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Aug 15, 2010

Fears grow for Liverpool as takeovers stall

Liverpool's takeover saga is showing few sign of conclusion, and, according to ESPN Soccernet sources, the question now being asked is whether the English football giants can avoid going into administration. According to well-placed sources, there can be no guarantee that a sale can be concluded before the current financing arrangements run out in six weeks time.

The Reds are deep in the red - so badly so that their accountants have qualified their accounts for two years running - and it is understood that the latest accounts, for the year to the end of July 2010 will show a further deterioration of the situation, even before taking into account a £2.5 million a week in fees - which hits £60 million extra debt by October 6 - the owners are running up towards their latest bank extension.

Against this background, focus will increasingly turn to the intentions of the Royal Bank of Scotland. Sources say that RBS is strongly committed to a solution that is in the best interests of the club. Clearly, however, difficult decisions lie ahead if a sale cannot be completed soon.

As Liverpool kick off the season at Anfield against Arsenal under new manager Roy Hodgson, what occurs on the pitch is likely to become secondary to what happens within the boardroom over the next six weeks.

Administration would be a totally unpalatable option to RBS and the Liverpool board, led by Martin Broughton. Both are working tirelessly to avoid it, and the inevitable automatic nine-point deduction that would wreck the entire new season - and any chance of lucrative Champions League qualification - just as it has started.

But administration can no longer be entirely ruled out, given the depth to which the club's finances have plummeted, and the interpretation being put on the board's short statement on Friday that a takeover remains "uncertain".

So far, the self-proclaimed leading contenders, a Chinese consortium led by Kenny Huang and another fronted by Syrian Yahya Kirdi, a friend of owners George Gillett and Tom Hicks, have failed to declare their backers or indeed even show proof of funds.

In the current financial climate, no club is too big to defy economic reality for ever. It was only recently that Portsmouth were taken to court by the Customs and Excise over mounting debts and a judge declared the then Premier League club to be insolvent.

While Leeds became the biggest club to experience financial meltdown, and Pompey are now just emerging from administration, it would be by far the most notorious plunge to footballing financial disaster if something similar happened at Anfield.

At present, administration is not thought the most likely scenario for Liverpool. If there is no sale by October, RBS could, of course, merely roll over the loan, extend it, but that would not break the log-jam which exists at the moment.

Current owners Tom Hicks and George Gillett have valued the club at up to £800 million, but there are no signs that any potential bidder is prepared to match that. And it may be that as the October deadline for RBS to make a decisive move on the future of Liverpool looms, the value will slip further below the £350 million previously mentioned.

The key issue for those trying to sell the club is whether can they find a credible buyer who will pay down the debt, build a new stadium and invest in players. Hicks and Gillett are promising potential new owners that in five years time the profitability of Liverpool will soar, once the £400 million new stadium is constructed and income growth results from it.

However, first, any potential owners have to build - and finance - the £400 million stadium. And the short-term financial position is bleak. In June, Gillett and Hicks tried to secure refinancing loans from Barclays Capital and FBR Capital Bank aiming to renegotiate £290 million of debt.

That game plan was to terminate their obligations with Royal Bank of Scotland and Wells Fargo which critically end on October 6, a date that approaches fast. Chairman Martin Broughton, managing director Christian Purslow and commercial director Ian Ayre vetoed the Hicks/Gillett attempt to buy themselves more time to find a suitable buyer.

Broughton has a mandate to find the best deal possible in the interests of Liverpool, not necessarily in the owners' best interests, and yet another refinancing agreement would keep Hicks and Gillett in control for longer. Lawyers Slaughter and May backed the board, blocking Hicks and Gillett's plans, and the Board insist no such proposals will be considered again.

This delay in finding new owners has triggered an average of £2.5 million a week in penalty charges, reaching a total of £60 million by the deadline of October 6, when, if that point is reached, some very tough decisions have to be made. Liverpool managing director Christian Purslow confessed on Sunday that his club need to find new owners "as soon as possible". He made it clear the timescale to identify the new owners is relatively short, with stability required and a new season already under way.

"We have had a number of bids for the club. We will take time to examine those extremely carefully," he told BBC Radio 5 Live's Sportsweek programme. "Second to that is [the need] to sell the club as soon as possible."

"We will make sure we take our time. I am not going to put a time limit on it. The challenge now is to sort the wheat from the chaff. I would not expect it to be a lifetime – but I would not expect it to be tomorrow either.

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