LIV Golf, which has support from Saudi Arabia, is preparing to file for bankruptcy next week. The reason for this is the sovereign wealth fund of the kingdom's refusal to provide additional funding to the golf challenger.
As reported by the Financial Times on Monday, LIV Golf sent settlement proposals to players who were promised multi-million dollar payouts, but these amounts now amount to only a few cents of the original value.
In the spring, Saudi Arabia indicated its intention to withdraw its multi-billion dollar investments in LIV Golf. It was expected that LIV Golf chairman, Yasir Al-Rumayyan, who is also the manager of Saudi Arabia's Public Investment Fund (PIF), would resign.
The PIF's stake in LIV Golf, intended to compete with the PGA Tour, was part of a series of investments aimed at strengthening the kingdom's participation in sports and entertainment as part of the economy's diversification away from energy.
Nevertheless, the tour has incurred losses exceeding $1.1 billion outside the US, and likely several more billion dollars in the US since its inception.
Among the golfers participating in the tour are Jon Rahm, Bryson DeChambeau, Phil Mickelson, and Cameron Smith.
Even before the war between the US and Iran, major Saudi projects were either canceled or significantly scaled back. The kingdom's Finance Minister, Mohammed Al-Jadaan, stated in December that the government 'has no ego' preventing it from reviewing projects.
Earlier this year, Saudi Arabia suspended construction of Makkah, a giant cubic structure that was supposed to be built in the center of Riyadh. The kingdom also postponed plans to build a desert ski resort and a large dam for an artificial lake.
LIV is trying to present a 'Version 2.0' within a pre-agreed bankruptcy deal. This deal stipulates that star golfers will be able to receive equity stakes and other forms of financial compensation under this agreement.
Saudi Arabia and other Gulf states have been affected by the US-Iran conflict, despite rising energy prices. These states are trying to diversify their economies so as not to depend solely on oil and gas revenues.
Bloomberg reported on Monday that Saudi Arabia is in early stages of negotiations to secure at least $8 billion in new loans, as the war in Iran puts pressure on the country, and the kingdom seeks to continue investing in non-oil activities.