It was confirmed on Saturday that we can finally add the likelihood of 777 Partners completing its takeover of Everton to what bears do in the woods and the religious leanings of Popes as mysteries that have been solved.
Many of you will have closed this case months ago, as the clues were piling up. Some, however, needed longer.
Among the latter group were Everton’s owner Farhad Moshiri, his various advisors and the Premier League, which was “minded to approve” the takeover if 777 had the money it claimed it had.
Never mind, lads. Good process.
So, what now?
Last month, I wrote a piece that explained the four most likely ownership scenarios for Everton, ranging from the least probable (777 completes its deal) to the most likely (the main creditors agree to write off some of their loans, so a new buyer can take on the club at a more sensible valuation).
Well, I forgot a fifth one, which was daft because you should never underestimate man’s ability to do absolutely nothing when faced with unpleasant choices. And the evidence of the last few weeks suggests that is the choice the key figures at Everton have made.
But before I explain how them doing nothing will play out this summer, let us take a few steps back to work out how Everton have reached a point where curling up in a ball and closing their eyes is the preferred course of inaction.
What has happened to 777’s proposed takeover of Everton?
Ah, it is a real shame this one, as the Miami-based investment firm, which already owns bits or all of seven other football clubs, just ran out of time.
I know, how unlucky!
Even now, Moshiri, apparently, is still leaving the door ajar for 777, who he once described as the “best partners to take our great club forward”.
But time waits for no man, even a master of the universe such as 777 co-founder Josh Wander, the face of that airlines-to-insurance empire.
So, nine months after agreeing to buy his 94.1 per cent stake in the club, subject to regulatory approval that was meant to take no more than 12 weeks, 777’s period of exclusivity is up and Monaco-based Moshiri is free to hook up with new partners.
Wander (in the baseball cap) watches Everton play Burnley in April (Robbie Jay Barratt – AMA/Getty Images)
Why did 777 fail to reach a deadline?
Let’s try a quiz. Was it…?
a) A document got lost in the post, someone changed their phone number without telling everybody else, the Premier League could not work out how clever 777’s business is, then it was Christmas, then a lawyer had a skiing accident, then a cheque bounced, Wander had to sort out a misunderstanding, Moshiri had second thoughts, there was a power cut and, you know what they say, time kills all deals.
or b) 777 Partners, which has been described as a “house of cards” in one lawsuit and a “Ponzi scheme” in another — claims 777 deny — lost access to its only sources of cash when a ratings agency downgraded its Bermuda-based reinsurance business before a regulator seized control of it, only for a similar fate to befall A-Cap, the American insurance conglomerate that has been propping 777 up.
Deprived of access to “other people’s money”, 777 is now in the hands of insolvency experts, with A-Cap desperately trying to make sure it does not get dragged down, too. That this would happen to 777, a dog’s dinner of over-leveraged and unaudited companies, some of which have already gone bust or been repossessed, has been obvious for months and it is a scandal this charade has gone on so long.
(The answer is ‘b’, by the way, though the situation is so dramatic you could be forgiven for not realising ‘a’ was made up.)
How much money has 777 put into Everton?
777 has loaned Everton almost £200million ($255m) of A-Cap’s money since last September.
For clarity’s sake, that money is actually lots and lots of insurance premiums from everyday folk who have taken out policies with one of A-Cap’s U.S.-based insurance brands put together.
In the past, these premiums have mainly been put into boring but safe investments, such as government bonds, because the whole point of insurance is that it is there, with a helpful cheque, when you really need it. However, a decade of low interest rates tempted some insurance firms, egged on by private-equity investors, to take a riskier approach by using a larger proportion of those premiums to speculate with.
This is the 777/A-Cap business model, and A-Cap’s premiums have helped Wander and company buy budget airlines in Australia and Canada, a sports media agency in Argentina and a basketball team in London.
Compared to those investments, lending Everton £200million to complete the season just gone and keep the cement mixers turning at the new stadium they are building on the banks of the Mersey might be one of their safer bets. The bar is not very high, though.
