Evertons investment and what the collapse of the MSP Sports Capital deal means

Everton’s hopes of improving their financial situation have been dealt a significant blow after MSP Sports Capital withdrew from talks over taking a minority stake in the club.

The New York-based investment group had signed an exclusivity agreement with the Premier League side in May and the plan was to invest up to £150million ($191m) 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 earmarked 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. The rest would have gone to the club.

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But, while MSP is proceeding with the £100million ($127m) loan to the stadium company, that exclusivity period is now over and the overarching deal is dead. The stumbling block? Opposition from one of Everton’s existing lenders, Rights and Media Funding Limited.

So what does the collapse of this proposal mean for Everton? Are there implications for the construction of the club’s new stadium and, in the shorter-term, for the manager Sean Dyche’s hopes of strengthening a struggling squad in what remains of the transfer window?

Follow the summer transfer window with The Athletic…

What does this mean for Moshiri?

In short, nothing good.

Sources close to the Monaco-based businessman continue to make reassuring (but off the record) noises about all being well, talks continuing, lots of options, nothing to see here…but the facts speak for themselves.

Since buying his first shares in the club in early 2016, the 68-year-old has spent £750million ($955m) on players, managers and a new stadium for Everton.

The goal has been to return the club to the position it held in the years before the Premier League was created: one of English football’s big beasts and serial silverware-hunters. The return has been… well, you know.

For his first six years at Goodison Park, how Moshiri chose to spend his money was only really a problem for his accountants. Everton fans could quibble about the choices he made but they could not complain about his financial commitment.

That changed in early 2022, though, when Russia’s tanks rolled into Ukraine.

For reasons we have addressed several times before, this changed everything for Moshiri and Everton. Within weeks of the invasion, Moshiri’s business partner Alisher Usmanov was added to the United Kingdom’s list of sanctioned individuals, which meant the club had to cancel several lucrative sponsorships with Usmanov-linked companies.

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The Uzbek-born oligarch was also going to provide a company that would take on the naming rights for Everton’s new home at Bramley-Moore Dock. Not anymore.

Then there was the impact on Moshiri, a British-Iranian, as much of his wealth is tied up in Russia and now out of reach. Suddenly, Everton, a club that had been overspending for years, had very real cashflow problems, both in terms of finishing the very ambitious stadium project and running a Premier League football team.

So, the club has borrowed more money and sold players, while Moshiri has tried to find investors.

First, there was a long dance with an American group led by Maciek Kaminski, but that came to nothing when the Polish-born property investor lost his backers. Talks would resume a few months later, though, and go… nowhere. Wasting more time. Kaminski was last spotted failing to complete on a deal to buy Belgian side Kortrijk.

This year, the search for investment has focused on two other U.S.-based investment groups: 777 Partners, from Miami, and MSP Sports Capital, based in New York.

Having looked at times like it was going 777’s way, MSP emerged as the preferred option and an exclusivity agreement was signed that appeared to answer Everton and Moshiri’s most pressing needs: funding for Bramley-Moore, some cash for the club and new blood for the board.

That deal has now collapsed and only the first of those three objectives — money, in the form of a £100million ($127.4m) loan, for the subsidiary overseeing the construction of the stadium — has been achieved.

The plan for MSP to take a 25 per cent stake in the club, via £150million of convertible debt, is dead. That means no cash injection for the club, no sharing of the load going forward, no clear path to a re-energised and fit-for-purpose board and more debt on the balance sheet.

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So, yes, this is a problem for Moshiri and Everton.

Matt Slater

What does this mean for the make-up of the Everton board?

Plan A was that MSP would take a significant minority stake in the club and get two seats on the board.

Those seats were expected to go to the investment fund’s co-founders, Jeff Moorad and Jahm Najafi. The former is a hugely experienced sports agent in the United States and the latter is a successful investor in the sports, media, property and technology sectors.

There was also expected to be a place on the board for at least one of Andy Bell or George Downing, two very successful British businessmen (Bell in financial services, Downing in property) who happen to be lifelong Evertonians.

In fact, those two have already put their money where their hearts are by lending the stadium company £40million in May. That was meant to be a bridging loan to keep the contractors Laing O’Rourke sweet, with the plan being that they would be repaid once MSP’s money arrived.

That last bit was no doubt vital for Bell and Downing in terms of domestic harmony — “You have invested how much of our money, in what?!?” — but also necessary to address the conflict of interest they would have as creditors of the club, a conflict that would normally keep them off the board.

