There is bad debt in the sports world and there is good debt. Bad debt involves leveraging the value of the club to fund its purchase, as was the case with Liverpool’s previous owners Tom Hicks and George Gillett who nearly drove the Reds to bankruptcy doing so.
Good debt, at least from a business point of view, involves taking out loans to selectively grow the value of the club over the long term rather than redirecting existing cashflow to do so. This is what Fenway Sports Group’s goal was said to be when they provided Liverpool low and zero interest loans.
In short, the idea was that it would allow the club to redevelop Anfield and a new training ground, increasing its value, but that the club would then pay the loan off over time rather than having to find the money for those projects up front.
On paper, with good debt FSG end up with a club worth more in the long-term and Liverpool’s ability to compete doesn’t take a hit in the short-term. Now, though, club-connected journalist David Lynch suggests repayment of those loans over a shorter time period is being prioritised over investment in other areas—including playing staff.
There is only one plausible goal of such actions: a sale, and one that comes sooner rather than later since such an approach risks damaging the club’s value over the longer term if results on the pitch drop for an extended period.
If FSG can now get back the money it loaned to redevelop Anfield and build new training facilities, it will have added value and removed debt. In short, it will maximise their return. But it will do so by going back on the unspoken promise made when loaning the club funds to improve infrastructure—namely that they were doing so by using good debt.
Instead, if the reporting is accurate, the club are now being asked to use their revenue streams to pay for those improvements—improvements that increase the sale value for FSG—over the short term at the expense of short-term investment elsewhere.
Given FSG’s promises when they bought the club and over their years as owners, to call this a disappointing development would be an understatement. But it is also a development that means that, for better or worse, a sale—and likely a full sale—is the is short-term goal.
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