Liverpool owners Tom Hicks and George Gillett will this week repay £40 million of outstanding debt as a condition of a refinancing package agreed with the Royal Bank of Scotland and Wachovia over the weekend.
By Paul Kelso, Chief Sports Reporter
Telegraph Sport understands that the details of the package have been agreed, with the American owners agreeing to repay £60 million of the outstanding loans as part of a deal with the banks that will ultimately reduce the debt to £230 million. The first tranche is expected to be repaid this week, with the remaining £20 million due later in the year.
In January last year Hicks and Gillett had agreed a £350 million loan with the banks that according to the most recent club accounts was due to expire on Friday. Sources with knowledge of the deal told Telegraph Sport that the £350 million figure has already been reduced to £290 million since last summer, and will come down by a further £60 million as a condition of the new deal.
The banks, negotiating with club managing director Christian Purslow, are understood to have demanded the repayment as a condition of extending a loan facility that is fundamental to the club's future as a going concern.
In the most recent accounts for the club and its holding company Kop Football Ltd, auditor KPMG warned that there was "significant doubt" that the club would remain a going concern if refinancing was not secured.
Kop Football made a loss of £42.6 million in the year to July 2008, £36.5 million of which was interest payments on the £350 million loan. By paying off £120 million of the outstanding debt the American's should have reduced their annual interest payments, but the banks may also have demanded a higher rate to extend their line of credit.
It remains unclear how the repayments will be distributed, how the American owners raised the capital required to reduce their exposure or what other guarantees they have provided. Under the original RBS deal they had guaranteed £185 million between them.
Both owners face significant challenges as a result of the financial crisis and Hicks is seeking investors in both of his US sports franchises.
Gillett recently sold ice-hockey team the Montreal Canadiens for more than £300 million, and may have used some of this windfall. Sources with knowledge of the deal said the pair's 50-50 ownership remained unaffected by the latest refinancing.
The original £350 million financing package was split between the football club, which was legally accountable for £105 million, and the holding company, against which the remaining £245 million was secured. The bulk of this was used to repay the acquisition loan taken out by the owners to buy the club.
Supporters' groups will want to see the debt directly relating to the club, which includes a significant amount of transfer spending, reduced. Two such groups, Share Liverpool and Spirit of Shankly, announced proposals for a supporter-led buy out of the American's last week.
News that the refinancing package has been agreed will frustrate those plans for now, but resentment at the debt burden, albeit reduced, is likely to remain.
By Paul Kelso, Chief Sports Reporter
Telegraph Sport understands that the details of the package have been agreed, with the American owners agreeing to repay £60 million of the outstanding loans as part of a deal with the banks that will ultimately reduce the debt to £230 million. The first tranche is expected to be repaid this week, with the remaining £20 million due later in the year.
In January last year Hicks and Gillett had agreed a £350 million loan with the banks that according to the most recent club accounts was due to expire on Friday. Sources with knowledge of the deal told Telegraph Sport that the £350 million figure has already been reduced to £290 million since last summer, and will come down by a further £60 million as a condition of the new deal.
The banks, negotiating with club managing director Christian Purslow, are understood to have demanded the repayment as a condition of extending a loan facility that is fundamental to the club's future as a going concern.
In the most recent accounts for the club and its holding company Kop Football Ltd, auditor KPMG warned that there was "significant doubt" that the club would remain a going concern if refinancing was not secured.
Kop Football made a loss of £42.6 million in the year to July 2008, £36.5 million of which was interest payments on the £350 million loan. By paying off £120 million of the outstanding debt the American's should have reduced their annual interest payments, but the banks may also have demanded a higher rate to extend their line of credit.
It remains unclear how the repayments will be distributed, how the American owners raised the capital required to reduce their exposure or what other guarantees they have provided. Under the original RBS deal they had guaranteed £185 million between them.
Both owners face significant challenges as a result of the financial crisis and Hicks is seeking investors in both of his US sports franchises.
Gillett recently sold ice-hockey team the Montreal Canadiens for more than £300 million, and may have used some of this windfall. Sources with knowledge of the deal said the pair's 50-50 ownership remained unaffected by the latest refinancing.
The original £350 million financing package was split between the football club, which was legally accountable for £105 million, and the holding company, against which the remaining £245 million was secured. The bulk of this was used to repay the acquisition loan taken out by the owners to buy the club.
Supporters' groups will want to see the debt directly relating to the club, which includes a significant amount of transfer spending, reduced. Two such groups, Share Liverpool and Spirit of Shankly, announced proposals for a supporter-led buy out of the American's last week.
News that the refinancing package has been agreed will frustrate those plans for now, but resentment at the debt burden, albeit reduced, is likely to remain.
