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Gillett Trying to Refinance Debt


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Technically not MLS news but it might explain a few things related to the Montreal Bid.

From the Sports Business Journal (Dec. 1, 2008)

http://www.sportsbusinessjournal.com/article/60725

Gillett trying to refinance debt

Print This Story By DANIEL KAPLAN

Staff writer

Published December 01, 2008 : Page 04

Liverpool FC co-owner George Gillett is trying to refinance $75 million of personal debt that pledges his interest in the soccer team as collateral, according to sources familiar with the situation.

The money is due late next month unless the three-sport owner can work out a new deal.

Gillett, who declined to comment, borrowed the money on Jan. 25 from Mill Financial, according to a Uniform Commercial Code debtor search in Delaware. Mill Financial is a unit of Springfield Financial Co., a lender based in Springfield, Va. The money, borrowed through Gillett Football, where Gillett’s 50 percent interest in the club is housed, funded an equity infusion for the English Premier League team required by creditors.

According to the UCC file, Football Investments, which owns Gillett Football, is pledged as collateral. If Gillett were unable to refinance and did not pay off the loan when it is due on Jan. 25, he would then default, meaning the lender could seek his ownership position.

Springfield is selling the debt, and sources said it will change hands by the middle of this month. At least one other entity, with an eye on seeking control of Gillett’s Liverpool interest, is bidding to acquire the debt from Mill, sources said.

The Liverpool FC co-owner seeks

new terms for debt tied to his

interest in the club.Gillett himself is looking to acquire the note with a group of investors, the sources said, at which point he could merely extend the deadline. If he were unsuccessful at buying the note, he also could pay off the loan on Jan. 25, presuming he has the money to do so.

Mill Financial Principal Ron Devine did not respond to calls for comment.

That Gillett finds himself trying to buy a note from a relatively obscure Virginia lender underscores the degree of financial difficulty he and equal partner Tom Hicks have found themselves in since buying Liverpool in 2007.

The duo originally borrowed about 280 million pounds (currently $429 million) from Royal Bank of Scotland and Wachovia to finance their acquisition, one of several English Premier League sales to foreigners in that time period. Hicks and Gillett had expected to refinance easily, but the credit markets soured in the summer of 2007. A hoped-for refinancing proved arduous, and the lenders required the duo earlier this year to put in about $150 million of equity they were not envisioning. That means there is at least $575 million of debt directly tied to Liverpool.

Gillett borrowed his money from Springfield at a rate as high as 19 percent, and Hicks, sources said, used a line of credit from JPMorgan Chase. A spokesman for Hicks declined to comment.

Gillett had anticipated until recently that he could simply extend the Jan. 25 deadline, a source familiar with the situation said, but last week, Springfield put the note up for sale.

Gillett emerged from bankruptcy protection in the early 1990s to amass a meat packing and ski resort fortune and then started buying sports assets, including Liverpool, the Montreal Canadians and a NASCAR team.

Liverpool is not the only sports team Gillett controls with high levels of debt. SportsBusiness Journal reported in May 2006 that the Montreal Canadiens and the Molson Centre, which he also owns, borrowed $240 million.

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People like this should just be lobotomized and put out to pasture. Doesn't have a f*ing dime to his name yet 'owns' 100's of millions of dollars worth of paper. And we wonder why we have a financial crisis!

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quote:Originally posted by Ed

People like this should just be lobotomized and put out to pasture. Doesn't have a f*ing dime to his name yet 'owns' 100's of millions of dollars worth of paper. And we wonder why we have a financial crisis!

Exactly. His (and many, many others) house of cards is falling down.

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quote:Originally posted by Desigol

This is why Fans in England are turning away from the Premiership. Ridiculous spending from owners with no interest in the Club other than financial.

Arsenal are bucking the trend so far, but may give in to Sam Korenke.

LOL. Arsenal are just like any other big club. They are just as money hungry as ManU or Chelsea.

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quote:Originally posted by Tuscan

Maybe Gillett and Saputo DIDN'T have the $$ to put forth towards the $40 mill then? All our questioning of tactics might all end up looking past the simple truth that those two just don't have the money to pony up due to personal debts.

Gillett was never in the ranks of Saputo, Kerfoot or Melnyk in terms of wealth. He may be worth a lot on paper but as we see most of that is financed by debt. I think he was mostly brought into the Montreal MLS bid for his expertise in running a professional sports business. He has done a good job in running the Habs and Bell Centre despite all of his questionable capitalization strategies which may now come back to haunt him.

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quote:Originally posted by Massive Attack

LOL. Arsenal are just like any other big club. They are just as money hungry as ManU or Chelsea.

I would say Arsenal is worst than the other top four. They are too cheap to buy the players needed to win. Then if players make too much they sell them on instead of paying them more.

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Arsenal makes the most money (37 million pound profit last year) and charges the highest ticket prices yet are cheapskates that buy nobody, sell everybody and have won nothing in the last few years. Did I mention they took on a ton of debt to build the Emirates? The Brits are always whining that "foreign owners just want to make money." Glazer, Gillett and Abramovich aren't making a dime. The only club that's ripping off the fans is the one gets a free ride. If it was a single "yank" in charge making all this money without delivering results they'd have burnt him at the stake already. But as long as its a consortium with some Brits at the table then I guess it's ok...

