Liverpool FC Forum

by **Ciggy** » Fri May 23, 2008 3:58 pm

Tom Hicks And His Corinthians Past
May 23, 2008

It seems Tom Hicks leaves a trail of devastation wherever goes. His disastrous foray into the Brazilian football market as chairman of Hicks, Muse, Tate & Furst left Corinthians, the second most popular club in Brazil, in a state of turmoil.

The parallels between what happened to Corinthians and what is currently happening at Liverpool are unsettling to say the least:

There was the initial blaze of publicity and fanfare when the company bought the club in 1999, with promises of big spending on the best players and the construction of a brand new 45,000 seater stadium in the suburbs of Sao Paulo.
There was an initial capital investment to tie down existing players and to finance the purchase one or two other additional players.
The economics behind the Corinthians deal appeared to be based on ridiculously rudimentary logic: “If you add up all the fans of professional baseball, basketball, football and hockey in the United States, that number is lower than the number of Brazilians who are soccer fans.” Clearly, no proper risk analysis had been undertaken - a situation which resonates with the due diligence period of 3 days prior to the purchase of Liverpool.
This flimsy approach was reinforced by the apparently rash and impulsive purchase of Cruzeiro six months later - traits which Liverpool fans are rapidly coming to associate with Hicks.
There was also the emphasis on the cheaper “young players”, with the following quote from the (unfortunately named) Richard Law, president of Hicks’ subsidiary group: “Our job is not to turn back the inevitable, but to build Corinthians and Cruzeiro up from the junior ranks.” Hicks followed a similar tack following the takeover of Liverpool: “You need to keep your star players but also develop your young players. Young players are the lifeblood of your team, so we talked about how we can improve that side of the team.”
Corinthians had already won the Brazilian championship in 1998, so Hicks inherited a winning team. The initial expenditure assisted in retaining the league title in Dec 1999 and the club also won the inaugural FIFA Club World Championship the following month.

This is where things started to go wrong.

Unable to resist the temptation to make a quick buck, HICKS BEGAN SELLING TRANSFER RIGHTS TO THE CLUB’S STAR PLAYERS. On top of that, he decided on the bizarre idea of changing the traditional colour of the club’s shirt. He also introduced sponsorship (something which Corinthians fans felt defiled their heritage).

All of these things led to a furious reaction from supporters and widespread protest against Hicks and his partners. The company bailed out three years later, ironically having accused its local partner in Brazil of “misappropriating funds” (read this and you’ll understand).

Corinthians began to spiral downwards. MSI took over the club’s management but, despite a league title in 2005, the financial problems initiated by Hicks proved too much of a burden. The club was relegated to the second tier of Brazilian football for the first time in its history in December 2007.

THERE WAS NO NEW STADIUM. Hicks invested about five hundred million dollars and within two years filed for bankruptcy.

In a recent prospectus issued to financial companies in London, Hicks claims in to be “a master of purchasing and growing professional sports teams”.

Liverpool fans, Texas Rangers fans and Corinthians fans might disagree.

http://www.soccernews.com/tom-hicks-and-his-corinthians-past/2293/

by **Igor Zidane** » Fri May 23, 2008 4:24 pm

Scary stuff that lynds. Why the f.uck didn't moores and parry look into all this before they sold .

People should read this carefully , because this is the future of LFC whilst these two are in charge.

by **tubby** » Fri May 23, 2008 4:39 pm

Scary stuff indeed but the whole thing about young players is being taken out of context. Any club will tell you that you should be bringing up young players. It makes financial sense if you end up developing your own star players. Do you think we could afford someone of Gerrards price tag now if we wanted? Hell no.

by **Rush Job** » Sat May 24, 2008 3:53 am

Igor Zidane wrote:Scary stuff that lynds. Why the f.uck didn't moores and parry look into all this before they sold .

People should read this carefully , because this is the future of LFC whilst these two are in charge.

Have to agree mate.

by **lakes10** » Sat May 24, 2008 2:05 pm

s@int wrote:Top notch post by T.Moore on Rawk

Not sure I agree with ALL his conclusions but the effort and detail is first rate.

