Liverpool Football Club's day in the High Court on Wednesday laid bare the complete breakdown of trust between the club's American owners, their bankers, and the directors appointed to manage the sale. The hearing, which lasted nearly five hours, saw lawyers debate complex corporate governance issues, but the overriding question remained: how did the situation become so dire?
The case centres on whether Tom Hicks and George Gillett breached the terms of a loan extension with the Royal Bank of Scotland (RBS) when they blocked the sale of the club to New England Sports Ventures (NESV) last week. In a witness statement, Hicks admitted that sacking directors Ian Ayre and Christian Purslow violated the agreement, but argued that the board and RBS had already breached it by keeping the owners in the dark during negotiations.
Hicks claimed that the club's English directors—Martin Broughton, Purslow, and Ayre—operated a secret 'home team' phone line for key takeover discussions, from which he and Gillett were excluded. He said this left him no choice but to reconstitute the board, appointing Hicks Holdings colleague Lori McCutcheon and his son Mack Hicks, even though he knew it would breach the RBS loan terms.
The crucial document is a corporate governance side letter drawn up by RBS, which allowed Broughton to decide the board's composition. Hicks acknowledged that his actions were contrary to this letter, but insisted they were necessary. The admission appears to be the crux of the case, potentially rendering other details—such as a threat of damages from NESV and a new £320m offer from Peter Lim—irrelevant.
Other revelations included the labyrinthine company structure created by Hicks and Gillett, with RBS owed £97m by the club itself and a further £200m by Kop Holdings Ltd. A US hedge fund, Mill Financial, was also said to have offered between £375m and £400m for the club, but was allegedly shut out of negotiations. The deadline for repaying RBS's loan is this Friday, with a long stop date of 1 November for any deal to be finalised.
