Failure in race for fourth could cost Liverpool £100m

Loss of Champions League football set to have big impact on sale of the club
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The Independent Football

Concession speeches are never easy and, as he explained that the Champions League was now virtually a lost cause, Rafael Benitez's voice was hoarse and cracked. His mood was not made any easier by a Danish journalist's attempts to quiz him on the life and times of Daniel Agger while he was doing it.

In the wake of a strangely low-key goalless draw against Fulham in the Anfield sunshine, the Liverpool manager's thoughts would have turned to the lost glory rather than the lost revenue that failure to qualify for the Champions League entails – anything up to £45m.

But it will have a significant impact on the sale of the club and in deciding Benitez's own future. Although Liverpool's owners, Tom Hicks and George Gillett, have appointed Barclays Capital and will appoint a new chairman, Martin Broughton from British Airways, to oversee the sale of the club, they have been told that they are now unlikely to get £500m for Liverpool and the eventual figure may be closer to £400m.

"The impact of not being in the Champions League is enormous – it is around £30m off the bottom line, more if you get to the later stages," said Professor Chris Brady, the dean of the BPP Business School, who specialises in football finance.

"It is absolutely prime non-commercial revenue and you get it in hard cash. I was hearing this morning that they [Hicks and Gillett] were valuing the club at £600m. I would suggest that is unrealistic by £100m and the price could come down further than that. If you take over a club not in the Champions League, you might need to spend anything up to £100m to get them back up there. The club still needs a new stadium that would cost around £350m. The total investment needed to take over Liverpool and run it properly would be £900m to £1bn."

At the weekend, Benitez, who was still publicly confident about re-qualification for the Champions League, suggested that Liverpool needed a minimum investment of £60m on at least three players to regain their competitive edge. The relationship between the size of a club's wage bill and success is a well-known correlation and Liverpool's is only the fifth biggest in the Premier League. Benitez alleged that Peter Crouch was able to substantially increase his salary by moving to Tottenham and any takeover would have to come with an implicit understanding that this wage bill would have to rise.

The club's bankers, the Royal Bank of Scotland and Wachovia, have now all but agreed to give Hicks and Gillett another six months to pay back £100m of the £237m they have borrowed against the club, a sum that was due to be repaid in July.

However, although many on the Kop would welcome the departure of the owners, any takeover would put Benitez's job in peril – and not just because billionaire owners like Roman Abramovich at Chelsea and Abu Dhabi United at Manchester City showed themselves all too ready to dispense with the managers they inherited. Yesterday, Liverpool's vice-captain, Jamie Carragher, pointed out that if they do fail to qualify for the Champions League, the principal reason would be the club's away form, which he compared to that of Wolverhampton Wanderers. That is ultimately Benitez's responsibility.

"One of the chief reasons for not getting rid of Benitez is that you would have to pay up the majority of a five-year contract," said Professor Brady. "Giving him and his backroom staff a £10-15m pay-off might be a substantial obstacle to the current owners. But if you have paid £500m for Liverpool and may have to invest another £500m, then paying off Rafa Benitez suddenly becomes peanuts."

With a price tag of between £400-500m and a need for substantial investment in a stadium that has more than 120 fewer corporate boxes than the Emirates Stadium, Broughton and Barclays may find the Far East the likeliest place to find a buyer.

"The Liverpool brand there is bigger there than anywhere else in the world," said Professor Brady. "If you land at Bangkok Airport, the first thing they ask if they know you are English is about Liverpool. It would probably appeal to a consortium rather than a single investor. Dubai International Capital [the consortium beaten to ownership of Liverpool by Hicks and Gillett in 2007] may be interested now that the Americans are offering total control.

"But there is still money to be made in the Premier League, not so much by running a club but by selling it on." Three years ago, Hicks and Gillett paid £174m for the club, which had a debt of £44m. If they sell for £500m, they will still make a profit of £30m – not a bad return for three years' work, even with all that bad feeling from the Kop.

Torres struggling to be fit for Madrid return

Fernando Torres is struggling to be fit for what would be an emotional return to Atletico Madrid in the semi-finals of the Europa League. The striker spent yesterday in Barcelona in the care of surgeon Ramon Gugat, who examined the knee injury that has plagued him throughout the season.

Liverpool said in a statement that Torres "will continue to receive treatment over the next few days – with the injury being reassessed later this week."

Torres, who missed the goalless draw with Fulham, is unlikely to be risked in Monday's encounter with West Ham at Anfield but his manager, Rafael Benitez, would hope to start him at Torres's former home, the Vicente Calderon, on 22 April.

Tim Rich

Why Hicks and Gillett are banking on Barclays

Q. What is Barclays Capital's involvement with Liverpool?

A. Tom Hicks and George Gillett last week called in Barclays Capital, the investment banking arm of Barclays, to help them sell off the club. BarCap offers a range of services to corporate clients including merger and acquisition (M&A) advisory. The American owners have failed to secure a cash injection of £100m from a minority investor, and are now prepared to listen to offers for the entire club. BarCap has been brought in to advise the owners and seek out potential bidders. It will then manage the process as it develops.



Q. What does this mean for the club?

A. The appointment is a sign that the US owners are stepping up their plans to sell the club. The Americans called in BarCap after their existing advisers – Rothschild and Merrill Lynch – failed to find a buyer. BarCap has built up its M&A teams in Europe and North America. It has also recently hired some heavy-hitting bankers in Asia whose contacts books could prove crucial if, as some insiders believe, there is significant interest from the region.



Q. Why bring in Martin Broughton?

A. Broughton is currently the chairman of British Airways, and has been brought in as independent chairman of Liverpool to lend the club credibility among potential investors. This marks another strand to its strategy to knock the business into shape to attract buyers. The existing management structure, including managing director Christian Purslow who is well respected, will remain in place to help facilitate the sale. Purslow has been instrumental in building Liverpool's presence in Asia.



Q. Why the urgency?

A. Hicks and Gillett are struggling to refinance their £237m debts, and although it seems Royal Bank of Scotland and Wachovia will offer six months' breathing space, the financial situation needs to be sorted out.

Q. Has BarCap taken on the debt?

A. No. It remains with RBS and Wachovia. However, BarCap has significant debt market operations, and could provide financing services if crucial to securing a deal.



Q. Where does this leave Benitez?

A. Weakened. While new owners often keep executives, the managers don't last long. Roman Abramovich quickly lost patience with Claudio Ranieri at Chelsea, and Sheikh Mansour sacked Mark Hughes at Manchester City. While the £15m termination fee is seen as prohibitive, should a buyer pay hundreds of millions for the club, they would be unlikely to baulk at the extra cost.



Q. What are the benefits of buying Liverpool?

A. The club is a global brand name, and such assets don't come up for sale that often. The club has also signed lucrative sponsorship deals with Standard Chartered and Adidas.

Nick Clark, Business Reporter

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