So 10 months on from the last year end we finally get to see what the state of the clubs finances were at the time of the takeover. It offers us a mixed bag. The headline figures make rather poor reading however there are some positives to show from them. Whether these positives will continue remain to be seen.

Key Figures

2007 2006 % Change
Turnover 133,910 119,499 12%
Cost of Sales 16,417 12,803 28.2%
Admin Expenses 143,160 117,324 22%
Loss Before Tax 21,655 4,931 339%
Net External Debt 43,868 25,617 71.2%
Cashflow from Operating Activites 39,996 22,142 80.6%
Gross Transfer Expenditure 69,972 41,753 67.6%

They make strong reading don't they? There are reasons behind these set of results. As you all know 2007 was a difficult year for LFC off the pitch. It started with the saga over who would buy the club. And it ended with the saga of who would buy the club. While in between there was the ray of sunshine that came into all our lives of one Mr Fernando Torres (stop bouncing at the back)

Turnover

This is broken down as thus

2007 2006 % Change
Media 52,161 49,753 4.8%
Matchday 38,442 32,654 17.8%
Commercial 41,794 35,559 17.5%
Museum & OSC 1,513 1,533 (1.3%)

As can be seen from above, apart from the Museum & OSC, healthy rises in revenue were enjoyed. The increased Media comes from the advancement to the Final of the European Cup. The matchday turnover increased as a result of 2 extra home games in the european cup knock-out stages compared to the previous season. Commercial increased both as a result of increased bonuses for the final appearance and increased merchandise sales, this was the first year of Adidas supplying the kits/training gear.

Admin Expenses

2007 2006 % Change
Staff Costs 77,589 68,868 12.7%
Amortisation of Players Registrations 31,121 25,231 23.3%
Impairment on Players Registrations 2,005 5,250 (61.8%)
Other Operating Charges 16,991 14,617 16.24%

As a result of the takeover, and the subsequent redesign of the planned new stadium, a couple of exceptional items went through the clubs accounts. The first was a complete writeoff of all costs that were capitalised to the balance sheet with regards to the original stadium design and it's associated planning permission. This came to £10,323,000. There was also the direct cost of the takeover. There were professional fees of £2,037,000 incurred aswell as a rather sickening bonus of £564,000 (pre-tax) for Rick Parry. This meant that the results stated are distorted by £13m. Had this not taken place the club would have been looking at a loss of approx £8.7m. Still higher than 2006, but entirely manageable in the short term.

Staff costs have increased because of two reasons. One is the general increase due to contract renewals during the period. Players signed on higher contracts than those players departing and also because there is an ongoing legal case on employment taxes and a provision has been made for the potential liabilitiy. This is an unknown but may be related to either the VAT issues that Newcastle were having with the HMRC or it maybe related to similar issues Arsenal were having with regards to tax status of players and where they are registered.

The amortisation of players registrations increased as a result of increased investment in playing staff, while the impairment charge relates to a writedown of the value of Gabriel Palleta prior to his transfer out of the club.

There was also an amount of £3.8m capitalised to the balance sheet relating to the revised stadium designs.

Net Debt

This increased markedly over the year. This was a result of the increased levels of capital expenditure in the reporting period. £54.4m of net capital expenditure occurred while there was only £40m of operating cashflows to pay for it. The £54.4m is made up of £46.1m outflow for transfer fees and £8.3m of expenditure to purchase fixed assets (likely to relate to land purchases and expenditure on the 2nd set of stadium designs).

There was also an intercompany loan made from Kop Football (Holdings) Limited to LFC. This was used to repay the loan obtained from David Moores for the purchase of Dirk Kuyt.

After the year end LFC received funds totalling £51.7m to repay existing due borrowings and to provide working capital. This is likely to be in the form of a loan but it has an advantage of clearing the clubs rather sizeable overdraft (£37.7m). Kop Football (Holdings) Limited also paid, on behalf of LFC, £1.3m in relation to the new stadium.

There is also upto £35m outstanding on transfer fees to other clubs. This is predominantly to european clubs and likely relate to the transfers of Torres and Babel.