So, they are in limbo. But the same could be said about the entire club.

In June, after months of protests by fans, Moshiri accepted that changes had to be made.

Out went chief executive Denise Barrett-Baxendale, finance director Grant Ingles and club legend Graeme Sharp, and in came interim chief executive Colin Chong, who has been running the stadium build, and two non-executives: Moshiri himself and John Spellman, an accountant and businessman.

This took some of the poison out of what had become a pretty toxic situation at and around the club, but nobody thought this was anything other than a temporary fix until the MSP deal was completed.

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The reshuffle also left one very significant figure in situ: Bill Kenwright. The 77-year-old theatre impresario has been on Everton’s board so long he is not just part of the furniture, he is the fixtures and fittings and all outdoor space, too.

To some Evertonians, he is the epitome of a Blue. To others, and this number is growing and getting more and more angry about it, he is the biggest culprit in the club’s slow decline.

Again, that is a topic we have addressed before and will no doubt do so again. The important thing to note is that Kenwright remains club chairman and still has an influence over Everton that is out of proportion with his now very small shareholding in the club.

How and when that changes remains, like so much else at the club, unclear.

Matt Slater

How will it affect the on-going stadium project?

That is currently unclear.

Moshiri revealed in an interview with talkSPORT earlier this year that the project, due for completion in the final months of 2024, is now expected to cost around £760million ($968m). In response, Everton later suggested this sum, which was significantly higher than the original £500million ($637m) forecast, included the cost of “ancillary works” and financing.

The club’s initial plan was to finance their new stadium through a combination of private debt, the sale of naming rights and Moshiri’s own input. Substantial contributions from the owner have allowed it to progress this far, but the sale of naming rights to USM Holdings had to be suspended indefinitely after the sanctions imposed on Usmanov.

With USM off the table, the club has instructed U.S. consultants Elevate Sports Ventures to find a new naming rights partner. That process remains ongoing.

MSP will still provide the next tranche of funding to the Everton Stadium Development Company, via a £100million loan. “The club can confirm that it continues to make good progress on securing the complete stadium financing, and as part of this progress it has secured a loan to support the development costs for our new stadium,” said an Everton spokesperson.

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But, to date, a shortfall remains.

The exact sum is disputed but was expected to come via a construction loan sourced by global banks JP Morgan and MUFG. It remains to be seen whether recent developments will have any impact on the arrangement.

Patrick Boyland

What does this mean in terms of Everton’s transfer spending ahead of the deadline?

This is undoubtedly a blow to the footballing side of Everton’s operation, too.

With a sizeable wage bill, regular heavy financial losses and a stadium still to fund, the club’s recruitment arm has been operating on a no-spend policy this summer, searching for deals with no or minimal up-front cost.

So far this window they have signed four players, including two loans and one free transfer. The other addition, 19-year-old striker Youssef Chermiti, was signed on buy now, pay later terms. At the same time, they have recouped fees in excess of £110million from the sales of players like Richarlison and Anthony Gordon over the last 12 months.

Adhering to the Premier League’s profitability and sustainability guidelines has also been an ongoing concern for Everton, but MSP’s arrival was expected to free up some wriggle room to construct deals before the end of the window. The US-based group was said to have recognised the need to improve a threadbare squad, with around a third of its investment earmarked for cash flow and other everyday costs.

In truth, confidence had long dwindled in that happening in time to impact the end of this window. This has been a long, drawn-out and ultimately unsuccessful process, with Everton’s recruitment team continuing to work on the assumption funds would remain tight.

“It (the MSP situation) doesn’t really impact us in the sense that the guidelines and parameters from a signing players point of view and in the market have been there anyway,” Dyche said on Thursday. “There are so many checks in the Premier League with deals, certainly for investors, they just don’t get done in a day or a week.

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“That’s ongoing on the business side of the club and I don’t get involved in that. But signing players, we know we’ve got to work hard in the market. We’ve got to find ways of creating deals.”

With additional future funds from MSP no longer an option, expect more of the same — unless Moshiri can find alternative investment.

Patrick Boyland

Are there clear alternative funding options the club might pursue now?

There is a very short answer to this question: no. There are no clear alternative funding options the club can pursue now.

There are, however, lots of unclear alternative funding options the club can pursue, as we have already witnessed over the last 18 months.

