Liverpool takeover: club face nine-point deduction if sale blocked and RBS intervene

08 October 2010 14:06
Broughton will seek High Court approval next week to complete the £300m sale to NESV against the wishes of co-owners Tom Hicks and George Gillett, but confirmed that if he fails administration and a points deduction is a possibility.[LNB]'It [administration] could happen, yes,' Broughton said. "This is all part of why it is important that we made the decision on Tuesday to accept one or the other of the two very acceptable bids. Heading for administration was a very likely outcome if we didn't.[LNB] Related ArticlesPremier League approve Liverpool takeoverLiverpool takeover: key menBroughton v HicksNew Liverpool regime will need deep pocketsLiverpool debt a warning to UnitedLiverpool takeover set for blessing"Even now with the court case looming, administration cannot be ruled out. It is not inevitable, and I am not going to start giving percentages of how much it is possible. That is why we are going to court to clarify our position on the sale of the club, and we have to win in court, and we will win in court.[LNB]"Going into administration needs to be avoided at all costs, as the negative impact would be catastrophic. Setting aside the nine-point deduction, it would have an impact on Liverpool's value and be wide open to predators, whereas we have what we believe is the right new owners to take the club forward."[LNB]Premier League sources confirmed yesterday that, contrary to previous guidance, administration of Liverpool's holding company Kop Football (Holdings) Ltd would trigger a 'significant risk' of a points deduction.[LNB]Sources close to NESV said last night that they are fully aware of the threat of the points deduction, which could see them begin their tenure with Liverpool rooted to the bottom of the league on minus-three points, but considered it a remote possibility.[LNB]Administration could occur if the High Court finds in Hicks' and Gillett's favour, forcing the club to pursue 'plan B', in which Royal Bank of Scotland intervenes to ensure that the club is sold.[LNB]The mechanism for RBS forcing a change of control would be for it to call in £280m of loans to Hicks and Gillett, which fall due on October 15, pushing the holding company into administration.[LNB]The league's guidance to clubs states that an insolvency event at holding company level will incur a points deduction unless the club itself is solvent, and can demonstrate that the insolvency is not caused by matters 'relating to the management of the football club'.[LNB]While the club is solvent, the fact that Hicks and Gillett were only able to buy Liverpool with the loans from RBS means it will be very hard for the club to argue that the administration is not related to football matters.[LNB]In those circumstances it is likely that the Premier League board would order a points deduction, the second in less than a year following the administration of Portsmouth.[LNB]The threat of a points deduction was confirmed as the Premier League announced that NESV's proposed directors, including John W Henry and Tim Werner, had met chief executive Richard Scudamore and been cleared to take control under its Owners and Directors test.[LNB]The league has conducted the same tests on the rival Asian bidder rejected by Broughton and RBS, and its principals have also met Scudamore.[LNB]NESV remains confident that the legal process, and the positive noises it has heard from the Premier League, make administration a remote possibility.[LNB]The next stage in the process should come next week with a High Court hearing at which Hicks and Gillett will resist the attempt to sell the club out from under them.[LNB]Unless Broughton receives a decisive judgment in his favour it could trigger the start of a long and bitter litigation.[LNB]Hicks has shown no signs of wanting to go quietly and will aggressively pursue his argument that the directors have no right to sell the club against the shareholders' wishes, and that the NESV offer dramatically under-values the club.[LNB]He is also likely to demand full disclosure of all discussions between Broughton, RBS and the Premier League in order to try and prove that the board have been working against his and Gillett's best interests.[LNB][LNB]

Source: Telegraph