How Everton could yet prove an attractive buy despite nearly £1bn of debt

With outstanding debt and other loans now soaring beyond £1 billion, the sale of Everton comes with a health warning for potential buyers. However, as Farhad Moshiri considers pulling the plug on his agreement with 777 Partners, insiders insist there is no shortage of suitors. As Telegraph Sport crunches the eye-watering bills involved, experts maintain the eventual new owner, after short-term pain, may yet net a “fantastic deal for themselves”:

‌What is Everton worth?

Somewhere between £1 and £500 million, depending on who you ask. The 777 deal agreed with Moshiri in September was said by one dealmaker to be valued in excess of £500 million, but with so much debt to clear, it is unthinkable the British-Iranian businessman stood to pocket even a fraction of that for his 94.1 per cent stake.

One variable on his take home price is known to have been Premier League survival, which has now been secured, but, if Moshiri now tears up his 777 deal, potential suitors will be pointing immediately to outgoings as they do their sums.
Although the last available accounts calculated official debt at under £400 million, shareholder loans from Moshiri and operational installments from 777 since last September, takes the figure beyond £1billion:

• £159 million – due to MSP Sports Capital last month

• £225 million – due to Rights and Media Funding

• £4-5 million – Metro Bank

• £190 million – estimated payments into the club by 777 Partners

• £450 million – shareholder loans from Moshiri £450 million

Kieran Maguire, a football finance lecturer at Liverpool University, suggests Moshiri will have been urged by some groups to walk away with a pound coin. “The sums would suggest the shares are worthless,” he explained. “If you say that the value of a house is 500,000 and you’ve got a mortgage of 600,000, you’re stuffed. I think 777 were willing to offer him something for the shares, none of the other other interested parties, as far as I’m aware, were.”

How complicated will it be for a new investor to come in?

With 777 likely to want to claw back their £190 million as lawsuits pile up, a clean divorce has been ruled out for Moshiri, and that will affect whoever comes in too.

It will be marginally easiest to offset various new debts for existing creditors, which is why Moshiri is so heartened that MSP are now willing to ponder a new takeover proposal.

MSP would approach Moshiri from a position of strength, with clauses attached to the money it already has in the club. The Esk, a respected Everton blogger and financial expert, explains in his latest analysis: “MSP Sports Capital has two distinct security arrangements.

One is a standard fixed charge over all the assets of Everton Stadium Development Company Limited. This means that in default MSP can acquire the stadium to recover their loan. Alternatively, MSP has an option to acquire 50 per cent plus 1 share of Everton’s issued share capital . . .Exercising this option would give MSP majority control over Everton Football Club.”

Telegraph Sport understands MSP are not minded to immediately trigger such security arrangements, however, not least because there are other complicating factors. There is a sense of trepidation around the club’s larger loan to Rights and Media Funding, for instance. Sources close to MSP blamed stipulations on that other loan as the major factor behind its decision to walk away from buying a stake in the club.

Another factor will be clarity over Moshiri’s shareholder loans. Both Maguire and the Esk agree “the assumption must be that Moshiri’s £450 million of outstanding shareholder loans are written off completely”.

What do the experts think will happen?

The club maintains the club is not at risk of administration. There has not been a single late payment to staff or players in the Moshiri era at Everton. If the 777 deal collapses, club staff hope Moshiri will dip into his own wealth to keep the club afloat. But both Maguire and the Esk appear to have their doubts.

”There is no simple solution here,” writes the Esk in his latest blog, suggesting it may be “wishful thinking” to hope Everton “can escape” administration, especially while 777’s financial and legal woes pile up.
”It’s all a bit precarious,” Maguire adds, saying he does not see why new owners will want to pay a dime to Moshiri to take on such debt.

Fans are quick to point out administration and further points deductions would not be the devastating blow it once was. A nine point cushion from the relegation zone seems well within sight. But there would also be a human cost. Players would almost certainly be sold and jobs would be lost as debts are paid off.

Why might this be a good deal after all?

With a brilliant new stadium at Bramley-Moore Dock to move into next summer, the outlook will start changing quite quickly so long as the club’s top-tier status remains intact. Potential buyers may look to the example set at Tottenham Hotspur to see that short-term pain may yet bring long-term gain.

By the start of 2020, the final build of their new stadium had cost the club £1.2 billion but, four years on, Deloitte money league tables saw the trophy-starved club leap-frog Chelsea as London’s highest-earning team, with annual revenues of £549.2 million.

Sam Boor, a director in Deloitte’s Sport Business Group, said: “A huge reason for Tottenham’s growth is the club being able to fully leverage and monetise the stadium, both in terms of the match-day income and the commercial activities.” With Chelsea selling for £2.5 billion two years ago, Everton, with a better stadium to move in to, suddenly doesn’t seem such a mad idea.

“There is the prospect of someone emerging with this club with a fantastic deal for themselves, but not for the lenders,” said Maguire. “Again, as with everything, it will come down to price.”