One of the reasons we were able to break the story about MSP’s deal collapsing this week is that we were already asking questions about why an “investment opportunity” in Everton was being shopped around the usual suspects in the U.S. again.

This came as a surprise to us given that MSP had filed a notice with the Securities and Exchange Commission in early June that it had raised $165million (£130m) and everyone connected with the deal seemed fairly relaxed about its progress.

But it now looks like they had all failed to make what seems to be a basic check in the due diligence process: are all our other lenders on board with this?

Think of it this way: you have a mortgage on your house with one bank but then try to get another mortgage, secured on the same house, with a different bank. How do you think that first bank might react?

The first bank in our Everton example is Rights and Media Funding, a Cheshire-based lender that has two directors, no employees, no website and no contact details: don’t call them, they’ll call you.

It does, however, have more than £300million in loans on its balance sheet and the majority of those have been made to Everton, with whom Rights and Media has a long-standing relationship. This year, the club has increased its lending facility with the lender to £200million.

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So, it is a very significant creditor. It also has a negative pledge clause on the security it has at Everton — four charges on the club’s assets. This means it can object to anyone else coming along and diluting that security. And this is what happened with the MSP proposal.

However, its objection to MSP’s convertible-debt plan was not just that it pushed them down the queue in a potential insolvency scenario, Rights and Media is also worried that MSP’s cash injection was more of a squirt when what is required is a transfusion.

It is perhaps worth saying something at this point about who really controls Rights and Media, as the two directors, David McKnight and Jonathan McMorrow, are unlikely to be making the big calls.

An earlier incarnation of Rights and Media was Vibrac, a closely-held private lender based in the British Virgin Islands. A book published in 2017, Football’s Secret Trade, by Alex Duff and Tariq Panja, revealed that Vibrac’s ultimate owner was British bookmaker and racehorse owner Michael Tabor.

Vibrac, and several related companies, ran a profitable business of making loans to clubs in England and Spain. Other names involved were British retailer Sir Philip Green and former Everton director and Planet Hollywood founder Robert Earl.

Matt Slater

Could Everton just borrow more money from them?

Of course, but if it was that easy, and that likely to be granted, it would have happened already. Dyche needed cash two months ago.

The club did borrow money from Metro Bank during the pandemic but that lender appears to want to get out of the business of propping up loss-making football and property development operations. Everton have been paying down Metro Bank’s circa £30million debt in chunks for the last couple of years.

We have already mentioned that Bell and Downing are already on the hook for £40million and the Banks of Farhad and Alisher appear to be closed for the foreseeable future, too. So, it has to be more debt from another new lender, which raises all kinds of questions about what security they would demand and what interest rate they would charge, or hoping that one of these conversations with a new investor pays off.

“As the majority shareholder has stated previously, he will continue to explore discussions on new investment, provided it is right for the future development of the football club,” an Everton spokesperson said on Thursday.

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But it will have to happen fast. There are genuine concerns about Everton’s cash flow, never mind the fact that Moshiri still has a substantial amount to find for his new stadium and Dyche and his players are facing another relegation battle.

Matt Slater

Might 777 now be back in the frame?

Sure, maybe. That is certainly the whisper on the wind, with some even saying it is done and dusted. As mentioned above, the starting point for The Athletic’s inquiries this week is that we had heard similar.

The other rumour desperately trying to fill the post-MSP void is that there is an Asian group interested in buying a stake in the club. Big place, Asia. Lots of interest in football clubs. Lots of groups.

However, this process, if that is the right word, started 18 months ago. And 777 has been kicked more tyres at Everton than Dominic Calvert-Lewin has kicked balls this year.

Maybe this time the group, which was founded in 2015, can get the money together and add Everton to its menagerie of similar-sized clubs: Hertha Berlin, Genoa, Sevilla, Standard Liege and Vasco da Gama, as well as stakes in smaller clubs Melbourne Victory and Red Star.

Or maybe we will just spend the next month talking about 777 and its impressive-looking portfolio only for the deal to fall down at the last hurdle.

The bottom line is that there are no clear or easy options left for Everton. Of course, that does not mean the club has no options, though.

Everton are still one of the biggest clubs in the land, with a proud history, huge fanbase and a beautiful new home to look forward to. But for Bramley-Moore Dock to be the starting point of a hopeful new journey and not the depressing end of a bumpy one, some very big and painful decisions have to be made quickly.

Matt Slater

(Top photo: Tony McArdle/Everton FC via Getty Images)

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