What does this mean for Liverpool Football Club? Well DIC had followed their usual protocols of applying high leverage against the business assets to support it. The club has benefited from major activity in the transfer market and the building of a new stadium, which is 50% complete. If the Dubai government is unable to reach agreement with its companies' creditors then it could effectively collapse.
This would mean disaster for Liverpool Football Club as it is unlikely that anyone will see the opportunity to make a return on such a highly leveraged business. It is inevitable that work on the new stadium will cease and the possibility of a fire sale of its most prized footballing assets including players Fernando Torres, David Villa, David Silva and Steven Gerrard are more likely than ever. Given the debts were placed directly onto the club and guaranteed by DIC rather than through a special investment vehicle (holding company) it is highly likely that Liverpool will face a points deduction from the FA.
One of the truly great clubs of all time woke up this morning and found itself on the brink of falling down a deep black financial hole.
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Back to reality.
What would have DIC done that would have been any different to H&G? In a world where credit was easy companies grew on the back of leverage against assets. What I believe would have been different would have been the sheer level of debts. Much like CFC face destruction if Abramovich fails, so would we.
IF H&G fail then LFC will be bought and we will not (I believe) face any points deduction. The debt levels are more than acceptable to a potential buyer at the moment and the company is run by an effective management team who are delivering its potential after years of neglect. This turnaround will take time and patience is required. Much like it is with Rafa at the moment.
We can't go out and buy players without taking on extra risk. It is a balancing act and one which Christian Purslow and his team is managing very very well!
Please do not comment on this page unless you have evidence of business reasons why H&G are bad for LFC. I don't want emotive comments, I want cold hard facts. Before you do, go do some research. I have done a lot for you and would refer you back to Blame Game Part One.
This morning I woke up and thought, thank god for that!