Contingent Assets/Liabilities

If certain conditions are met the club has potential income of £8.6m and potential expenditure of £7.4m on transfer fees.

Transfer Expenditure

The one area that causes the biggest debate. Every year we have fans complaining about the amount of money spent on players and every year they get it wrong, massively. These are the true figures for the last 3 financial years.

(figures in £000s)
Financial Year Ending 2007 2006 2005
Purchases 69,972 41,753 46,106
Sales 25,946 16,838 13,162
Net Transfer Activity 44,026 24,915 32,944

Note, 2007's Figures include the Dirk Kuyt transfer which took place in August 2006 and came to approx £10m.

Since the end of the financial year Javier Mascherano Martin Skrtel, Sebastian Leto, Charles Itandje, Emiliano Insua and Damien Plessis have been brought into the club on a permanent basis. All of this excluding Javier Mascherano resulted in transfer fees payable of £10.9m. Add in Mascherano at an estimated minimum of £10m gives a gross outlay of £20.9m since the 31 July 2007. Also Momo Sissoko and Palleta have both left the club, Palleta for £0.5m and Sissoko for a reported £9m. Leaving net spending at approx £11.4m since 31 July 2007.

The Immediate Future

The immediate future is now difficult to predict, will we be sold again or won't we. Will the stadium go ahead or not, can the club afford the debt repayments it may be asked to pay? So many questions so little answers. There is only a limited area of certainty.

1) The latest Premier League tv deal. This will increase league media revenues by approx £15m, as a result the club is looking at breaking the £150m turnover mark this current financial year.

2) The increased sponsorship revenue from Carlsberg which adds around £2m a season to existing revenues.

3) The supporter pet hate, increased ticket prices. These will generate approx £2m to £3m a season to revenues.

4) This financial year there won't be the large £10.3m exceptional writeoff, nor will there be the takeover costs (unless something happens in the next 10 weeks)

These 4 items alone generate a swing of approx £30m in profit, although interest costs and any increased staff costs will not be known for a year.

From midway this latest financial year LFC also took complete control of LFC.tv Limited. This will double the share of turnover/profit generated from it's activities.

Benchmarking against our rivals

This time I thought I would do a benchmark against our 3 main rivals at the top, Chelsea, Man Utd and Arsenal. I do this because this is another area of mass debate, and low knowledge, to beat the Moores/Parry regime. With this I aim to show how the top 4 compare in the revenue, core costs (player amortisation and wages) and transfer expenditure stakes.

The figures relate to the season 2006/07 and are taken from the published accounts of all 4 clubs. There is a slight difference in accounting reference dates but I believe these are insignificant. The figures also relate to footballing activity only (arsenal have a property development going on at present, chelsea have the hotel etc)

(in £000s unless stated)
Liverpool Manchester United Chelsea Arsenal
Turnover 133,910 210,081 177,109 176,507
Media 52,161 61,484 Not Avail 44,312
Matchday 38,442 92,562 Not Avail 90,613
Commercial 41,794 56,035 Not Avail 41,582
Amortisation of Player Registrations 33,126 24,252 69,968 18,782
Staff Wages 77,589 91,588 122,779 89,703
Staff Wages as % of Turnover 57.9% 43.6% 69.3% 50.8%
Gross Transfer Expenditure 69,972 78,998 26,802 17,585
Net Transfer Expenditure 44,026 61,718 5,202 (1,569)

As you can see matchday revenue is what I consider the most glaring difference between our performance and that of Arsenal and Manchester United (unfortunately Chelsea didn't do a segmental report on turnover). We are currently in excess of £50m behind in turnover from matchday revenues. That is a hell of a way to be behind and it is because of one factor. Anfield. It is too small and too poorly equiped for corporates to generate the sort of revnues Arsenal and Manchester United make. It is why a new stadium, from a financial point of view, is a must. The other areas are relatively insignificant. The media is down to positions in the league, the higher you are the more money you get. This then feeds through to the tv money received from UEFA.

Our commercial v that of Uniteds stems from an approx £4m difference in kit sponsorhip value and the shirt sponsorship being around £9m below that of Uniteds at the time.

