by Brian Reade
‘To hear from their mouths about their plans to improve the stadium and build a new team was at the time brilliant. During that first year I met them quite a lot because they were going to Anfield and were seen down at the training ground a lot.
‘At first things went fine. They bought big players and I’ll be honest, it was exciting. Especially the promise of the new stadium. Obviously it would have been a big wrench to leave Anfield but I thought it would be amazing to lead Liverpool out in a new stadium as captain.’
The impression they left their captain with was he was now a kid in a big sweet shop called Anfield. Or after naming rights, possibly the Willy Wonka Anfield. They said they were going to buy big players for the present and young players for the future, back Rafa and change the Academy. And they said they wanted feedback from him. That if their captain had anything that needed to be said he should let them know. He left them brimming with positivity.
‘I thought this could be the time we go to the next step and really compete with Chelsea and United. And that was because of what I heard in that first meeting.’
Little did he know it would end up on the steps of the High Court. As for all the meetings that were promised, he would never have a face-to-face chat with Tom Hicks again.
Jamie Carragher recalls a stiff, awkward occasion riddled with small talk and pleasantries: ‘No one grilled each other, we all just told each other what we wanted to hear. We told them it’d be great if they could do this and that, and they said it will be great when we do this and that. It was all “everything is going to be great”.’
But he admits to slight reservations and fears that the board had made the wrong decision in ditching DIC for the Americans: ‘I knew George Gillett had been interested for a while but it came out that he didn’t have enough money and had to get Tom Hicks in for his cash.
‘In the back of my mind I was thinking “this isn’t right”. One of them hasn’t got the cash and the other doesn’t really want to be here: this could end up going wrong. Also, I wasn’t happy with joint bosses. We should have known better after having Roy Evans and Gerard Houllier as joint managers. I don’t care what anyone says, there has to be a number one in everything. Eventually there’s going to be a problem and they’ll end up falling out.’
Surprisingly, Carragher had been given a warning about Hicks and Gillett from an unlikely source: Rio Ferdinand.
‘Rio told me that the Glazers were terrified of the Dubai people taking over. They thought they’d have another Abramovich on their hands. The Glazers were really hoping Hicks and Gillett would beat them to it. Which made me think, “Hang on, have we made a mistake here?”’
Unlike David Moores, and many of the shareholders, the Daily Telegraph’s report about DIC’s plan to sell the club after seven years hadn’t bothered him.
‘I guessed Hicks’s and Gillett’s plans were roughly the same. They just sold themselves to Liverpool more cleverly, saying they wanted it to be a family club who would pass it down to their next generation of sons. Good custodians of the club and all that. They cleverly appealed to Scouse romanticism. But I suppose in life if you’re really desperate for something, when it comes along you’re just delighted. If there is something in the background you’re not sure of you just think “we’ll be all right”. And sadly, that was us.’
For more than a few reasons Carragher now looks back in anger: ‘In a decision of such magnitude it should have been hook, line and sinker sorted, with nothing left to chance.
‘This was a decision that those at the top knew was going to affect the club for ten, twenty years and obviously you’d have thought they really should have got it watertight. I think David Moores got so worried about selling it to the right people, in the end he worried too much.
‘But what really annoys me is that the rest of us didn’t see through them. Because Liverpool people aren’t normally kidded. It’s normally us who are kidding other people. We always think we’re on the ball and sharp and that’s one of the things that angered me later. I felt I’d been kidded by these Americans. There were times towards the end when I thought “I wish I could have that meeting with you again, because I’d love to tell you what I think.”’
Gillett had no such misgivings about his meeting with the heart and soul of Liverpool FC, Gerrard and Carragher. ‘They’re special,’ he said with a huge smile and a wistful sigh, before adding that Jamie had given him his first lesson in speaking the local dialect.
