Everton takeover may make sense for A-Cap - but it leaves serious concerns

Just who will emerge victorious when it comes to acquiring Everton from Farhad Moshiri remains to be seen. But there are plenty of options for the Blues owner.

Following the collapse of the planned takeover by 777 Partners, last month after the Miami-based investment firm failed to come up with the funding to complete, Moshiri has pivoted to open up discussions with a number of other interested parties.

Everton fans, and club creditors, Andy Bell and George Downing, backed by the family office of billionaire Michael Dell, were early frontrunners, while a reported £400m bid was lodged by London lawyer Vatche Manoukian, backed by a member of a Middle Eastern royal family and the wealthy Australian Myer family.

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Other potential buyers have been mentioned along the way, including US billionaire John Textor, who has since ruled himself out after failing to progress talks with Moshiri; current creditors MSP Sports Capital; former AS Roma owner Dan Friedkin, and an American consortium fronted by a former MLS player.

Another name to have emerged is that of insurance firm A-CAP, the company who had been providing much of the financing for 777 Partners’ investments.

Given the links and exposure to struggling 777, a company that is now faced with selling off many of its sporting assets having engaged investment bank Moelis to move that plan forward, The Telegraph report that claimed Moshiri was now in dialogue with A-CAP chief Kenneth King, who is said to be in London this week for talks, will have no doubt been of some concern to Evertonians.

When speaking via a webinar earlier this year, which addressed to investors the impact of the credit rating downgrade of 777’s Bermudan-based reinsurance business, 777Re, where A-CAP had exposure, King moved to clarify the relationship between A-CAP and 777 Partners.

He said: “A-CAP and 777 are not affiliates by any definition. A-CAP is a lender to 777 for businesses outside the reinsurance relationship, and ACAP is a seeding company to 777 as a reinsurer. Those are the relationships. There’s no affiliation relative to two entities.

“If you were to talk to any of our reinsurers, you know, they would say, you know, A-CAP is very selective in who they pick as a reinsurer, and A-CAP believes in developing, harvesting relationships with its reinsurers to do things beyond reinsurance, and we’ve done that in each of our cases, not just with 777. So that’s the type of partner that we are, but we make sure that there’s no affiliation associated there.”

A-CAP’s interest in acquiring Everton likely stems from King wanting to protect the investment made in 777 Partners’ football business A-CAP are understood to have provided the bulk of the £200m funding that 777 had used to fund working capital at Everton since the turn of the year as part of the initial agreement between Moshiri and 777.

The 777 Partners to the Blues to Everton were via unsecured junior debt, placing them at the back of the queue of current creditors that includes Rights and Media Funding Limited, MSP Sports Capital, Bell and Downing, and Metro Bank.

With 777’s businesses failing, and A-CAP wanting to reduce exposure, making a play to acquire the club and then refinance the debt to remove 777 from the picture may be a way of doing that, as well as allowing them to make the case that they have taken steps to protect policyholders and investors from the exposure to 777 businesses.

The new stadium at Bramley-Moore Dock could be used as security as part of a debt restructuring plan and A-CAP could look to tidy up the balance sheet and sell the club fairly quickly, potentially realising a considerable profit as well as solving one of their 777-related problems.

While it might make some sense from an A-CAP perspective, aside from the concerns over ties to 777, one thing that they would appear to lack when compared to other interested parties is a track record in sports investments and having operational control over such assets.

The interest in an Everton acquisition comes not from a place of wanting to be involved in football and the growth of the club long-term, with a clear strategy around how to do that in place, but to ease a situation that has caused A-CAP significant headaches in recent months, and one where their exposure is likely to lead to more in the coming months.