October 13, 2010
Liverpool As An Example of Corporate Litigation, UK Style
Posted by David Zaring

For those unfamiliar with batttles for corporate control in the UK, the efforts of the lenders to Liverpool FC to seize the company and sell it to the owners of the Red Sox has been extremely educational as well as entertaining.  That all of this is being done over the objections of the owners, including private equity slickster Tom Hicks, make it look somewhat similar to the way that insolvency litigation works here - you've got the business loaded up with debt, missed payments by the owners, and the easily victimized lenders trying to pull the trigger.  Enter the lawyers.  As is de rigeur in English football, you've also got a late, rich bid for the team by someone from Asia.  And the particular mechanism of the suit - the lenders told the board to proceed with a sale, so the owners replaced two board members with loyalists, allegedly in breach of an agreement with the lenders to leave the board alone - sounds vaguely Delaware.

Anyway, the Guardian liveblog of yesterday is absolutely worth your time, and the best place to go for this story (of course, it's the best place to go for everything soccer).  You'll find it most engaging if Liverpool is the team you've followed since you were seven, but if you haven't (and I'm sorry for you if that's not the case), you'll still enjoy it.  The video of the supporters breaking into "You'll Never Walk Alone" outside the high court once the verdict was announced brought a tear to my eye ... but then, so did the video of long-time Liverpool supporter Chris "The Lady In Red" DeBurgh.  Here's a taste of the legal analysis:

Andrew Nixon, Associate at Thomas Eggar LLP, said:

This ruling means that there will be no need for Mr Broughton and the board to bring their own declaratory proceedings seeking an Order that they are entitled to push ahead with the deal.

Hicks and Gillett do have a right to appeal the ruling against them and given the amount of cash they are set to lose on a sale to NESV, they are likely to do so. Should they decide to take that option, then there will be further delay. If an appeal is launched then RBS may extend the loan deadline. Regardless of Justice Floyd's assertion in this morning's judgment that it would be "inappropriate" to appeal it seems likely that there is still considerable mileage in this case.

Gerald Krasner, Partner at insolvency and recovery specialist Begbies Traynor and former Chairman of Leeds United Football Club (before selling to Ken Bates in 2005), said:

This morning's announcement means that the possibility of Administration is now highly unlikely and the smart money is on the deal with NESV now going through. Even though there are obviously other parties now looking to muscle in, the chances of them being able to usurp John Henry's bid are remote although, if Hicks and Gillett look to appeal against today's ruling, that will delay things somewhat.

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