Bloomberg News

Liverpool Loss $81 Million as Stadium Costs Written Off

May 03, 2012

John W. Henry’s attempt to move English soccer team Liverpool away from the financial crisis he inherited resulted in a record 49.4 million pound ($80.1 million) loss during fiscal year 2011.

The loss is mainly related to costs associated with plans for a 70,000-seat stadium that have been scrapped and severance payments to ex-employees including Roy Hodgson, who was fired as manager in January 2011 after just six months.

Fenway Sports Group, controlled by hedge fund trader Henry, bought the team in October 2010 after lenders to former owners Tom Hicks and George Gillett forced a sale when the pair defaulted on a loan linked to their 2007 buyout. FSG, which also owns Major League Baseball’s Boston Red Sox, wrote off 200 million pounds of debt owed by the previous administration, Liverpool Managing Director Ian Ayre said today in a preliminary release of the results on the club’s website.

“It creates a very stable platform for us to move forward from, it creates a situation where most of those things are now off the books and we move forward in a positive sense in a sustainable business and with the ability to grow on that basis,” Ayre said.

Liverpool will revert to an older stadium design that is unlikely to bring added costs incurred if it moved and is still exploring a way of expanding its home Anfield, Ayre said.

Liverpool has struggled on and off the field as losses have climbed to almost 100 million pounds during the past three years. Fans protested against Gillett and Hicks during their ownership and the team now faces a third straight season out of European soccer’s elite Champions League after falling to eighth in the Premier League.

FSG has spent about 100 million pounds on new players since the start of 2011 and hired fan favorite Kenny Dalglish to replace Hodgson. Liverpool’s record in 2012 is worse than every team in the 20-team league other than already-relegated Wolverhampton.

Two Trophies

Still, the Reds can claim a second domestic trophy of the season by beating Chelsea in the F.A. Cup final in two days. They won the second-tier Carling Cup in February for a record- extending eighth time.

Not being in the Champions League reduces television and marketing revenue by least 25 million pounds. It may also hurt the club when it comes time to renew or replace its record 81 million-pound shirt sponsorship deal with London-based bank Standard Chartered Plc. A 25 million-pound contract with U.S. jersey supplier Warrior starts next season.

FSG cleared the 200 million-pound facility the previous owners’ holding company had with RBS and Wachovia Corp. with a three-year agreement that includes RBS, as well as Barclays Plc and Bank of America Corp., according to a mortgage document published by Companies House. Annual interest payments that reached as much as 18 million pounds under Hicks and Gillett are “a much more palatable” 3 million pounds, according to Ayre.

“What has been demonstrated since their period of arriving is that they want to create a stable foundation with a platform to build on,” said Ayre, who described the accounts as relating to a “transitional period” between ownership groups.

“There has been a clearing out of debt, a clearing out of money that’s been expended on stadium that just isn’t going to achieve much going forward and a significant investment in the team, an investment in the commercial and business infrastructure and an ongoing objective of improving that team on and off the pitch,” Ayre added. “These are all great indicators of people who want to take the business forward.”

Liverpool’s losses for the fiscal years between 2008 and 2011 totaled 92 million pounds, according to filings made with Companies House and today’s announcement by the club. The figure would be higher if was based on the accounts of Liverpool’s parent company under Gillett and Hicks.

To contact the reporter on this story: Tariq Panja in London at tpanja@bloomberg.net

To contact the editor responsible for this story: Christopher Elser in London at celser@bloomberg.net


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