It wouldn’t be the only time Gillett turned to Carragher for a Lern Yerself Scouse lesson. Months later, when he was showing Canadian friends around Melwood, he called the proud Bootle lad over and said: ‘Jamie, Jamie do your Scouse.’ Carragher, with the words Jesus, Effing and Christ written all over his red face, muttered a few noises and backed away, grimacing.
There were times when Carragher felt he was being used but could do little about it. After the Lowry meeting the Liverpool website put out quotes from him and Gerrard saying how bright the future looked under the Americans. Whenever new stadium plans were announced it would be the Jamie and Stevie show, with the local lads dragged out to big them up.
‘It annoyed me the owners would always seek our approval, as though that would make it all right and the fans would buy it. But what else where we supposed to say? Yes, there was an element of us being used, but we were employees of the club and it felt like we were getting pulled in a lot of different directions.’
The captain and vice-captain weren’t alone. On the day of the takeover, above a photo of the smiling families on the Anfield pitch, the Echo splashed the headline ‘Rafa: We’re In Good Hands’. In the story underneath the Spanish manager was quoted as saying: ‘I am convinced they want the best for the club.’
But like his leading players he was very much toeing the party line. Benitez felt they were making all the right noises but sensed very quickly they had no knowledge or understanding of the game and weren’t particularly bothered that they were flaunting their ignorance.
They would borrow phrases from ice hockey, baseball and gridiron to describe football situations, with one favourite of Gillett’s driving Benitez to distraction. ‘We’ll see what we get in the draft’ he would say when the manager inquired about his forthcoming transfer budget. Before one transfer window Gillett grabbed hold of Benitez’s knee while he was in mid-flow and assured him: ‘Roffa, I am going to give you £50 million of my money plus what we get in the draft.’ You could have spotted the Spaniard’s hackles rising in Madrid.
At the opening meeting they told Benitez they wanted Liverpool to be the best in the world and they wanted to give him the backing to realise that ambition. He told them it wasn’t all about money. He didn’t need a Roman Abramovich, or require a bottomless pit of funds, just a decent budget for a club of Liverpool’s size, plus their support in overhauling the Academy, because he believed the lack of young talent coming through was at the root of the club’s problems. They told him they were impressed with both him and his plan. Hence his public quote that the club was in safe hands. In private he was shrugging his shoulders, giving his trademark knowing grin and saying ‘We’ll see’.
With footballing honeymoons the new people tend to strike it lucky. The ridding of dead wood and the injection of fresh blood quite often stimulates a club. Liverpool in the spring of 2007 went through such a positive phase. It hadn’t been a great season up to that point. After Benitez had won the Champions League in 2005, the FA Cup in 2006 and started the 2007 season with a clinical dismantling of Chelsea in the Charity Shield, hopes were high that he might take the final step on the road to sainthood by delivering the first Premier League title to Anfield.
Yet by the time the Americans arrived, the season was on a life-support machine. Five defeats in the first twelve games had killed title hopes and Arsenal had knocked them out of both FA and League Cups in January, meaning salvation rested on a trip to Barcelona in the last sixteen of the Champions League. Suddenly the critics were
denouncing Istanbul as a fluke that belonged to some ancient saga.
But a fortnight later Liverpudlians were dancing down the Ramblas after storming the Nou Camp en route to making it past the ‘world’s best team’ (copyright every journalist outside of Madrid) to face a PSV Eindhoven side they had already outclassed in the group stages. Many people were beginning to think the Yanks were a lucky charm. Benitez, though, could not be counted among their number.
Behind the scenes his frustration was growing. He saw quite a bit of Hicks and Gillett back then as they were frequently in town holding meetings. But whenever he brought up his summer budget and the necessity to start lining up deals before the season ended, nothing concrete was coming back. They would listen, sympathise, lay on the flattery and throw out the promises, but come the next meeting they would be at the very same point. Benitez felt he was getting more sense out of the flowers in the table vase. Nothing was moving apart from the signals in his head which were telling him he was being taken for a fool.
