Liverpool FC and the Blame Game
Liverpool FC Sinking in a sea of Debt
Liverpool FC - Blame Game Decisions Part One (Owners)
The first article is about Tom Hicks' and the ownership of his American sporting ventures. It would appear that Tom's debt woes aren't contained to these shores as he comes under increasing pressure to pay off debts across the pond as well. The potentially enforced sale of the Texas Rangers, for up to $500m, being the possible cure to his financial headaches. This follows on from the recent sale of George Gillette's NHL team, the Montreal Canadiens, presumably for similar reasons.
Back in the days of debt being a perfectly normal way of life the lenders, I believe, were as much at fault as anyone else. How else do you explain Hicks' lenders providing him the opportunity to default on interest payments for up to two years? Oh how the world has changed now, you'd be lucky to miss a single payment these days!
We really need to start thinking about the world as pre and post credit crunch. Before the credit crunch I do not believe there were any doubts that Liverpool FC would have a new stadium well on its way to completion by now. The stadium would no doubt have been completed while also adding star players. How? Well, back then, the banks would have happily continued lending to pretty much anyone with a half decent business record and some personal wealth.
Is this the fault of the businessmen of the world? Well they have to shoulder some of the responsibility but they will, quite rightly, ask you to consider the pressures they were under. You see debt funding, while easy to attain, was one of the ways of creating or maintaining competitive advantage. As an example if you sell widgets but the widget maker up the road has a new machine meaning he can produce and thus sell his widgets cheaper, well you have to react or go out of business. While debts were freely available every 'widget maker' in the world was updating their plant and machinery to create competitive advantage. Market conditions, consumer choice, shareholders and globalisation all placed pressure on senior managers to react (or live with the consequences of non reaction), so invariably they reacted rather than died.
So then consider these normal pressures and add in fan pressure and expectation to the quite clear realisation that with some considerable investment Liverpool FC could, in the fullness of time, surpass the revenue and profit generating machine at Old Trafford. To borrow or not to borrow and get there quicker while leaving my own cash free? I know what my answer would have been.
Sport is a business like no other, where on the pitch success is inextricably linked to off the pitch rewards. You can't just let time stand still with your playing squad while you take a few years to build a new stadium. Likewise you can't invest hundreds of millions into the playing squad without the stadium (and thus revenues) to pay for them over the longer term. Add in the increased requirements for home-grown talents (requiring investment in academies) and unless you are owned by Sultan Loadsofmoney or Oligarch Abramovich you simply can't do both things at once. You have to balance the requirements. Before the credit crunch and while using borrowed money these 'balanced steps' were more like leaps forward whereas post credit crunch they are now quite small. Thus requiring a lot of extra patience.
Borrowing is something that, post credit crunch, is increasingly difficult to do. Reeling from the reverberations of the financial shock waves, financial institutions have now gone the complete opposite way of their pre credit crunch proclivities. This is not only a reaction to the mistakes but also a result of the requirements to retain better capital reserves. Banks quite simply cannot take chances like they used to. Any lending must be first and foremost prudently assessed. Let's be honest many sporting ventures were / are over leveraged and therefore always going to come under close scrutiny. I don't really care what Alex Ferguson says, the fact that he netted over £80m in the summer and spent very little speaks absolute volumes to me. We are not the only ones in this situation. Any sporting venture across the world which is considered to be over leveraged will have to 'cut their cloth'.
What is interesting, to me anyway, is that Liverpool FC probably represents the owners' most saleable asset. However they probably believe that LFC is still an untapped oil reserve that will provide an exceptional return on investment in the future. Hence why, in my opinion, no amount of demonstrating is going to do any good, but potentially harm, with calculating hard nosed businessmen. Especially as, in relation to debt, the marketplace seems to be sorting itself out through banking imposed requirements.
As the debt avenue has closed down the owners need to bring in additional investment capital into the business. Before the credit crunch they could have achieved their targets (and kept all of the returns) without diluting their shareholding. That does not seem feasible now. Which in fairness they appear to have recognised and are attempting to do something about.
So we move onto the frank account from Rafa Benitez this morning and how he has helped the owners with their need to bring down the debt levels. I actually see this as a positive. It becomes clear, for the first time, that Rafa is actually involved and up to speed with the finances of the club. Even more importantly it appears that he is playing his part, being realistic and still not writing off success. It would also appear that he signed his new 5 year contract, despite the callings of Real Madrid, in full knowledge of the situation.Rafa has taken a very responsible and realistic position in the current situation. Something I actually find quite heartening and something that the 'anti-Rafa brigade' and every journalist should consider (as well as our injuries, delay to Aquilani, loss of form from key players etc.) the next time they decide to open their mouths with their short term views.
The possible down side is that you would expect that key players are also aware of the situation and there could be a knock on effect on morale for our star players, knowing that additional 'star players' may not be arriving any time soon. Although I can't think of any one better to manage this than Rafa.
As I have stated countless time we are on a long term ride people. This is seen throughout every level of the club. We no longer have access to quick cash through borrowing. Therefore things are going to take time.
- The owners, I have no doubt, will move on. When they can realise a good return on their investment. This will take time.
- A new stadium will be built. But we need the global uncertainty over borrowing to subside or an investor to come in. This will take time.
- New players will be brought into the club. But we need the global uncertainty over borrowing to subside or an investor to come in. This will take time.
- We will win the Premiership and other competitions when we get an injury reduced season or new players come in to the squad. This will take time.
Anything negative that anyone wants to do, say or try and impose in the mean time (in relation to the owners or Rafa) will not get us any nearer to the club's current goals. Goals which they seem to be inexorably heading towards. They all need to be left alone and given time to get on with business.