Everton’s new stadium at Bramley-Moore Dock last month (Paul Ellis/AFP via Getty Images)
What happens to that money now?
Good question, tens of thousands of insurance-policy holders would love to know.
Here is what we know.
The loans from 777 to Everton were secured, but the security 777 holds is weaker or, in the parlance, ‘more junior’ than the club’s two other big third-party lenders.
This means that if Everton were to suffer any kind of insolvency event — going into administration, for example — 777 would be higher up the repayment queue than all the club’s unsecured creditors (typically, hundreds of suppliers of food and beverages, office equipment, pitch-maintenance kit, vehicles and services) but behind their players and other clubs, the so-called “football creditors”, and those two other secured lenders with their senior debt.
But until something happens — a change of ownership, for example, or an insolvency event — 777’s loans just sit on Everton’s balance sheet as another debt and on its own balance sheet as assets.
That last point is particularly significant as 777 has been under the control of restructuring experts from B Riley Advisory Services, a subsidiary of Los Angeles-based liquidation specialists B Riley Financial, for the past three weeks. It is currently unclear if either Wander or his partner Steve Pasko now have any say at all over the firm’s direction.
There is no immediate prospect of B Riley demanding its money back from Everton. After all, that would almost certainly force the club into administration, freezing their interest payments and crystallising a huge debt write-off.
Likewise, A-Cap is unlikely to demand its money back from 777, as that would send 777 over the edge and wipe billions off A-Cap’s balance sheet.
One of 777’s many aggrieved creditors could pull the trigger, with London-based investment group Leadenhall Capital Partners being the most likely. But that dispute is being waged in the trenches of a U.S. district court in New York, and B Riley is digging in.
Leadenhall has accused 777 and A-Cap of fraud but the matter is only a civil case at present. If the department of justice was to wade in with criminal charges, those Everton loans could switch from being liabilities to being the proceeds of crime. The club really would be up a certain unpleasant tributary minus a hand-held propulsion device then.
But, for now, 777’s loans are an asset to a company on a precipice, an insult to that company’s creditors and another liability for a club weighed down by debt.
Who else do Everton owe money to?
This piece has been very bleak so far, so let us break off from the litany of woe with some good news.
Everton, by all accounts, have not yet missed a payroll or tax payment. We have also not heard the type of story we often get when clubs get into financial trouble — of the local printer or pie-maker being badly out of pocket. No, Everton have been paying their bills.
Unfortunately, they have been doing so with borrowed money.
Sorry, the good news break did not last long.
Everton manager Sean Dyche kept the club up to a backdrop of financial uncertainty (Chris Brunskill/Fantasista/Getty Images)
They owe, in descending order of magnitude: about £450million to Moshiri, £225m to Rights And Media Funding (RMF), a very opaque lender based in nearby Cheshire; almost £200m to 777; £158m to American investment firm MSP Sports Capital; and about £10m to Metro Bank.
Of those sums, the most significant involve RMF and MSP, as the former has first dibs on Goodison Park, the Finch Farm training ground, the club bank account and any money Everton are owed, while the latter’s main collateral is the club subsidiary which owns the new stadium.
Most financial experts would probably rather be in RMF’s shoes than MSP’s, as its collateral is a tad more secure and substantial, but we are splitting hairs here, really, as neither lender is in a particularly strong position. The old adage applies here: if someone owes you £100, it is their problem, but if they owe you £100million, it is your problem.
There is one other variable to this complicated equation, though.
MSP’s loan is also secured against 51 per cent of the club’s shares, which means it could have wrenched the steering wheel out of Moshiri’s hands seven weeks ago, which is when he was meant to pay it back.
The fact it chose not to do that leads us neatly on to our next question.
Where do Everton get money from now?
Not MSP, that is for sure. And not RMF, by the sound of it, although it is hard to tell with a set of initials that has had hundreds of millions of pounds to lend to football clubs but never says anything.
Moshiri has already poured £750million into Everton since 2016 but his support mysteriously dried up not long after his business partner Alisher Usmanov was sanctioned by various governments in the days after Russia invaded Ukraine in February 2022. Usmanov had also been a generous sponsor of Everton via his various Russian-based companies.
