The Wall St financial bailout collapsed today and amongst the banks that could be hit hardest is Royal Bank of Scotland who would have been amongst the largest beneficiaries. The bailout would have allowed RBS to offload billions of dollars of toxic assets and loans. This year itself RBS wrote down $10 billion in losses from worthless subprime securities. Its ill timed and expensive buyout of ABN Amro with other partners led to a loss of $21.7 million. Today’s 777 point drop on the Dow pushed RBS stock prices to $2.75, an 80% drop from its peak.
Given its dire straits, the basic question is whether RBS has the funds to refinance the loan in 2009 for the stadium. Tom Hicks and George Gillet are offloading the repayment of the first $600 million loan on to the club, which costs it a staggering $50 million in interest alone every year. LFC supporters are asking the bank to stop financing the owners.
The two owners have very little collateral which I would hazard a guess have been further eroded by Wall St’s huge losses. The club’s finances lie on shaky grounds and it could default on its loan repayments. The financial bailout even if it comes through, carries with it considerable oversight provisions which could mean that it may not be in RBS hands to give out another loan even if it so desires.
What does this mean for Liverpool? Finding an owner who is independently wealthy to buy out the club as soon as possible, assume the debt and repay the loan, have enough funds to finance the stadium and player transfers, and earn the confidence of the fans who are tired of ownership that sees their club as a cash register.
Update: RBS share prices further plummeted after Fortis their partner in the controversial and ill timed ABN AMRO takeover was nationalized.