A Cautionary Note

I am not a financier or a businessman, nor am I one of those rabid, alleged football “fans” who view their club as a sacrosanct institution, beyond criticism. I am, however, a council tax payer who is being told (not asked, I emphasise) that I and the rest of the local citizenry are to underwrite a speculative building project on behalf of two private companies. It is reasonable to question such an arrangement.

I refer, of course, to the riverside stadium project, involving the Peel organisation and Everton Football Club. The complex proposal being touted is that LCC form a Special Purpose Vehicle (SPV) to facilitate the construction of such a stadium, with LCC acting as guarantor for the finances. The first question which comes to mind is why LCC is getting involved at all in a deal which is essentially between two private companies.

The principal shareholder in EFC is a billionaire who has recently bought the Liver Building. The owner of Peel is another billionaire, a tax exile resident in the Isle of Man. Surely these people – the main beneficiaries of the council’s largesse – have the resources, the business credibility and the financial acumen to proceed on this deal. There is, of course, one caveat. Like many “successful” wheeler-dealers, their success has been made using other people’s money, with little risk to themselves.

We do not know from where the finance for the project will come; but we are told that LCC’s credit is rock solid for it to act as guarantor. This begs a question: if the deal is so sound, why should it require LCC to act as guarantor? We are also told that LCC is bound to make money on the deal (We were told the same tosh about the money poured into Finch Farm). Is this really the case? Many investing councils said similar things about the Bank of Credit and Commerce International before it went bust with over £10 billion of debts. Even a small council like that of the Western Isles suffered big losses, in their case £24 million.

 Are we to trust the judgement of civic leaders who have taken us into the as yet unresolved financial scandal of the LCC-BT partnership of Liverpool Direct? I think not – their record of financial management is woeful.  They are wholly unqualified for this kind of deal, and, frankly, out of their league with the likes of Whittaker (Peel), and Moshiri (EFC) and his shady Russian partner Usmanov.

Nevertheless, our armchair financiers will retort that there is no risk in the deal, with money rolling in to Premiership clubs. That has a superficial validity; but, if that is the case, again I ask: why does EFC need LCC? Are the future finances of EFC themselves guaranteed? The experience of Leeds United is instructive.

The only club in that bigger and wealthier Yorkshire city, they were a headlining Premiership club. EFC legend, Peter Reid, described their fanatically loyal fan base as the best he had ever experienced. Wealth, size, support – all of the ingredients for success as a club; and, indeed, they had it for a while. That is, until they were relegated, soon followed by the club going into administration. Ten years on, they are still struggling to recapture their Premiership place.

When next you read that there is no risk involved in this deal, think of Leeds United and Western Isles Council. Think of the calibre and record of people potentially placing the credit of the council in harm’s way as you think of the private companies who stand to profit. Billionaires not dipping into their own pockets, whilst ours could well be picked. It is right to be cautious.

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