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But a point worth noting is that unlike Liverpool and United, Arsenal actually has a sustainable business model. The stadium cost money, but it's going to be a revenue gainer for them long-run. Personally, I think are relatively smart. They just need to start retaining more of the talent they bring through.

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Call Arsenal sustainable, but even after debt payments United nets more money. Being a winner simply allows United to grow and sell is brand on a more global scale. So while their costs are much higher than Arsenal, they bring in more than enough money to offset this.

Arsenal's Net profit in 2008 was £36.7 million

Manchester United's Net profit in 2007 was £42.3 million

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quote:Originally posted by Massive Attack

Saputo has the money. His family owns a real company that makes real profit.

The money the company makes does not go into Joey Saputo's pocket.

They have shareholders.

His value is not the same as the Saputo company's value.

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quote:Originally posted by jimmynow

The money the company makes does not go into Joey Saputo's pocket.

They have shareholders.

His value is not the same as the Saputo company's value.

According to Forbes in 2006, the Saputo family is worth $2.4 billion. That's the family, not the company.

Saputo has the money.

I don't know why people are even debating this point.

Saputo pulled out because he thought it didn't make business sense. Not because he couldn't afford it. That is a major distinction.

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Sports clubs at this level aren't really about making a profit. The appreciation of net assets is really what it's all about. A lot of people thought Fergie was off his rocker paying what, 6m for Ronaldo? Now he has the luxury of selling him off or using him to make what, 20-30m from CL, 30-50m from the EPL. That supports a wage bill of like 1.6m per week. That buys some pretty decent players. Why are the supporters in England complaining about? We should be the ones complaining. What's our MLS salary cap equate to? $50,000 US a week? You couldn't even pay John O'Shea for that!

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quote:Originally posted by Massive Attack

According to Forbes in 2006, the Saputo family is worth $2.4 billion. That's the family, not the company.

Saputo has the money.

I don't know why people are even debating this point.

Saputo pulled out because he thought it didn't make business sense. Not because he couldn't afford it. That is a major distinction.

Odds are, you're right. However, I tend to get pretty skeptical about any big time financing, family owned or not, in this day and age. Sometimes the people you least expect are not doing as well as you think outside of the public eye. That said, he probably decided to go into a different direction.

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Guest Jeffery S.
quote:Originally posted by youllneverwalkalone

Sports clubs at this level aren't really about making a profit. The appreciation of net assets is really what it's all about. A lot of people thought Fergie was off his rocker paying what, 6m for Ronaldo? Now he has the luxury of selling him off or using him to make what, 20-30m from CL, 30-50m from the EPL. That supports a wage bill of like 1.6m per week. That buys some pretty decent players. Why are the supporters in England complaining about? We should be the ones complaining. What's our MLS salary cap equate to? $50,000 US a week? You couldn't even pay John O'Shea for that!

Man Utd paid 12 million euros for C. Ronaldo. An article in a Barcelona paper today explained how before he was signed a rep from Barça went to his tiny apartment near the Expo in Lisbon, he was was 18, his girlfriend sat there giving him a foot massage, and he refused to hold out to go to Barcelona because he thought he should do Sporting a favour and let them get the full transfer fee for him. Which was taken to be a rather noble thing to do on his part, as he could have denied Sporting the transfer by holding out and signing as a free agent a year later.

The normal economic system of world soccer does not apply with MLS, or only partially. When MLS teams can make money by selling players, like they do in S. America for example, then the investment side of things will be favourable for those interested in participating for financial reasons. Another thing I heard today, an interview with Minguella a former FIFA agent who has had Stoichkov, Rivaldo, others. He commented that the most money he ever made from a player was for Jardel, not from commissions on new contracts or transfers, but because he was a part owner of the player, a model we are seeing more and more when European clubs buy S. Americans (multi-ownership). So he received a much higher amount from transfer payments on his player than on working on fees and commissions as a FIFA agent.

I understand that the president of Oporto tried to do a similar deal with Dani Fernandes when he was an u-18 still, the president of the club was also part investor in certain players. Dani refused, the order came to stop playing him for the last games of the season(Oporto promptly lost the Portugal junior championship) and pushed for the move out rather than be subject to that kind of contract relationship.

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quote:Originally posted by piltdownman

Call Arsenal sustainable, but even after debt payments United nets more money. Being a winner simply allows United to grow and sell is brand on a more global scale. So while their costs are much higher than Arsenal, they bring in more than enough money to offset this.

Arsenal's Net profit in 2008 was £36.7 million

Manchester United's Net profit in 2007 was £42.3 million

Absolutely, but i think that a point that's being referenced with Gillette rings true with United also because they've leveraged themselves at a much higher level.

Having lots of debt works if you have a stable business, however if things fall down you can go bankrupt in a hurry. It's been reported before that: 1) United is servicing it's debt at junk bond levels (and we're talking pre-credit crunch, if they had to raise money today there's a very strong chance they'd fail). 2) falling out of a CL league would put them close to insolvency because of all the extra money they earn from it.

United's formula works as long as they can continue to grow or tread water. If things dry out (which is certainly possible in this environment) it would be very ugly.

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