Phillips, 22, had been with Stuttgart since August, making seven starts in his 11 appearances with the 2.Bundesliga outfit.
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Sofascore rates Phillips as one of Stuttgart’s top performers this season, an 88 percent passer out of the back.
He’ll arrive back at Anfield in January.
The club also has youngster Sepp van den Berg, but he’s only played thrice in the League Cup.
The defender is the son of longtime Middlesbrough and Bolton midfielder Jimmy Phillips.
We have reached an agreement with Stuttgart for Nat Phillips to return from his loan spell in January.
Phillips will return at the beginning of next month and be eligible for Reds matches, starting with the FA Cup tie against Everton.
— Liverpool FC (@LFC) December 27, 2019