It's In His CIC: PRC Gov't to Buy Liverpool FC?

♠ Posted by Emmanuel in , at 8/06/2010 12:53:00 AM
Does he love me? I want to know
How can I tell if he loves me so...

Truly, it's the silly season. Much has been made by me and others about the disastrous investment record of the PRC sovereign wealth fund the China Investment Corporation (CIC). Most famously, it invested in Wall Street bigwigs right before the credit crisis took full effect. I even said that I'd make tonnes of money setting up a hedge fund which did exactly the opposite of what CIC did, for theirs is the reverse Midas touch.

Or is it still? I may have to revise my opinion, dear readers. As the following article notes, it's doing pretty good for itself nowadays. Also, the British press is alight with rumours that Chinese businessman Kenny Huang is a prospective buyer of the cash-strapped Liverpool. For, its malodorous, debt guzzling, and widely disliked American owners appear to be shopping it around after their obviously disastrous tenure. The rumour mill is further alight with news that Huang is a front man for the CIC with its $300 billion in investible funds. Can it be another high-visibility example of growing Chinese influence, and, more importantly in this context, portfolio diversification? Surrely, dollar-denominated assets can't be valued as the greenback renews its inevitable slide. From the Independent comes this article for the grist mill, though there are several more like it in practically every major daily here:
The Anfield board yesterday sought categoric confirmation of the finances behind the proposed buy-out headed by Kenny Huang – which the club's investment bankers maintain is a credible offer – after the sovereign wealth fund linked to the deal was reported to have denied any link to or knowledge of Huang and the bid for Liverpool.

A spokesman for the state-owned Chinese Investment Corporation (CIC) was reported to say there was "no way" the fund would be involved in such a risky deal, adding, "Next they'll say CIC is going to buy Playboy." Barclays Capital (BarCap), however, which is overseeing the sale of the club, does believe Huang's bid is credible. Both BarCap and Liverpool are still awaiting definitive proof from Huang that he has CIC's backing...

The Chinese government, which does not like a high-public profile, may be unsettled by the enormous profile afforded them already by the story and may be seeking to take a step back while negotiations continue. It is worth noting that no regulatory bodies would be able to take action against the CIC in this instance if the statement from China later turns out to be misleading.

Huang – who has now transferred his public relations office on the subject from London back to Hong Kong – has been put forward as the public face of the bid. The picture is rendered more complicated by a message, sent from Huang's own mobile telephone on Tuesday to a journalist at the respected Chinese publication Titan Sport, stating that "Mr Huang would also like to deny that there is any involvement of mainland China state-owned enterprises in his business dealings" and that "if there is any related development, he will make a further announcement"...

CIC has been keen to diversify away from the dollar and out of US bonds. It is heavily profit-driven – recording only six days ago an 11.7 per cent profit on $58bn (£36.5bn) invested overseas last year – but operates in line with the Chinese culture of long-term finance thinking, where profit is not expected immediately. That would fit with Anfield. As would the Chinese taste for buying into premium Western brands...

Analysts in China are not reading any significance into CIC's decision to divest $558m (£351m) of its Morgan Stanley holdings over the last few weeks – a figure equal to Liverpool's worth. CIC's vast funds under management do not demand the same sell-to-buy culture which has characterised the football club's transfer market policy.
Remember, too, that another Hong Kong-based businessman, Carson Yeung, owns Premier League contender Birmingham City. Out with the old Yanquis, in with the new mandarins. Like in the rest of global political economy, perhaps English football is going to be increasingly dominated by titans from the Middle Kingdom. That's likely an improvement.

Is Kenny Huang indeed a front man for the Chinese government? To paraphrase Aretha Frankin--and Cher too--it's in his CIC (that's where it is).

UPDATE: Details of the bid by Kenny Huang are being outlined about how he will improve the performance of the club. From the Guardian:
Chinese ownership of Liverpool would return the club to its former position of primacy in the transfer market, a representative of Kenny Huang's QSL consortium announced today. Marc Ganis, a Chicago-based sports executive who has struck previous deals for Huang's QSL vehicle and is his long-term associate, acted as spokesman for the Chinese consortium today. He confirmed that an outline takeover proposal had been submitted to Barcap, the investment-banking division of Barclays, and the Liverpool chairman Martin Broughton, who together are overseeing the sale of the club.

If the bid is successful, Ganis assured Liverpool fans that wage and transfer budgets under QSL would allow the five-times European champions to compete on equal terms with Manchester City, Real Madrid and Internazionale. "Liverpool is and always should be one of the highest-spending clubs in all of football," he said. "And our financial models presume Liverpool will be at or near the top in spending on players every year."

That will be of great comfort to Liverpool fans who have grown frustrated at the payment of up to £43m a year in interest over the three years since Tom Hicks and George Gillett's highly leveraged takeover. In the 12 months to 31 July 2009, those payments meant Liverpool's wage bill was severely restricted – equivalent to only 83.5% of Manchester United's last year and 61.5% of Chelsea's.