With unpaid debt and other obligations already over £1 billion, the sale of Everton comes with a warning to potential bidders. Insiders say Farhad Moshiri has plenty of potential bidders as he considers terminating his relationship with 777 Partners. As Telegraph Sport examines the eye-watering expenditures, experts believe the eventual new owner, after short-term hardship, may nevertheless net a “fantastic deal for themselves”
What is Everton worth?
Depending on who you ask, the figure ranges from £1 to £500 million. The 777 agreement negotiated with Moshiri in September was believed by one dealmaker to be worth more than £500 million, but with so much debt to discharge, it seems unlikely the British-Iranian investor would receive even a quarter of that for his 94.1% interest.
One variable on his take home price is understood to have been Premier League survival, which has already been achieved, however, if Moshiri now tears up his 777 arrangement, interested suitors will be referring directly to outgoings as they do their figures.
Although the last published reports put official debt at less than £400 million, shareholder loans from Moshiri and operating installments from 777 since September have pushed the sum above £1 billion.
According to Kieran Maguire, a football finance expert at Liverpool University, Moshiri was likely persuaded by certain parties to walk away with a pound coin. “The sums would suggest the shares are worthless,” he explained. “If you say a house is worth 500,000 and you have a mortgage of 600,000, you’re done. I believe 777 was willing to make him an offer for the shares; none of the other interested parties, as far as I know, were.”
How complicated will it be for a new investor to come in?
Moshiri’s clean divorce is unlikely due to 777’s desire to recoup its £190 million in lawsuits. This will also impact whoever succeeds him.
Moshiri is encouraged by MSP’s willingness to consider a new takeover bid, as offsetting additional debts will be easier for existing creditors.
MSP would approach Moshiri from a position of power, with terms tied to the funds it already has in the club. The Esk, a respected Everton blogger and financial analyst, reveals in his most recent analysis: “MSP Sports Capital has two unique security structures.
One is a normal fixed charge that applies to all Everton Stadium Development Company Limited assets. This means that if MSP defaults, they can acquire the stadium to repay their loan. Alternatively, MSP has the option of purchasing 50% plus one share of Everton’s issued share capital.Exercising this option would give the MSP majority control of Everton Football Club.”
Telegraph Sport understands that MSP are hesitant to implement such security measures right once, not least because of other complicating circumstances. There is concern over the club’s larger loan to Rights and Media Funding, for example. According to sources close to MSP, the company’s decision to withdraw from purchasing a part in the club was primarily motivated by loan terms.
Another factor will be transparency regarding Moshiri’s shareholder loans. Both Maguire and the Esk agree that “the assumption must be that Moshiri’s £450 million in outstanding shareholder loans are completely written off.”
What do the experts think will happen?
The club maintains the club is not at risk of administration. There has not been a single late payment to staff or players in the Moshiri era at Everton. If the 777 deal collapses, club staff hope Moshiri will dip into his own wealth to keep the club afloat. But both Maguire and the Esk appear to have their doubts.
”There is no simple solution here,” writes the Esk in his latest blog, suggesting it may be “wishful thinking” to hope Everton “can escape” administration, especially while 777’s financial and legal woes pile up.
”It’s all a bit precarious,” Maguire adds, saying he does not see why new owners will want to pay a dime to Moshiri to take on such debt.
Fans are quick to point out administration and further points deductions would not be the devastating blow it once was. A nine point cushion from the relegation zone seems well within sight. But there would also be a human cost. Players would almost certainly be sold and jobs would be lost as debts are paid off.
Why might this be a good deal after all?
With a fantastic new stadium at Bramley-Moore Dock set to open next summer, the perspective will swiftly change as long as the club’s top-tier status is maintained. Potential buyers may look to Tottenham Hotspur as an example of how short-term suffering may lead to long-term gains.
By the beginning of 2020, the full construction of their new stadium had cost the club £1.2 billion, but four years later, Deloitte money league tables showed the trophy-starved club leapfrogging Chelsea as London’s highest-earning team, with yearly revenues of £549.2 million.
According to Sam Boor, a director in Deloitte’s Sport Business Group, “A huge reason for Tottenham’s growth is the club being able to fully leverage and monetise the stadium, both in terms of match-day income and commercial activities.” With Chelsea selling for £2.5 billion two years ago, Everton, which has a better stadium to move into, no longer seems like such a crazy proposition.
“There is the prospect of someone emerging with this club with a fantastic deal for themselves, but not for the lenders,” Maguire stated. “Again, as with everything, it will come down to price.”
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