According to club-connected writers, Liverpool appears to be planning to maximize Fenway Sports Group’s return if—or when—it is sold
There is bad debt and good debt in the sports world. Bad debt entails using the club’s value to pay the purchase, as was the case with Liverpool’s previous owners Tom Hicks and George Gillett, who nearly drove the Reds into bankruptcy in the process.
Good debt, at least from a business standpoint, is taking out loans to deliberately expand the club’s worth over time rather than shifting existing cashflow to do so. This was the stated purpose of Fenway Sports Group when they offered Liverpool with low and no interest loans.
In brief, the loan would allow the club to renovate Anfield and build a new training facility, enhancing the club’s value, but the club would repay the loan over time rather than having to find the money for those projects up front.
On paper, FSG ends up with a club worth more in the long run, while Liverpool’s capacity to compete does not suffer in the short term. However, club-connected journalist David Lynch claims that repaying such loans over a shorter period of time is being prioritized over investment in other areas, including playing staff.
There is only one plausible outcome of such actions: a sale, and one that happens sooner rather than later, because such an approach risks lowering the club’s value in the long run if results on the field fall over a protracted period of time.
If FSG is able to recoup the money it loaned to rebuild Anfield and establish new training facilities, it will have enhanced value while eliminating debt. In a nutshell, it will maximize their profit. However, it will do so by breaking an unspoken commitment made while loaning the club monies to enhance infrastructure—namely, that they would do so with good debt.
Instead, if the reporting is correct, the club is now being expected to use their revenue sources to pay for those short-term improvements—improvements that boost the selling value for FSG—at the price of short-term investment elsewhere.
To call this a sad development given FSG’s promises when they bought the club and over their years as owners would be an understatement. But it is also a sign that, for better or worse, a sale—and most likely a full sale—is the short-term goal.
Leave a Reply