NESV threaten to walk away from Liverpool deal if club are docked points
Published 11/10/2010 | 10:55
New England Sports Ventures positioned itself to renegotiate its proposed £300m purchase of Liverpool over the weekend, threatening to walk away if the club were docked nine points as a result of administration.
Having indicated on Friday that, as the threat of administration was considered remote, NESV remained committed to the deal regardless, the syndicate’s view hardened considerably over the weekend.
Liverpool chairman Martin Broughton is seeking High Court approval for the sale to NESV against the wishes of owners Tom Hicks and George Gillett, with a hearing expected to take place on Tuesday. There were suggestions last night that the club were considering an approach for representation to Lord Grabiner QC, a company disputes specialist.
If the court endorses Broughton’s right to sell the club, NESV will go through with the deal agreed last week. Should the court rule against the chairman, however, administration is a genuine possibility, and NESV now regards it as a deal-breaker and will consider walking away entirely if the club is docked nine points.
NESV is understood to have secured a clause in the deal signed with Broughton in the early hours of Wednesday allowing it to renegotiate the price in the event of administration. Broughton warned on Friday that administration “would impact on Liverpool’s value and [leave it] wide open to predators”.
NESV’s change in position comes after the Premier League told the club board that a nine-point deduction was a “significant risk” even if the administration occurred at Liverpool’s holding company Kop Football (Holdings) Ltd.
Royal Bank of Scotland, whose £237m loans to Hicks and Gillett via Kop Holdings becomes due on Friday, has indicated that if the court rules against Broughton it might be forced put the company into administration to effect a change of control. NESV’s threat to walk away came as a surprise to RBS and the club board, and was interpreted by several sources close to the negotiations as a positioning exercise. It is also evidence of a marked deterioration in relations between John W Henry’s group, the club board and RBS.
Henry and his advisers are understood to have become frustrated at last week’s events. As late as Monday they believed that they were the only serious bidders for the club, only to be told on Tuesday that they were one of two, with the other emanating from Asia. They also believed that Broughton had clear authority to sell the club and were surprised at the legal challenge from Hicks and Gillett.
They increased their offer to secure preferred bidder status, but an apparent lack of clarity over the threat of administration and the likely Premier League sanctions have tested their patience.
Despite having opened negotiations with Broughton and RBS in mid-August, and begun due diligence two weeks ago, the threat of administration and a points deduction appears to have surprised Henry and his advisers.
RBS has been closely involved in the negotiations with NESV and the club board, and its stance should not have come as a surprise. For several weeks the bank and the board have privately indicated that administration of Kop Holdings was considered ‘Plan B’ if a sale could not be agreed.
The Premier League, meanwhile, insists that it gave the Liverpool board guidance on the risk of a points sanction last Tuesday, but that it did not differ from that given to all clubs at the start of the season.
Liverpool managing director Christian Purslow said on Sunday that he was confident a deal would go through. “I’m completely focused on making sure the sale completes. I’m not contemplating administ-ration and nobody should be,” he said, less than 48 hours after Broughton said it could not be ruled out.
“NESV approached us. They met our chairman. He was immediately struck with their seriousness and the entire senior management team of NESV came to Liverpool. They spent a large amount of time in the club doing their work.”
Nine-point sanction will be hard to argue against
Premier League guidelines state that an insolvency at holding company level will incur a points deduction unless the club themselves are solvent, and can demonstrate that the insolvency is not caused by matters “relating to the management of the football club”.
Hicks and Gillett were only able to buy Liverpool with loans from RBS, so it will be very hard for the club to argue that the insolvency is not related to football matters. West Ham avoided a points deduction when their holding company Straumur went into administration last year because the club themselves were solvent, and the insolvency was triggered by problems with Straumur’s Icelandic-based companies, not the club.
Southampton were docked points by the Football League when their holding company was pushed into administration because the club was its only asset, and the football itself was insolvent.