Benitez, paranoid at the best of times, was moving past thinking they didn’t understand the urgency of Liverpool’s needs to thinking they’ve got no intention of helping him. He was telling people that nothing had changed since the takeover, and he was right.
Cut through the hype and the sugar-coated words and David Moores is still there, bumbling along the way he always did (going to matches at home and in Europe for free and telling Rafa to ‘see Rick’ when he approached him with a problem), Parry is still there, doing what he always did (telling Rafa to ‘leave it with me’ whenever he raised an issue), no extra transfer money had been pledged, and no extra income was in sight because, despite a few elaborate plans, the sixty-day vow to make a pile of rubble in Stanley Park had turned into a pile of bollocks.
All the new owners appeared to have done was buy out the existing shareholders and gone home and waited for the team to win another Champions League, thus boosting the club’s value. Actually it was worse than that. They hadn’t bought out the shareholders, a bank loan had. And they wouldn’t be paying the interest on that loan, the club’s profits would. The Guardian’s David Conn was the first journalist to latch on to this after studying the offer document to shareholders. On 14 March, under the headline ‘Americans borrow £298m to buy Liverpool: Club likely to foot annual £21.5m interest payments’, he wrote:
Thomas O Hicks and George Gillett Jr., the two American businessmen who are close to completing their takeover of Liverpool, have borrowed almost £300m from the Royal Bank of Scotland to finance the deal.
The bank has loaned the money at 1.5% above the current standard lending rate, meaning that about £21.5m interest will be payable this year.
The debt is not being taken on by the club in the way the Glazer family loaded Manchester United with £660m borrowings from their 2005 takeover, but professionals close to the deal said it was nevertheless likely that Liverpool would pay the interest, or pay Hicks and Gillett ‘a big dividend’ at the end of the year to enable them to do so.
The terms of the loans are in the offer document sent to all shareholders, revealing that the two men are borrowing £185m to pay for the £174m takeover itself and associated costs, with another £113m available as a ‘revolving credit facility’ to absorb Liverpool’s debts and fund the club and preliminary work on the new 60,000-seat stadium. A further £200m will be borrowed to build the stadium but the way that will be done has not been worked out. The initial £298m loans are guaranteed by Hicks and Gillett personally.
The takeover is certain to go through after it was confirmed last week that over 80% of Liverpool shareholders had accepted the offer of £5,000 a share. Moores, the former 51.5% shareholder, will be paid £89.615 million for the 17,923 shares he bought for about £12 million.
Hicks and Gillett, who have said they intend to be custodians and hold Liverpool as a family asset, will own the club via a company structure based in the tax havens of the Cayman Islands and the US state of Delaware.
The ultimate holding company, Kop Investment LLC, is registered in Delaware, which has low corporation tax and no capital gains tax, and its principal office is at Hicks’s corporate headquarters in Dallas, Texas. One professional involved with the deal said that this did not mean the two men foresaw a sale or flotation and were ‘sheltering’ those future gains from tax, but that it was simply ‘a tax efficient’ way to structure the deal.
Yet despite this story appearing in March, only five weeks after the takeover, hardly any fuss was made of it. Maybe that was because it appeared in the Guardian. Maybe it was because fans wanted to believe it was mischief-making, playing around with words to paint Hicks and Gillett as Glazers Mk II, when they hadn’t actually taken a cent out of the club yet. Or maybe it was because nobody dared to believe it was true.
Nevertheless, the question has to be asked of the shareholders, who all willingly sold Liverpool short for that extra £500 per share. Moores only owned 51.6 per cent, yet he, along with Parry, has felt the full wrath of the fans for failing to see that they were blatantly putting their loan on the club. You’d have to presume the vast majority of these shareholders were intelligent people, many of them successful businessmen, to have been able to afford a financial stake in the club. So why, having read the offer document, didn’t they speak out?
