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 Premier League side in May and the plan was to invest up to £150million 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.
The club’s supporters, however, will have more pressing concerns. In the previous two seasons, they overcame closely-fought relegation battles and they have endured a difficult start to the 23-24 campaign — having lost their opening two matches. The club have also only added four new players this summer and the only one who cost a fee, 19-year-old striker Youssef Chermiti, is not fit enough, according to manager Sean Dyche.
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.
Moshiri, a 68-year-old British-Iranian, bought the club in 2016, having previously owned a minority stake in Arsenal with his business partner Alisher Usmanov. Moshiri, who is based in Monaco, has poured at least £750million into Everton, with very little to show for his generosity apart from a half-built stadium by the banks of the Mersey.
His free-spending approach to football just about made sense for as long as he had access to Usmanov’s financial support but that was dramatically cut off last year when the Uzbek-born oligarch was added to the UK’s list of sanctioned individuals in the wake of Russia’s invasion of Ukraine. That forced Everton to cancel several lucrative sponsorships with Usmanov-owned companies and opened another hole in the stadium-financing plan as Usmanov was going to provide a naming-rights partner.
Everton, a founder member of the Football League, have competed in English football’s top flight for a record 120 seasons. And, despite a 28-year trophy drought, they remain one of England’s most successful teams in terms of silverware.
Set up by sports agent Jeff Moorad and investor Jahm Najafi, MSP describes itself as a private equity firm that invests in teams, leagues and sports-related businesses. It has stakes in Spanish football team Alcorcon, German side Augsburg and Portugal’s Estoril, as well as shares in F1’s McLaren and the NBA’s Phoenix Suns.
Everton, MSP and Moshiri were all asked for comment but declined to do so.
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(Photo: Getty Images)