Comparing against Arsenal shows we lack only in matchday revenues, while commercial activity is slightly distorted from Arsenal due to the £3m a year they get for stadium sponsorship that neither us nor Chelsea/Man Utd get.

You will also see that we only trailed Manchester United in both Gross and Net Transfer Expenditure in the financial year.

© Tim Moore

thats a great post and it shuts mark lawrenson up.
he said on Radio five live the other night he " could see the club going bust in the next 2 years if its not slod"

by **Igor Zidane** » Sat May 24, 2008 2:31 pm

Ripped from rawk.

http://www.soccernews.com/liverpool-fc-tom-hicks-debt-lies/2378/

Liverpool FC: Tom Hicks - Debt & Lies
May 24, 2008

The word ‘liar’ is often used to describe Liverpool co-owner Tom Hicks. Yet it’s a potent word to use and needs to be justified.

For instance, the statement made at the time of takeover - “We have purchased the club with no debt on the club” - did not preclude the loading of purchase debt onto the club in future. However, given that the loan taken out was a bridging loan (short-term loans which charge penal rates of interest), the owners would have known that they would be refinancing in future, and that the acquisition debt could be transferred onto the club at that point.

So they chose their words carefully - it’s spin; it’s deceit; but it’s not an outright lie.

Now to the lies.

Hicks stated around the time of the takeover that they wouldn’t ‘do a Glazer’ - “Clearly I think that was a blueprint of what not to do” . This implied:

that he wouldn’t transfer the purchase debt onto the club
that the club’s profits wouldn’t be used to service this debt.
It’s been widely reported that the only thing that prevented the full £350m refinancing debt being loaded onto the club’s balance sheet was the opposition from Messrs Moores & Parry. The takeover agreement stipulated that the consent of all board members was required in order for such a course of action to be ratified. Tom Hicks, a leveraged buyout expert, didn’t expect such resistance and was reportedly enraged by Moores’ and Parry’s stance.

Hicks, still upset that he hadn’t got his way, stated shortly after the deal had been completed that he “ought to line up all the lawyers and shoot them” , doubtless referring to the contract clause which resulted in only a portion of the total debt being secured against the club.

This invalidates the first bullet point and is lie number one.

Amongst the various promises made at the time of takeover was the following in the official offer document to shareholders:

“The payment of interest on, repayment of or security for any liability (contingent or otherwise) due under the facilities [loans] will not depend to any significant extent on the business of Liverpool.”

A few months later, Hicks revealed his true intentions in an interview with Lawrence Donegan in the Guardian:

“Hopefully the club will have extra cash flow so they can pay us a dividend to do that,” Hicks said. “If they don’t, then it will come from our pockets. But the club will have to have profits sufficient to pay those dividends.”

This clearly contravenes what was stated in the official offer document and invalidates the second bullet point - giving us lie number two.

It’s this second lie which is the principal source of anger and concern amongst Liverpool FC supporters. The club’s operating profit just about covers the annual interest payment - meaning that failure to qualify for the Champions League in any one season could lead to serious financial difficulty. It also means that, rather than putting the club’s profits towards transfer funds, these profits are instead diverted to service the (ridiculously high) interest payments on the owners’ acquisition debt.
In short, it’s a recipe for disaster.

Yet, the above lie also creates an opportunity; Hicks may actually have broken the law. His statement to Donegan contradicts what was written in the official offer document, the sort of thing that could warrant investigation by the Takeover Panel (since shareholders have effectively been provided with false information by Hicks).

So, to summarise, we have now established that Tom Hicks has lied about the debt being put on the club.

The bad (or good!) news is that this is only the tip of the Hicks iceberg. There are many more examples of spin and lies which we will hopefully be able to cover in future, though none as serious as this."

by **heimdall** » Sat May 24, 2008 5:35 pm

Igor Zidane wrote:Ripped from rawk.

http://www.soccernews.com/liverpool-fc-tom-hicks-debt-lies/2378/

Liverpool FC: Tom Hicks - Debt & Lies
May 24, 2008

The word ‘liar’ is often used to describe Liverpool co-owner Tom Hicks. Yet it’s a potent word to use and needs to be justified.