And 777, for reasons already discussed, can no longer keep sending A-Cap’s money across the Atlantic.
So, we have a company that has lost more than £250million over the past three seasons and still has close to £100m to pay towards its new stadium.
Blimey. Good thing, then, that the season is over, half a dozen surplus players at Everton are out of contract, their summer tranche of Premier League funding is due and the transfer window is opening in less than two weeks.
Dominic Calvert-Lewin and Amadou Onana are two of Everton’s more attractive playing assets (Tony McArdle/Everton FC via Getty Images)
If nothing else, 777’s loans have enabled Everton to reach a point where costs should fall, some broadcast money comes in and they can sell players.
The latter had to happen anyway, owing to the club’s ongoing battle with the league’s profitability and sustainability rules (PSR). For understandable reasons, Everton want everyone to know that they are not holding a “fire sale” this summer, so please do not insult them with any cheeky offers.
No, this is something completely different. It is the sale of all of the club’s most sellable players, ideally by the end of this month, so another points deduction can be avoided next season. Not a fire sale at all. No, sir.
OK, that is a bit facetious, as, whatever type of forced sale you call it, Everton can still attract decent value for the likes of Jarrad Branthwaite, Dominic Calvert-Lewin, Amadou Onana and Jordan Pickford if they can create some market tension. It only takes two clubs to tango.
Who decides the club’s future?
Blimey, this is like asking who will decide Westeros’ future halfway through Game Of Thrones. And the cast of pretenders at Goodison Park is only marginally less comprehensive.
Moshiri’s is still the name above the door, so he is still the most important player in this piece. And while his loans are unsecured, the sheer quantum of his debt means he would have a big say if Everton were to enter administration, as your voting power on any proposal to exit administration is proportionate to your share of the overall debt.
But the 69-year-old British-Iranian is in no position to dictate terms, really.
Moshiri stands next to a wreath on a seat in remembrance of Everton chairman Bill Kenwright (Alex Pantling/Getty Images)
The real decision-makers at Everton are MSP and RMF, the two secured lenders owed almost £400million between them.
MSP, a syndicate that includes British businessmen and lifelong Evertonians Andy Bell and George Downing, could elbow Moshiri aside tomorrow if it chose to, and could also take possession of the new stadium over at Bramley-Moore Dock. It has so far decided it is better to stick than twist but that may change as summer turns to autumn and Everton need another infusion of cash.
RMF will have a decision to make then, too. Is it more or less likely to get a good chunk of its money back by voluntarily agreeing to write off some of its loans, or does it want to test how good its collateral is in an administration process?
Because until it and MSP agree to give up a little of what they are owed, nobody is buying Everton. Moshiri, on the other hand, will do very well to get 10 per cent of his directors’ loans back, and that would most likely only come as some bonus-related payment based on Everton’s return to full health.
How does this end?
With lots of people losing lots of money. That much is certain.
How much money and whether they agree to lose it with some degree of control, dignity and acknowledgement of their own parts in this sorry tale is uncertain. But it is still in their control. Just.
If Moshiri and his creditors do take the difficult but grown-up decisions still available, Everton can wake up from this nightmare wiser, stronger and renewed. But the longer they just do nothing, the prospect of administration later this year just grows.
You will notice I have not yet mentioned John Textor, Sixth Street or any other American white knight who might be galloping to the rescue. That’s because they are not coming while Everton have debts of almost £1billion.
Textor has a few issues of his own to resolve, too, which, to be fair, he did immediately point out in the breath after the one he used to say he would like to buy Everton.
Textor, president of Lyon, meets fans ahead of last month’s French Cup final (Christian Liewig – Corbis/Getty Images)
Halve Everton’s debt and Textor will most likely be too late to the takeover party.
Do it without going through administration, which would greatly endanger the club’s status as Premier League ever-presents, with all of the other damage that process causes, and there could be a Chelsea-style bunfight for the Grand Old Team.
Let us end on that rosy note.
(Top photo: James Gill – Danehouse/Getty Images)
