Liverpool on the brinks into administration

Tom Hicks and George Gillett's ill-starred reign as owners of Liverpool looks like having less than a month to run after the club's loans with Royal Bank of Scotland were placed into its toxic-assets division.

The deadline for the refinancing of the owners' personal loans from RBS is 6 October, and that now looks set to be the date that Hicks and Gillett's association with England's most successful club will end. The bank's decision to switch the debts to its Global Restructuring Group is the strongest possible signal that these loans will not be extended.

The co-owners' previous attempt to refinance the debts in June, when they are believed to have offered to secure the loans against their US assets, was overruled by the club's board, led by the chairman, Martin Broughton. Now, with the loans having been shifted into RBS's so-called "bad bank", where all toxic assets have been housed since last year, it is clear the club's lender has also adopted a more steely stance towards the Americans.

According to the club's accounts to July 2009 Liverpool's owners owe £237.4million to RBS. Through companies in the UK and overseas, Hicks and Gillett are also personally exposed to tens of millions of pounds in other commitments to the club and its lender. These have been a mixture of cash, which the pair have injected through equity, and guarantees to the RBS loans. Last year's accounts stated these amounted to £145.3million, but it is believed to have risen dramatically after the last refinancing agreed five months ago.

RBS would hope to achieve an orderly sale without having to take control of Liverpool. However, depending on the terms of the April refinancing agreement – which have never been made public – that may prove difficult if the co-owners, who value the club at £800million, refuse to go quietly.

One tool at RBS's disposal is to force the insolvency of Liverpool's UK parent and associated companies. It is clear from mortgage documents lodged with Companies House that in the event of default RBS has the power to place Kop Football and Kop Football (Holdings), as well as Gillett's loan-security vehicle, Football UK Ltd, into administration. However that would be unpalatable for the bank, Liverpool's board and the Premier League since it would require the imposition of a nine-point penalty on the club.

Gérard Houllier's return to English football with Aston Villa provides a reminder of how little and everything has changed about Liverpool since the need for new investment prompted former chairman David Moores to accept the Americans' £5,000 per share offer. Houllier spent years bemoaning Liverpool's inability to compete financially with Manchester United and Chelsea (though Arsenal's achievements at that time always undermined his argument) and was sacked after an alarming dip in form, bad buys and with Liverpool fearing they could be cut adrift while losing the services of two disillusioned stars – Michael Owen and Steven Gerrard.

Replace Owen with Fernando Torres this summer and the parallels are clear yet, even though the calls for Houllier's removal far exceeded those for Benítez, Liverpool's support is now politicised like never before. Instead of bridging the gap, Hicks and Gillett have cut Liverpool adrift – from title contention, the Champions League and from the faithful. Hicks hoped to win the latter back by ceding to Benítez's demands on his last, powerful contract at Anfield, but he had no chance.

Offering Jürgen Klinsmann a European Cup-winning manager's job turned the tide of public opinion against the co-owners, but a bigger mistake was to redraw plans for a new 60,000-capacity stadium on Stanley Park within weeks of their takeover. It was pre-credit crunch, and planning permission and European funding was in place for a stadium that was estimated to cost £215million.

The verdict was returned long ago. And they never did buy Snoogy-Doogy.

Source: Guardian UK

Stay tune for more news and follow me on Twitter.