are increasingly influential.
Champions League qualification – and progress – will be a minimum requirement for the Reds for several seasons to come.

Liverpool by numbers

£174m Amount paid by Tom Hicks and George Gillett for Liverpool
£298m Amount borrowed by Hicks and Gillett at the time of their takeover
£500m Amount now being sought to pay for new stadium and to refinance original loan
£30m Expected operating profit for 2006/2007
£21.5m Annual interest payments on the existing loan
£23.5m Net spending on players this summer
£20.2m Most expensive signing - Fernando Torres from Atletico Madrid
£250m Cost of new stadium at Stanley Park

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