News Update from Anfield: Gillett vs Hicks

Owners' dispute eclipses Liverpool's new deal

By David Bond at the Daily Telegraph Last Updated: 1:59am GMT 17/01/2008

Liverpool's American owners are edging closer to clinching a breakthrough refinancing deal with banks despite growing tensions between the club's joint chairmen Tom Hicks and George Gillett.

According to City sources, a £350 million deal with the Royal Bank of Scotland and American investment bank Wachovia could be announced early next week. It is understood lawyers for both sides are now working through the fine print of the funding package which, if confirmed, will come six weeks before an existing one-year loan used to finance the American takeover expires. Once concluded the Americans hope the deal will restore a sense of calm to Anfield after a period of extraordinary instability.

But the Daily Telegraph has learned that there remains deep uncertainty about the relationship between Hicks and Gillett, the two US sports entrepreneurs who bought Liverpool in a £220 million deal last February. And even if the refinancing deal is confirmed, insiders are worried about how much longer the partnership will last.

Gillett is deeply unhappy with his joint owner following his explosive remarks in which he confirmed that the pair had approached former Germany coach Jurgen Klinsmann about taking over from Rafa Benitez. Gillett has been seriously unsettled by the reaction.

He is understood to be all the more irritated as the Hicks gaffe came despite assurances from the Texan billionaire that he would stay silent until the club's future was more secure.

Gillett has also been reluctant to press ahead with the refinancing plans, fearing that the new structure will load too much debt on to the club's balance sheet. It is also known that Gillett, the less wealthy of the two men, has been struggling to meet the banks' demands to put up £75 million each of cash and personal guarantees.

At one stage the growing split threatened to plunge the club into a new takeover battle, just 12 months after the Americans squeezed out Dubai International Capital, the investment company of Sheikh Mohammed bin Rashid al-Maktoum.

That remains a possibility, but any hopes DIC had of doing a deal with Gillett to buy out Hicks' 50 per cent holding appeared to be fading last night.

DIC are understood to be prepared to bide their time, believing that the relationship between Hicks and Gillett could be beyond repair and that the refinancing will only be a short-term measure.

Under the terms of the deal, around half of the £350 million of debt is to be placed on to Liverpool's books, partly to finance the start of work on the new £400 million stadium at Stanley Park and to refinance £20 million of loans for new players. The move is a reversal of the vow the Americans gave when they took control not to copy the approach taken by the Glazer family at Manchester United.

The rest is to be secured against Liverpool's parent company Kop Holdings. Having blocked attempts to load all the debt on to the club last year, former chairman David Moores, who remains a director, and chief executive Rick Parry, are uneasy about how the borrowing will be serviced, with interest payments of £30 million a year.

Questions unanswered

How sound is the Hicks/Gillett relationship?
The Jurgen Klinsmann gaffe has placed extra strain on a partnership already cracking over the £350m refinancing.

How much of the £350m debt will be placed on the club?
About half, with the rest on parent company Kop Football - with interest of £30m a year.

What happens if Gillett decides to pull out of the bank deal?
He could look to bring in Dubai International Capital and try to force out Hicks.

Will DIC give up on their plans to own Liverpool?
No. They will bide their time but a quick deal is unlikely if Hicks strengthens his grip.

What does the bank deal mean for Rafa Benitez?
It looks like a question of when, not if, the Spaniard leaves.