Why didn’t they look at the details of the RBS agreement and realise Hicks and Gillett were only being given a one-year loan? In any businessman’s head that should have set alarm bells ringing, as the bank was saying we only believe you’re good for this huge loan for twelve months. Unlike DIC, who had a seven-year plan, these two were only allowed a one-year one, after which they would have to pay off what they owed to seek reinvestment.
If they were, as they claimed, custodians who wanted to hand the club down through generations of their families, why wasn’t more of their own cash put in and a longer loan with lower interest rates negotiated?
City takeover adviser David Bick, chairman of Square1 Consulting, who has been involved in several major Premier League deals said: ‘I looked at the offer document that was sent to shareholders and I couldn’t believe my eyes. They’d bought it with one-year funding, which was effectively an overdraft. If you are borrowing that sort of money for this sort of asset you usually borrow for at least three years, more likely five or seven. You’re not buying it on a twelve-month loan.
‘The document alone should have said to the shareholders and Rick Parry “this is not right, they’re buying this on an overdraft”. It left them totally reliant on interest rates not going against them. No one envisaged the whole financial meltdown, but, even before it, this deal was never properly financed. It was fundamentally flawed from the off. The financial structure was wrong and everyone who looked at it said “this is lunacy”.’
For shareholders to hand over the club to leveraged buyout men with unknown motives, who had been vouched for by banks who were so unsure they only gave a short-term loan, was a highly dangerous move. But then the more cynical among us were speculating that they were getting an extra £500 per share, plus they were given guaranteed ticket rights; meaning should Liverpool reach a major cup final, even if they hadn’t been to a game that season they would receive tickets for the showcase occasion.
Three months later, when UEFA gave Liverpool a paltry allocation for the Champions League Final in Athens, this ruling meant thousands of season ticket holders, like myself and my son, who had been to every European home tie and travelled to away ones, were automatically denied a ticket.
It’s easy to see why the shareholders turned a blind eye to the small print in the offer document and grabbed their mini-lottery win, especially as they’d been assured from above that this was the right move. But it’s hard to understand why, in the years that followed, when accusations of greed and stupidity were thrown at the chairman and Rick Parry for not seeing what was before their eyes in black and white, that these people escaped without a scintilla of abuse. Especially, as far a
s we know, with their ticket rights to big games still legally guaranteed.
If David Conn’s article failed to ruffle any feathers, two months later the Guardian had another go at stripping the American emperors of their new clothes. This time they hit the bullseye. This time it came not through a journalist or a financial document but straight from the horse’s mouth. Hicks had agreed to give reporter Lawrence Donegan an exclusive interview in Dallas as part of the Champions League Final buildup, during which he didn’t so much let the cat out of the bag as toss it in the air and volley it across the Atlantic right over Ireland and straight down the Mersey.
He publicly admitted that the club’s profits would be used to meet interest payments on the loan that had bought the club. In effect, he was owning up to doing a Glazer, which completely contradicted his denial of such a model at the takeover press conference.
‘Hopefully the club will have extra cash flow so they can pay us a dividend to do that,’ Hicks said when asked how the cost of the loan would be met. ‘If they don’t, then it will come from our pockets. But the club will have to have profits sufficient to pay those dividends.’ And, as if to rub those naive Liverpudlian faces into the dirt, Hicks likened them in a cold, matter-of-fact way to breakfast-eaters, and their beloved club to a box of cereal:
‘When I was in the leverage buyout business we bought Weetabix and we leveraged it up to make our return. You could say that anyone who was eating Weetabix was paying for our purchase of Weetabix. It was just business. It is the same for Liverpool; revenues come in from whatever source and go out to whatever source and, if there is money left over, it is profit,’ he said.
It was an astonishingly frank admission but even more astounding was the fact that once again nobody picked up on it. Maybe this time because the Guardian published it on the eve of the Champions League Final, when every fan worth his salt was over in Athens – most trying to buy a ticket from a tout as the well-heeled former shareholders walked past the riot police and into the ground.