Latest Developments in Liverpool FC Ownership Saga

Here are the latest developments regarding the Liverpool ownership saga:

-The Premier League has blessed New England Sports Venture’s (NESV) attempted purchase by stating that NESV meets the criteria of the league’s Owners’ and Directors’ Test. Read the statement here.

-More worrisome news comes as NESV could walk away from the deal should Gillett and Hicks prevail in the court action, fail to achieve loan re-financing and points are subsequently deducted from the resulting administration, as the Guardian reports here. Such a doomsday scenario will reinforce fear in some quarters that the club could “pull a Leeds” and tumble down the lower divisions. Leeds United were relegated from the Premiership at the end of the 2003-2004 season thanks to  the chaotic stewardship of Peter Risdale and have only recently begun the long slog up; they are currently one of the contenders in the npower Championship.

-The Royal Bank of Scotland has set an October 15th deadline for George Gillett and Tom Hicks to obtain yet more re-financing for nearly 300 million pounds of debt. Failure to meet this deadline, or sell, could result in the bank placing the club in administration.

-Club chairman Martin Broughton is racing against this deadline to achieve High Court approval for NESV’s takeover. George Gillett and Tom Hicks are, understandably, upset at this manoeuvre, and will be challenging Broughton on the grounds that they had removed vital board members prior to the decision. Moreover, they will argue that the board breached its fiduciary duty by failing to deliver an appropriate return on the sale. Andrew Nixon, a partner at London firm Thomas Eggar, told the Independent newspaper “If they [Gillett and Hicks] can give proper evidence that the £600m price they are talking about is realistic, they have a case…If they can’t prove there could be a better sale, they are going to have a very, very difficult job.”

-Liverpool may face a points deduction because of the ownership chaos. The Premier League rule states, “Upon a club or its parent undertaking suffering an event of insolvency the board shall have the power to impose upon the club a deduction of nine points scored or to be scored in the League competition.” An excellent summary of the Premier League’s point deduction process is provided by the Guardian here.

-Some prior cases may prove instructive as they relate to points deductions as detailed in this Telegraph article. West Ham United were not docked points last year because the club itself was solvent while its parent company, Straumur, faced insolvency issues because of non-football related assets in Iceland. On the other hand, Southampton were docked points because its holding company, Southampton Leisure Holdings plc, went bust with the club as its only real asset as explained here. Liverpool’s situation, while unique, is more akin to Southampton’s as Kop Holding’s only real asset is the club and the RBS debt is inextricably tied to the club itself.

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