Avoiding the Drop

Tom Hicks: Keepin' it classy in the Lone Star State

Fun little international legal note: apparently, Texas has jurisdiction over England. I was certainly unaware of this, but sadly the legal team representing Tom Hicks was not. Yesterday at something like 3:25 PM EST (which is something like 8:25 PM in England), Hicks put a stop to all that nonsense about Liverpool celebrating the end of the Hicks and Gillett era by getting a Texas judge (Judge Jim Jordan, whose former Facebook page you can view here) to issue a temporary restraining order that blocks the sale of Liverpool until a hearing on October 25th.

Oh, and of course, Hicks can’t just stop there; Hicks is also calling this whole affair an “epic swindle” and may sue Martin Broughton, RBS, Liverpool, and whoever else he can think of for something in the area of $1.6 billion.

Those of you playing the home game will notice that October 25th is ten days past October 15th, which is the due date for repayment on something like £237 million worth of loans. That means that, in theory, the Royal Bank of Scotland could throw the club into administration this Friday; they probably won’t do that, however, as doing so would incur a nine point penalty and scuttle the sale to NESV.

Either way, the TRO will need to be cleared up before the sale goes through. With any luck, it will be cleared up by the Texas court (whose jurisdiction appears to be based on the fact that Hicks and Broughton met a few times in Texas) deciding to defer to the English high court’s judgement yesterday; whether that will happen by this weekend, however, remains to be seen. It’s also entirely possible that the Texas court holds firm on their October 25th hearing date, which just means that this entire disaster gets drawn out for eleven more days.

Here’s the thing: what’s the endgame for Hicks? Should RBS decide to call in the loan, it’s pretty clear he can’t make the payment. In theory, one of these other purchase offers (Mill Financial or Peter Lim) could pan out, but those would all involve the club going into administration first, which should affect it’s purchase price. Plus, he seems to not have much of a case; the agreement that he says “swindled” him was one that he signed and agreed to. If he didn’t realize that he lost authority to reconstitute the board, that’s on him; it’s pretty plainly spelled out. On top of that, his own attorneys admitted that he violated the agreement in court yesterday; that shows that he knew what he signed and just isn’t interested in upholding his end.

See, technically, Hicks has really not been in control of the club since he agreed back in April to a refinancing plan that took away his control of the board of directors. Had he not agreed to that refinancing, he would have had to make a huge payment (with money that he apparently doesn’t have) or see the club thrown into administration. On top of that, the club only has this massive debt so that he could finance his purchase (the £200 million in acquisition debt is money that he borrowed to pay himself back after purchasing Liverpool); this isn’t money owed because Liverpool is overspending on wages and players, it’s money owed because the owner didn’t have enough cash to buy the club in the first place.

That’s the thing, here: Hicks seems to not understand that this isn’t a swindle, but an agreement that he was allowed to make in order to preserve some semblance of dignity. Because of that, RBS wasn’t entitled to find the best deal for him; they were entitled to find the best deal that would get the club’s debt off their books. When a bank forecloses on a home, part of their process doesn’t involve finding repayment for the original homeowners; that seems to be what Hicks expects here. For all intents and purposes, Liverpool has really been run by a bank-appointed administrator since April; they’re not TECHNICALLY in administration, but they’ve been run like they were, and Hicks has apparently just not realized it.

Either way, this whole saga is far from over, which is a shame as I’m really starting to be sick of the whole thing.