Liverpool's accountants have cast doubt over the future of the English Premier League club's parent company as the American owners struggle to refinance $563 million in debt.
|George Gillett, left, and Tom Hicks are battling in the current financial climate [GALLO/GETTY]
The group formed by Tom Hicks and George Gillett Jr. to buy the club in 2007 lost $68.7 million last year, mainly due to interest payments on the debts the two partners took on to buy the club in 2007.
In its annual report, Liverpool's accountants warned that the group is struggling to refinance debts before a deadline of July 24, and the problems "may cast significant doubt on the group's and parent company's ability to continue as a going concern.''
Although Hicks and Gillett say they are confident of securing a refinancing deal, the figures reveal that the financial success of the club is being swallowed up by the cost of servicing the parent company's loans.
The accounts for the year ending July 2008 showed Liverpool made a profit of $16.4 million but the parent company, Kop Football (Holdings) Ltd., posted a substantial loss of $68.7 million, mainly due to interest payments totaling $58.9 million.
The club's accountants, KPMG LLP, also included a warning.
"The group has credit facilities amounting to 350 million pounds which expire on 24 July 2009,'' the accountants said.
"The directors have initiated negotiations to secure the replacement finance required by the group and these negotiations are ongoing.
"These conditions ... indicate the existence of a material uncertainty which may cast significant doubt on the group's and parent company's ability to continue as a going concern.''
The club's turnover was a record $256.6 million, compared to $215.9 million the year before, with a profit of $16.4 million.
That was reflected by a similar turnover for Kop Football (Holdings) of $264.5 million, most coming from the football club, though the group posted an overall loss of $68.6 million.
Cause for concern
"Accountants like KPMG don't use the language they used lightly. They are worried about the ability to continue on the present basis,'' said football finance analyst Professor Tom Cannon of Liverpool University.
"I have not heard accountants talk about a top club in a way like that before.
"Fans should be very concerned. Turnover is going up, trading profit is going up but they are still making a loss.''
Hicks and Gillett have been scouring the globe to find investors for the club.
Hicks' financial problems extend beyond Liverpool. He has already said that he is prepared to sell a majority shareholding in his Texas Rangers baseball team after the Hicks Sports Group in April defaulted on $525 million in loans relating to that team and his Dallas Stars ice hockey team.