For instance, the statement made at the time of takeover - “We have purchased the club with no debt on the club” - did not preclude the loading of purchase debt onto the club in future. However, given that the loan taken out was a bridging loan (short-term loans which charge penal rates of interest), the owners would have known that they would be refinancing in future, and that the acquisition debt could be transferred onto the club at that point.

So they chose their words carefully - it’s spin; it’s deceit; but it’s not an outright lie.

Now to the lies.

Hicks stated around the time of the takeover that they wouldn’t ‘do a Glazer’ - “Clearly I think that was a blueprint of what not to do” . This implied:

that he wouldn’t transfer the purchase debt onto the club
that the club’s profits wouldn’t be used to service this debt.
It’s been widely reported that the only thing that prevented the full £350m refinancing debt being loaded onto the club’s balance sheet was the opposition from Messrs Moores & Parry. The takeover agreement stipulated that the consent of all board members was required in order for such a course of action to be ratified. Tom Hicks, a leveraged buyout expert, didn’t expect such resistance and was reportedly enraged by Moores’ and Parry’s stance.

Hicks, still upset that he hadn’t got his way, stated shortly after the deal had been completed that he “ought to line up all the lawyers and shoot them” , doubtless referring to the contract clause which resulted in only a portion of the total debt being secured against the club.

This invalidates the first bullet point and is lie number one.

Amongst the various promises made at the time of takeover was the following in the official offer document to shareholders:

“The payment of interest on, repayment of or security for any liability (contingent or otherwise) due under the facilities [loans] will not depend to any significant extent on the business of Liverpool.”

A few months later, Hicks revealed his true intentions in an interview with Lawrence Donegan in the Guardian:

“Hopefully the club will have extra cash flow so they can pay us a dividend to do that,” Hicks said. “If they don’t, then it will come from our pockets. But the club will have to have profits sufficient to pay those dividends.”

This clearly contravenes what was stated in the official offer document and invalidates the second bullet point - giving us lie number two.

It’s this second lie which is the principal source of anger and concern amongst Liverpool FC supporters. The club’s operating profit just about covers the annual interest payment - meaning that failure to qualify for the Champions League in any one season could lead to serious financial difficulty. It also means that, rather than putting the club’s profits towards transfer funds, these profits are instead diverted to service the (ridiculously high) interest payments on the owners’ acquisition debt.
In short, it’s a recipe for disaster.

Yet, the above lie also creates an opportunity; Hicks may actually have broken the law. His statement to Donegan contradicts what was written in the official offer document, the sort of thing that could warrant investigation by the Takeover Panel (since shareholders have effectively been provided with false information by Hicks).

So, to summarise, we have now established that Tom Hicks has lied about the debt being put on the club.

The bad (or good!) news is that this is only the tip of the Hicks iceberg. There are many more examples of spin and lies which we will hopefully be able to cover in future, though none as serious as this."

What a bullsh1t post, not you Igor but the guy on RAWK. If Hicks has broken the law then so have 99% of all other mergers and takeovers. There is always an element of massaging the truth, not that I condone it.
It is strange that nothing new has been said in a while, I wonder whether that is a good or bad thing but I still believe that the entire club will soon be sold to DIC. In a way it probably would have been better if Everton had gotten 4th spot instead of us as that would have devalued the club but then again I couldn't stand the bitters beating us!

by **Kharhaz** » Sat May 24, 2008 11:23 pm

In a way it probably would have been better if Everton had gotten 4th spot instead of us as that would have devalued the club but then again I couldn't stand the bitters beating us!

And commit a mass suicide for all lfc supporters? Its bad enough the scum lifting the double, and the fiasco we have with our owners and now you are showing a hint of regret that everton failed to finish the job off?

Words fail me.

by **heimdall** » Sun May 25, 2008 2:01 am

Kharhaz wrote:
In a way it probably would have been better if Everton had gotten 4th spot instead of us as that would have devalued the club but then again I couldn't stand the bitters beating us!

And commit a mass suicide for all lfc supporters? Its bad enough the scum lifting the double, and the fiasco we have with our owners and now you are showing a hint of regret that everton failed to finish the job off?

