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Liverpool Sale May Be First Scrutinized After Portsmouth Crisis

Liverpool’s prospective sale may be the first scrutinized under Premier League soccer rules introduced to avoid a repeat of the financial meltdown at Portsmouth last season.

New owners must show they have the funds to sustain the club for one year and provide information about how they’ll finance a takeover before receiving league approval, according to guidelines outlined yesterday.

“We recognized there was reputational damage when you have a Portsmouth situation,” Richard Scudamore, the league’s chief executive officer, told a group of invited reporters in London. “We’ve had to do things that enable us to protect ourselves from that reputational risk.”

Portsmouth, which went through four owners in six months, became the first English top-division club to seek creditor protection in February after amassing debt of more than 100 million pounds ($159 million). It also came close to liquidation over millions of pounds in unpaid taxes.

“The business cannot afford to be let down like that,” said Scudamore, head of the world’s richest domestic soccer competition. He added that the new rules would have prevented at least one takeover at Portsmouth last season.

Hong Kong-based businessman Kenny Huang is among the suitors interested in acquiring Liverpool from U.S. co-owners Tom Hicks and George Gillett, who put the team up for sale in April after the club’s parent-company debt ballooned to 351 million pounds. They bought the 18-time English champion for 219 million pounds, including debt, in 2007.

Portsmouth Demoted

Liverpool and potential investors have contacted the Premier League to begin discussions about supplying the required financial information. The paperwork must be submitted 10 days prior to any board appointments, and league officials will meet prospective new owners when they seek approval to take over.

“Everybody is aware of the new rules,” Scudamore said.

Portsmouth was demoted to the second tier at the end of last season after being given a nine-point penalty for going into administration. U.K. tax officials may find out today or tomorrow if their attempt to block a settlement with creditors has been successful.

The south coast club’s dispute with Her Majesty’s Revenue and Customs, which claims it’s owed as much as 37 million pounds, has prompted the league to require all teams to disclose their tax payments for the first time, on a quarterly basis. The first tax filings have to be shown to the league on Sept. 30.

Record Payments

“I don’t see any club at the same risk-point that Portsmouth were in last year,” Scudamore said. “I find it amazing HMRC allow clubs to get into arrears.”

Premier League teams will receive record payments from central funds as this season marks the first under new three- year domestic and overseas television contracts. Total revenue for the 2010-11 season will be around 1.2 billion pounds, an 18 percent increase from the previous campaign, the league said.

Increased sales haven’t led to better financial performances. Thirteen of the 20 teams analyzed by Bloomberg News in March were losing money, leading West Ham co-owner David Gold to say the Premier League faced “oblivion.”

The new measures come less than nine months after the league brought in financial controls that included a requirement that any investor with a stake greater than 10 percent be publicly named, proof that outstanding debts to other teams had been paid and a demand for future financial information.

Portsmouth was given a transfer embargo midway through last season after the league ruled it had unpaid player-trading debts.

While the new rules would reduce the risk of a repeat of what happened at Portsmouth, the league “ultimately can’t eliminate risk entirely,” Scudamore said.

To contact the reporter on this story: Tariq Panja in the London newsroom at tpanja@bloomberg.net

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