Why a DIC Takeover would have spelt even greater disaster for Liverpool

One of the big stories on Thursday was former Liverpool owner David Moores’ comments criticising the American owners. He spoke out to talk justifiably about how the Americans are damaging the club but he also mentioned some other interesting information that wasn’t so widely reported in the press. Speaking about the other options he could have gone for, other than George Gillett and Tom Hicks deal, he talked about how prospective owner Dubai International Capital had an equally bad plan in mind for Liverpool FC. He told the Times, Liverpool had a “lucky escape” with DIC:

“Several things happened (or didn’t happen) that gave cause for concern. Our being made aware that DIC had devised a seven-year exit strategy was one such issue, along with a suggestion they intended to raise £300 million in working capital (ie, debt), secured against the club. “I was conscious of the fact I’d agreed a deal with DIC, and telephoned Sameer al Ansari to tell him that the board preferred Gillett and Hicks’s offer, and I wanted 48 hours to think things through. DIC representatives confronted me prior to the game and put it to me that I had to sign off on their offer immediately or the deal would be withdrawn. I told them I wouldn’t be held to ransom – and they withdrew the offer. With hindsight, we may have had a lucky escape there as Dubai is not the buoyant market it was in 2007.”

Since 2007, Dubai has gone into economic meltdown and DIC has had just as much trouble in staying afloat as an investment company of Dubai’s rulers. Coinciding with Moore’s comments, DIC announced on Thursday they were seeking a three month extension on paying some of its debts, raising more fears about the state of credit in the city-state. In a two paragraph statement it announced that DIC and a co-ordinating committee of some of its banks have asked its lenders to extend “certain maturities” until September 30th. The company said:

“The extension period would allow the implementation of a consensual longer term plan that would enable DIC to maximize the value of its business for the benefit of all its stakeholders.”

The heart of the debt crisis in Dubai is centred on the state owned conglomerate Dubai World. It is estimated by the International Monetary Fund that it, along with other debt spread across the government and an array of state-linked businesses, owes over $109 billion. DIC, unlike Dubai World though, is directly owned by Dubai’s ruler Sheikh Mohammed bin Rashid Al Maktoum rather than the state, but it is still troubled by financial problems. The company has a $1.25 billion loan due in June which it obviously cannot pay and has therefore asked for an extension.

Speaking to the Associated Press, Rachel Ziemba, an analyst at Roubini Global Economics, said DIC, like Dubai World, borrowed significantly against its own holdings to fund buyouts of other companies. A fate that would have befallen Liverpool if Moores had accepted their deal in 2007. So when the credit crisis struck in mid 2008, DIC found credit harder to come by and just like Dubai World, is having tremendous problems, although at a smaller scale than the state owned conglomerate. DIC certainly can be ruled out as a potential buyer then.

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