Words fail me.

oh well done for missing the point, try reading the sentence again!!
I actually said I couldn't stand the bitters beating us!! It would have meant Hicks and Gillett probably having to sell up though.

by **Kharhaz** » Sun May 25, 2008 2:07 am

heimdall wrote:
Kharhaz wrote:
In a way it probably would have been better if Everton had gotten 4th spot instead of us as that would have devalued the club but then again I couldn't stand the bitters beating us!

And commit a mass suicide for all lfc supporters? Its bad enough the scum lifting the double, and the fiasco we have with our owners and now you are showing a hint of regret that everton failed to finish the job off?

Words fail me.

oh well done for missing the point, try reading the sentence again!!
I actually said I couldn't stand the bitters beating us!! It would have meant Hicks and Gillett probably having to sell up though.

No it wouldnt. All it would have meant is, rafa was sacked at the end of the worst season we could possibly have. And then the yanks could say "see, told ya klinsmann was the man".

by **Number 9** » Sun May 25, 2008 4:19 am

Captain Prozac versus King Kleenex!

by **Number 9** » Sun May 25, 2008 4:33 am

One things for sure when you two post there will be tears.For the sake of rainforests everywhere and the many babies nappies it would take to wipe little eyes magnified by sh'iteness can i just say one thing!!!

One thing!

Carlsberg dont make tw@ts but if they ever do Heimdall i will give you a call!! :rasp

by **Ciggy** » Sun May 25, 2008 10:22 am

Mail on sunday:

Liverpool manager Rafa Benitez has been forced to add players to his Anfield fire sale in a frantic bid to raise the £35 million he needs for new signings. As newly published accounts for last season lay bare how tight the club's financial situation is, Benitez will now listen to offers for the likes of Alvaro Arbeloa, Jermain Pennant and steve finnan, as well as those he had already decided to let go, including Peter Crouch, John Arne Riise and Scott Carson.
Benitez has been told that if he wants to sign Aston Villa's Gareth Barry, Udinese's £8m-rated left-back Andrea Dossena and a top-class right-sided midfielder he must fund new signings this summer out of player sales. The only guaranteed arrival is defender Philipp Degen from Borussia Dortmund and now Benitez's auction has eight players for sale.
Liverpool made a pre-tax loss last year of almost £22 m and now, after co-owners Tom Hicks and George Gillett effectively loaded the club with a £350 m loan, Liverpool will have to find £30m-plus in annual interest charges alone, leaving Benitez having to fund his transfer war chest through sales.

by **HacksawJimDuggin** » Sun May 25, 2008 11:14 am

Ciggy wrote:Mail on sunday:

Liverpool manager Rafa Benitez has been forced to add players to his Anfield fire sale in a frantic bid to raise the £35 million he needs for new signings. As newly published accounts for last season lay bare how tight the club's financial situation is, Benitez will now listen to offers for the likes of Alvaro Arbeloa, Jermain Pennant and steve finnan, as well as those he had already decided to let go, including Peter Crouch, John Arne Riise and Scott Carson.
Benitez has been told that if he wants to sign Aston Villa's Gareth Barry, Udinese's £8m-rated left-back Andrea Dossena and a top-class right-sided midfielder he must fund new signings this summer out of player sales. The only guaranteed arrival is defender Philipp Degen from Borussia Dortmund and now Benitez's auction has eight players for sale.
Liverpool made a pre-tax loss last year of almost £22 m and now, after co-owners Tom Hicks and George Gillett effectively loaded the club with a £350 m loan, Liverpool will have to find £30m-plus in annual interest charges alone, leaving Benitez having to fund his transfer war chest through sales.

F*CK

This is not good news.

I am all for going after new top players but if we are to offload 6-7 first squad players and use the funds to recruit 2-3 then my maths suggests our first team sqaud will diminish in size.

Do we have reserve players ready to come in (?) or do we go into next season with a smaller squad (which we know will make things tougher for us!)?

by **LiverpoolMadman** » Sun May 25, 2008 11:35 am

They have to sell the club to DIC before all the "good" players "gone" to other clubs ....

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