Liverpool Board Says Texas Court Order Blocks Club's Sale
Liverpool’s board said a temporary restraining order obtained in Texas yesterday by owners Tom Hicks and George Gillett blocked the sale of the English Premier League soccer club to the operators of the Boston Red Sox.
The Liverpool owners are trying to stop the forced sale of the 18-time English soccer champion and are asking for $1.6 billion in damages from their lender, Royal Bank of Scotland Group Plc, and independent board members. State District Judge Jim Jordan in Dallas issued the order and scheduled arguments in the case for Oct. 25, Hicks and Gillett said yesterday in an e- mailed statement.
The legal move came hours after the American pair lost a case in London to RBS that cleared the way for a sale. Chairman Martin Broughton and the other two independent directors, Ian Ayre and Christian Purslow, said the order stopped them from selling to New England Sports Ventures LLC, which agreed on Oct. 6 to buy the team for 300 million pounds ($475 million).
“The independent directors consider the restraining order to be unwarranted and damaging and will move as swiftly as possible to seek to have it removed,” the board members said in an e-mailed statement.
A hearing is scheduled for after 2 p.m. London time before Justice Christopher Floyd as Liverpool tries to block the U.S. injunction, saying the Texas court doesn’t have jurisdiction over the case.
Hicks and Gillett allege in their filing in the Texas court that the directors were “acting merely as pawns of RBS, wholly abdicating the fiduciary responsibilities that they owed in the sale.”
Hicks and Gillett tried to stop the sale to John W. Henry and Tom Werner’s New England group by changing the independent directors, but Floyd yesterday ruled they had to reinstate the ousted members. Broughton said the owners would lose about 140 million pounds if the New England group’s bid goes through.
The owners say the accepted price is too low, and that the board ignored other bidders.
The restraining order blocks any sale and prevents RBS from seizing or foreclosing on Liverpool’s owners. The directors began “to take action designed to insure that Messrs. Hicks and Gillett would be ousted as owners,” the filing said.
Hicks’s lawyer, Steven Stodghill, said last night in an interview that allegations made in his client’s filing “are some of the most brazen acts alleged in many years against a board” and said it made sense to file for a restraining order in Texas because RBS and New England Sports Ventures do substantial business in that state.
“We have very good basis for jurisdiction,” he said. “I have no idea what’s going on in England right now. But I do know that we have injunctive relief granted by a state court. I think they would go forward at their peril.”
Henry, who flew to London for negotiations, gave a thumbs- up sign to reporters waiting outside the London offices of Liverpool’s lawyers as he arrived to attend a board meeting last night.
Since their 219 million-pound leveraged buyout in 2007, Hicks and Gillett have had disputes between themselves and have met with fan opposition over rising debt and their failure to build a promised new stadium.
The soccer club, a five-time European champion, is off to its worst start in more than 50 years. The team is in 18th place and would be relegated to the second division if the season were to end today.
Hicks and Gillett were granted a six-month extension to repay by lenders RBS and Wells Fargo & Co. in April, with the agreement that the club be put up for sale and Broughton appointed.
Hicks and Gillett have a day to pay back the 237 million- pound loan. The bid from the New England group would repay 200 million pounds of the debt on completion.
RBS could put the club into bankruptcy. Liverpool, which has a global fan base, would be the second team in England’s top league to go into administration, a form of protection from creditors. That would bring a nine-point deduction from the Premier League.
“I think it will force the bank into a situation where they say we might have to put this in administration and take it from there,” said Danny Davis, a partner at London law firm Mishcon de Reya specializing in sports business law and insolvency.
Liverpool’s relegation to the second division would cost it millions of pounds. It already missed out on as much as 30 million pounds after failing to reach this season’s Champions League.
Hicks and Gillett argue that the sale to the Red Sox group isn’t the best deal available. Broughton, appointed to sell the club by its lenders in April, said it is. Singapore billionaire Peter Lim said two days ago that he made a 320 million pound bid, trumping his earlier offer after it was matched by the baseball team owners.
In yesterday’s filing, Hicks said he got a letter of interest from a third potential purchaser represented by FBR Capital Markets, offering between £375 million and £400 million.
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