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Financial setback for Everton

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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