Everton’s hopes of improving their financial situation have received a huge hit after MSP Sports Capital withdrew from talks about taking a minority stake in the club.
The New York-based investment group signed an exclusivity
agreement with the Toffees in May and the plan was to invest up to
£150million ($190m) in convertible debt that would become a stake of
approximately 25 per cent in the 145-year-old club.
In a complicated deal, £100million of that investment was
meant for Everton Stadium Development Company, the subsidiary club owner Farhad
Moshiri set up in 2017 to oversee the construction of Everton’s new ground at
Bramley-Moore Dock, with the rest going to the club.
But that exclusivity period is now over and the deal is
dead, with the stumbling block being opposition from one of Everton’s existing
lenders, Rights and Media Funding Limited.
Everton, currently bottom of the Premier League after losing
their first two games of the season without scoring a goal, have a loan
facility with the Cheshire-based firm that the club has extended to £200million
this year. That debt is secured via four charges on club assets and they have
negative pledge clauses which mean the holder can demand repayment of its debt
before the borrower takes on any further borrowing.
With Rights and Media Funding Limited reluctant to give up
its protection against possible default, MSP’s plan became unworkable. The
lender’s main concern, however, was that MSP was not putting enough money into
the club in return for its equity and Everton simply need more cash.
That may well be true but the club will now not be getting
any from MSP. But the U.S. group is proceeding with the £100million loan to the
stadium company, although this is now just a straightforward loan and not
convertible debt.
This should enable Moshiri to repay the £40million he
borrowed from English businessman Andy Bell in May which was always intended to
act as a bridging loan for the larger MSP investment. Bell, the founder of
share-dealing platform AJ Bell, lent the money to the stadium company via his
family investment firm Blythe Capital.
What is not clear, however, is if the MSP loan will now
unlock the rest of the funding required to complete the stadium.
The original plan was that the remaining £260million would
come via a five-year construction loan sourced by global banks JP Morgan and
MUFG, but that was premised on MSP taking an equity stake in the business.
With MSP out of the picture in terms of additional
investment, Moshiri is trying to find alternatives, including resuming talks
with Miami-based investment firm 777 Partners. Whether those talks go any
further than the ones that took place earlier this year remains to be seen.
Everton’s problems, though, go beyond a failure to find
fresh investment and a slow start to the season. They have lost more than
£400million between 2018 and 2022 and are currently being investigated by an
independent panel for possible breaches of the league’s spending rules. A
ruling is expected later this year.
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