This week, Everton’s takeover saga has taken even more twists and turns.
After being in the driver’s seat for so long, anointed as the chosen ones by Farhad Moshiri to acquire his 94.1% stake in the football club, Miami-based 777 Partners’ chances of taking control now look incredibly slim .
Despite providing some £200m of funding to the club for working capital through unsecured junior debt, 777 have seen over the course of the last month an Australian budget airline they own fall into voluntary administration; accused of running a fraudulent enterprise in a civil suit filed in a New York court by a company that had loaned them significant sums of money; missed payroll for one of the European clubs they own; and parted ways with the PR company that took care of their image because it hadn’t paid its bills.
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Add to that concerns that already existed over allegations of missed or late payments and a number of ongoing legal cases against them, and it now seems unfathomable that 77 will be able to get through the Premier League, which gave conditional approval after seven months last year. month on the condition that the group met four strict and very high criteria.
One of those criteria was the repayment of a £158m loan to MSP Sports Capital, the New York-based company that had provided direct funding to the club after an existing lender, Rights and Media Funding, objected to a deal for 25 % equity. Limited, last year. It was a move that paved the way for 777 to enter the fray and attempt to buy the club from Moshiri.
MSP is now back in the spotlight, with the company assessing the feasibility of acquiring the club in light of the likelihood of the collapse of the 777 Partners deal, and examining the best course of action to safeguard their investment in the club and the potential to obtain further rewards through a potential sale in the future.
It’s certainly not a given, and MSP would be reluctant owners if it were to happen, but it’s a potential avenue that could be explored beyond 777 and fans’ concerns about reports citing administration as a possible outcome.
But whether it is MSP or another party believed to have US interests, there will likely have to be a debt restructuring, something Everton have reportedly looked at through a restructuring. experts to help short-term debt problems.
The Blues have a significant debt burden. But unlike Tottenham Hotspur, who have more than £800 million in debt, Everton has negative cash flow, and when a company has negative cash flow, servicing those debts becomes very difficult. There is no option to pile more debt on the club to solve the problems, so what needs to happen is a reduction in the debt burden.
If it were MSP, they could, for example, convert £158 million into equity, or write off the loan as payment for Moshiri for the club. That seems unlikely. To make a compelling case for MSP’s takeover it is likely that Moshiri will have to write off his £450 million in shareholder loans to the club, something he will not be willing to do anytime soon.
But with so much debt, the club is effectively worthless when it comes to the purchase price placed on it.
Football finance expert Kieran Maguire, lecturer at the University of Liverpool and author of ‘The Price of Football’, told the ECHO: “It’s like your house is worth £400,000 and your mortgage is £600,000. It is difficult to understand why anyone would want to pay Moshiri anything for the football club.
“There will be a few people here who might need a haircut. There are a number of different levers that can be used to try to restructure debt and reduce it to a manageable level.
“In the case of someone like Andy Bell or George Downing, who have provided some funding, as Evertonians they will probably be quite sympathetic to what is going on and try to find a solution that is best for the club “It’s harder for someone like Rights and Media Funding Limited because they don’t have any emotional connection to this.”
MSP had the option to take a controlling stake in the Blues after April 15, the loan maturity date, due to the fact that one of the security arrangements was against Blue Heaven Holdings, the company through which Moshiri owns the club. However, that deal would still leave Moshiri with a shareholding, and with so many other factors at play, including the need to reduce debt to manageable levels, it was decided that a short reprieve would be granted to 777 Partners to the £158m, a Premier League condition prior to any approval.
Full control may be more attractive to MSP in the future, but a big part of their success would lie in a share raise, allocating further shares, using the money to pay down some of the debt and the cash flow of aid. In turn, an improvement in cash flow would allow the club to refinance its existing debts on more favorable terms compared to the new stadium.
There is no simple solution to Everton’s problems at the moment, and there are already reports raising the grim possibility of a board, although that idea has been rejected by the club and is reportedly not being considered.
With the season nearing an end, there were some concerns about the club’s ability to make ends meet during the summer months. They received a £15m funding deal through 777 Partners for working capital just a fortnight ago, but sources say the funding will be in place by the summer.
The moment the final Premier League table is confirmed, the wheels will be set in motion for the merit payments to be made to clubs. If Everton remain 15th, they will be entitled to £18.7 million in central funding for their performances, which will be paid out in a lump sum and will be important for cash flow during the summer. There is also the possibility that significant amounts of money could be raised through player sales.
However, there is no silver bullet for the Blues in this whole situation, and the success of any new ownership group, be it MSP or another interested party, will depend on the ability to reduce debt to manageable levels very quickly.