Financial meltdown or sign of improvement?

Looking over this morning’s back pages is not a pretty sight for Liverpool supporters as the nationals rally round the idea that the club are literally falling into a pit of financial woes, with no way out.

‘˜Liverpool’s American dream looks like a dead end,’ reports The Guardian. ‘˜Liverpool left to tumble into £420m black hole,’ declares The Independent. ‘˜Red alert at Liverpool’s soaring debt’ says The Times

This all stems from the news this week which publicly revealed that the club’s co-owners Tom Hicks and George Gillett lost £42.6million in the year ending August 2008. The club’s accountants, KPMG, warned there’s now ‘œmaterial uncertainty which may cast significant doubt upon the group’s ability to continue as a going concern’.

The American tycoons’ time at Liverpool is full of lies and unfulfilled promises since they took control of the club in February 2007, as David Conn reminds us in this morning’s Guardian.

The North American pair borrowed the £185m to take over Liverpool and although they promised in those choreographed public appearances not to “do a Glazers”, they have loaded the responsibility for paying those debts on to the club itself.

It was of course true that the banking system had collapsed, but the club was sold to Hicks and Gillett because they were supposed to have the muscle to build the stadium. There is no sign that they are any further forward now; one Liverpool source, asked about the project yesterday, said: “You can forget about that.”

Similar sighs of disbelief about the new stadium project’s potential to never get started are aired in Nick Harris’ article in The Independent.

KFL’s debts increased by £77.5m in a year, partly because of £18.7m spent in the period on work relating to the proposed new stadium in Stanley Park, including on architects’ fees. ‘œThis is for a stadium that is as far away as ever from being started, let alone finished,’ said one source.

Hicks and Gillett are confident that they’ll seal an extension on the loan they took out to purchase the club from the Royal Bank of Scotland. It’s due to be refinanced by July 24th and although fans group Spirit of Shankly called for the RBS to call off ties with Hicks and Gillett yesterday and give the Americans no other choice than to sell up, this is likely to be nothing more than a pipe dream. What bank would give up a loan opportunity where they were making £36.5m from interest per year?

But looking beyond the obvious doom of the headlines and figures in red, this morning’s papers mention positive signs that the club is on the up, not down as reports would have you believe. After all, Hicks and Gillett will have know of their financial position for a long time before this news broke out. In that time, Rafa Benitez has been given a new contract and Fernando Torres has been given a pay rise.

Figures released last week which showed the club’s best ever turnover and a sizeable profit for the year ending July 2008 shows somewhere, someone in the club is doing their job right. The figures also revealed that the Americans had invested their own money into the club. David Conn continues:

Hicks and Gillett have put money in, a significant difference from the Glazers, who have provided nothing for United to invest. The accounts show that £58m was loaned from the Cayman Islands holding company, which is understood to have funded player signings.

Meanwhile ‘œa Liverpool source’ tells Nick Harris in The Independent that looking at the positives from the current situation makes for a happier reading. After all, this is the first squeak we’ve heard from the Hicks and Gillett soap opera in months and that’s because for the last few months things have been rosy for Liverpool. A fantastic end of season run, along with Rafa’s new contract means all the signs are there to put up a fantastic title challenge next season. And that is what we all want, isn’t it.

‘œSix months ago there was a chief executive [Rick Parry, about to depart] who’s relationship with at least one owner [Hicks] was untenable. The manager’s position was in doubt, which meant the players felt unstable. The owners were not getting on and commercially the club was standing still. Things look very different now. Rafa has a new deal, the players are happy and settled and there is money for more squad investment. Tom and George are united in their ambitions.’

Other positives to take from this morning’s papers is a unanimous agreement that Liverpool’s financial problems will not effect Benitez’s transfer kitty this summer, with the Spaniard being given £20million plus whatever he makes from selling players to bolster his squad.

Andy Hunter writes in The Guardian:

Rafael Benítez’s transfer budget will not be reduced as a result of the alarming losses suffered by Liverpool’s parent company, Kop Football (Holdings) Limited.

Nick Harris says in The Independent:

Liverpool’s manager, Rafa Benitez, will still be given summer transfer funds of around £20m plus whatever he makes in sales, according to sources close to the club’s owners

The news that broke this week perhaps appears or sounds worse simple because there is nothing to distract the press or fans this week. Now that the season’s over, it’s the only piece of Liverpool news breaking at the moment. If Liverpool go out and sign a couple of top quality first team players this summer, then this doom and gloom of financial worry will be pushed to the back of minds as football does the talking once again.