Liverpool was bought with GBP 298 million loan

The Royal Bank of Scotland has loaned George Gillett, Jr. and Thomas O. Hicks GBP 298 million to finance the takeover of English Liverpool.

The bank loaned the two American businessmen the money at 1.5 percent above the current standard lending rate, meaning that about GBP 21.5 million in interest will be payable this year.

The club is not taking on the debt the way English Manchester United did when the Glazer family borrowed GBP 660 million in its 2005 takeover, but those close to the deal said it was likely that Liverpool would pay the interest, or Hicks and Gillett would receive "a big dividend" at the end of the year so they could make the payment.

The terms of the loans are in the offer document that is sent to all shareholders and show that the two men are borrowing GBP 185 million to pay for the GBP 174 million takeover and the associated costs.

GBP 113 million is available as a revolving credit line to absorb Liverpool's debts and fund the club and the preliminary work on the new 60,000-seat stadium. Another GBP 200 million will be borrowed to build the stadium but those details have not been worked out.

Hicks and Gillett guarantee the initial GBP 298 million loans personally.

The offer document also shows how stretched Liverpool was last year financially as the club's chief executive, Rick Parry, searched for someone to take over the club.

In August, David Moores, who was then chairman, lent the club GBP 10 million so that manager Rafael Benitez would have money to build up the squad.

GBP 2 million of it was personal money belonging to Moores and GBP 8 million was from a family trust fund. Benitez used that money to buy striker Dirk Kuyt.

Parry said that with a takeover being likely, the club did not want to finance any more through a bank.

"We were at the limit in terms of our short-term borrowing facilities and were racking up expenditure keeping the stadium on schedule, so it was a fantastic gesture by David to make that money available," Parry said.

Hicks and Gillett are paying Moores for his shares in the club and his loans will be repaid in full.

The takeover is certain to be completed after it was confirmed last week that over 80 percent of Liverpool shareholders had accepted the offer of GBP 5,000 a share.

Moores, who owns 51.5 percent of the shares, will be paid GBP 89.615 million for the 17,923 shares he bought for about GBP12 million.

Robert Tilliss, the New York-based financial adviser to Hicks and Gillett, said buying "one of the leading brands in the world's number one sport" is what attracted the men to the club.

Tilliss said they would bring their sports business expertise to England from the U.S., where GBP 10.3 billion was spent in recent years upgrading stadia and where ticket prices make those in the Premier League seem cheap.

Tilliss said the popularity of English football in Asia was also a factor.

"All clubs in the U.S. continue to drive on international, national and local revenues, and the great brands of English football certainly have room to develop."

Hicks and Gillett, who said they intend to be "custodians" and hold Liverpool as a family asset, will own the club through a company structure based in the tax havens of the Cayman Islands and the U.S. state of Delaware.

The ultimate holding company, Kop Investment LLC, is registered in Delaware, which has low corporation tax and no capital gains tax. The company's main office is at Hicks's corporate headquarters in Dallas, Texas.

One professional involved with the deal said the two men did not foresee a sale and then tried to shelter the future gains from tax, but that it was just "a tax efficient" way to structure the deal.

Source: euFootball.BIZ © Copyright 2006 - All rights reserved.