Rival bid complicates court battle for Liverpool Football Club
Published 12/10/2010 | 08:20
Royal Bank of Scotland (RBS) will today lead Liverpool into a High Court battle with the club's American owners, a move which the bank believes will clear the way for a takeover by New England Sports Ventures (NESV).
It had been expected that Liverpool's executive chairman, Martin Broughton, through his club's solicitors Slaughter and May, would be seeking a declaratory hearing on the legality of the board's decision, last Tuesday, to accept the £300m bid for the club tabled by NESV, owners of the Boston Red Sox.
But it was RBS's name that appeared on the court schedule yesterday, and it is the bank that will seek to demonstrate that undertakings made by the club's current owners, Tom Hicks and George Gillett, one of which removes the Americans' right to change the composition of the Liverpool board, are valid.
There is some hope in the Broughton camp that if Mr Justice Floyd rules in favour of RBS, then Broughton will not need to bring a similar case for Liverpool.
The picture was further complicated last night when it was revealed that a rival £300m bid, which NESV edged out last week, came from Singapore's eighth wealthiest man, billionaire Peter Lim, who now claims he was so confident of taking over at Anfield that he had talks with Broughton about the nature of his triumphal announcement and learned he had failed only hours before NESV was unveiled as the winner.
In what appeared to be an attempt to capitalise on the legal uncertainties, Lim suggested yesterday that he was ready to provide only cash and no borrowings to secure the club, though NESV was ready to deliver £240m from its own balance sheet and leave only Liverpool's existing credit facility as borrowings. Lim also said he would pay more penalty fees to RBS than the £10m he claims NESV has offered.
Lim's emergence is of no consequence if RBS wins its case since the NESV deal is done if its legality can be proved.
That legality hinges on the Americans' undertakings, which Broughton has said have been written into the club's articles of association, to cede the right to make boardroom changes to him and not to impede the sale of the club. But while 81c of Liverpool FC's articles has been amended allowing only Broughton to change directors, article 7a of Kop Holdings — the holding company which approved the NESV deal — suggests Hicks and Gillett have the power to do so, which could mean that their attempt to suspend managing director Christian Purslow and commercial director Ian Ayre, and impose two new American directors to block the sale, might be valid.
This apparent contradictory constitutional issue may conceivably cause Broughton problems in court if and when he seeks to prove the validity of the sale, though when pressed on the undertakings issue last week, Broughton said that Hicks and Gillett had “signed them and made them to RBS as a condition of the lending extension”, which gave them a six-month extension on the terms of their £237m loan facility at the bank.
RBS last night revealed it had sought an interim injunction on Friday, preventing Hicks and Gillett from removing Broughton from his own position and today's proceedings are a continuation of that process.
In Mr Justice Floyd, the Americans and RBS will find a stickler for detail who is well accustomed to high-profile cases. Last year, he ruled out an attempt by Ali Hewson, the wife of Bono, to prevent Stella McCartney using the word “nude” in her eau de toilette range. Neither will he tolerate hours of legal obfuscation in this case. One of the objects of his wrath has been a leading City of London law firm who charged nine years' worth of man hours on a five-day trial over BlackBerry patents.
Though there seems to be a prospect of today's hearing not eliciting a firm result, a positive outcome for RBS would forestall the perceived anxieties of NESV of the bank calling in its loans when they fall due on Friday — thus sending the club into administration, which would result in a nine-point deduction by the Premier League — before RBS sells to NESV.
Though the points deduction might create the need for more price negotiation between Broughton and NESV, it does not mean the entire deal being scuppered. Hypothetically, a lower price could be based on the greater percentage chance of relegation.
For Broughton, the sale of the club to a good buyer — as he perceives NESV to be — is more important than the sale price. RBS has not even concluded that it will effectively put the club into administration if the court case fails and Hicks and Gillett block the sale. Bloomberg revealed last night that the Americans are technically already in default of the £273m owed to RBS and the Wells Fargo bank.
Five Hicks/Gillett gaffes
NEW STADIUM: Liverpool had won a 999-year lease of land at Stanley Park — a stone’s throw away from Anfield — in 2006, but Hicks and Gillett asked for a redesign. It was expected that work would start in early 2008, but still not a single sod has been cut.
BENITEZ CONTRACT: Benitez penned a new five-year contract in March 2009. Just over a year later — after Liverpool finished seventh — he was gone, landing the club with a costly pay-off. That could have been avoided had a new contract been delayed until Benitez’s previous one was up.
LOAN: Gillett and Hicks wiped out a debt of almost £45 million when they took over, but within 12 months a £300m loan had been taken out. The loan was due to be paid back in July last year, but the Americans will leave that millstone hanging around the neck of new owners.
PR: Gillett and Hicks’ popularity among fans was already dwindling when Tom Hicks jnr — a director of the club — further angered the Anfield faithful when he replied to a letter from a fan, saying in an email: ‘blow me f*** face’ and calling the man an ‘idiot.’ He was forced to resign.
INFIGHTING: Gillett and Hicks fell out over the running of the club. Hicks wanted to axe chief executive Rick Parry, although Gillett remained a fan and they began sitting in separate seats when they attended matches at Anfield.