Liverpool could face nine-point deduction

SOCCER:THE ENGLISH Premier League is likely to deduct nine points from Liverpool if their chairman, Martin Broughton, fails in his court action next week to force the sale of the club and Liverpool are instead put into administration by their main creditor, the Royal Bank of Scotland.

It was previously thought the penalty would not be imposed because Liverpool’s holding company, owned jointly by the Americans Tom Hicks and George Gillett, would be the one defaulting on the €271 million owed to the Royal Bank of Scotland (RBS), rather than the club. However it emerged yesterday that the Premier League’s chief executive, Richard Scudamore, believes that according to the league’s rules the holding company’s administration cannot be entirely separated from the club, and the nine-point penalty would apply.

That would be an enormous blow to Liverpool’s season and future prospects, plunging the team immediately into a genuine relegation battle. If it were to happen next Friday, October 15th, the due date for repaying RBS, Liverpool would be reduced to minus three points, eight behind the two bottom clubs, Wolves and West Ham, nine from safety.

Concerns have also been expressed in some quarters that the penalty could discourage New England Sports Ventures, the Boston Red Sox owners, from proceeding to buy the club, a takeover that was approved in principle by the Premier League yesterday.

NESV have agreed with Broughton to pay off the €230 million owed to RBS, which Hicks and Gillett borrowed to buy the club in the first place in February 2007, but administration and a points penalty may force new owners to spend more than they want on new players in January to ensure Premier League survival.

An NESV source offered reassurance yesterday that the investors, led by the majority shareholder, John W Henry, remain committed, even if Broughton’s court case, opposed by Hicks and Gillett, fails and administration and the points penalty follow. The US investors have been aware of that possibility throughout their negotiations, according to the source, and the likelihood of it being imposed has not caused Henry to have second thoughts.

The prospect of a points penalty does, though, dramatically increase the importance for Broughton of succeeding with next week’s court action. Broughton will ask a judge to declare he was within his legal rights to agree the sale. The judge must agree Broughton had the sole right to appoint and remove directors, so keeping his majority on the board with the managing director, Christian Purslow, and the commercial director, Ian Ayre.

Last Tuesday, Hicks attempted to sack those two and replace them with his son, Mack, and Mack’s assistant.

Broughton will also be asking for a declaration that Hicks and Gillett cannot block the deal because of undertakings they gave RBS not to obstruct a “reasonable” sale. Hicks argues the deal, which will pay him and Gillett nothing for their shares, nor repay their €165 million loans to the holding company, “dramatically undervalues” Liverpool, so he wants to hold out for another deal offering more money.

If Hicks succeeds, Liverpool are expected to limp on until Friday, when the loans are due for repayment. Hicks and Gillett, under financial pressure in the US, are not expected to find the money, so RBS are believed likely to put Liverpool into administration.

The expectation is the bank would then sell the club to NESV at the price already agreed, €230 million, but that could be up for negotiation. A nine-point penalty on Liverpool for falling into a form of insolvency would affect such a negotiation, as well as plunging the team into trouble.