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Everton takeover: What's next for Farhad Moshiri, MSP and John Textor with 777 Partners deal dead

A deal that was agreed back in September of last year, one that was heralded as a new beginning for Everton, will formally come to an end tomorrow.

777 Partners’ attempt to purchase the Blues has been enveloped in crisis and controversy for much of the year, with the Miami-based investment firm having faced a litany of legal cases, including allegations of fraud in New York civil court brought by London-based Leadenhall Capital last month in relation to a $600m financing deal.

Questions had swirled around for some time over the suitability of 777 as owners, as well as whether or not they had access to the kind of capital required to not only complete a deal, but to be able to invest in completing the new stadium and solving the club’s financial headaches.

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777 Partners, who had a sprawling football portfolio including Genoa, Hertha Berlin, Vasco da Gama, Standard Liege, Red Star Paris, and Melbourne Victory, had been relying heavily on financing from another Miami-based firm, A-CAP.

However, US state regulators in two states have recommended A-CAP reduce exposure to 777. The regulators said the move highlights their states’ efforts to safeguard the financial interests of individuals depending on annuities and insurance products, particularly retirees, widows and orphans.

The five insurers and reinsurers in question belong to the A-CAP group, run by Kenneth King, an associate of 777 Partners co-founder Josh Wander, and which at the end of the year held assets totalling $11.5billion. Of that, $2.9billion was invested in 777-related entities.

According to data in the regulatory memo seen by the Financial Times, A-CAP's investments in 777 Partners-related businesses were 1.8billion mark over the threshold at the end of 2023. These investments have caught regulators' attention and raised concerns due to the regulatory limits on single-issuer exposure, which A-CAP’s allocations are alleged to have exceeded.

The turning off of that particular line of credit has been damaging for 777, which also saw an Australian budget airline it owns, Bonza, collapse into voluntary administration last month. That, with legal action over fraud allegations made by Leadenhall, which claimed 777 Partners had used collateral to acquire finance that either did not exist or was not owned by Wander, co-founder Steven Pasko, or their business entities, as well as legal action over allegations of non-payment of monies owed to Obra Capital, the group's model began to unravel.

Earlier this month 777's ownership of Vasco da Gama and Standard Liege was seized temporarily by courts in Brazil and Belgium, with the Standard case relating to unpaid wages and allegations of non-repayment of monies owed to the former owner for the sale of the club.

Back in March, the Premier League, having taken some seven months to reach a decision over the Everton takeover, informed 777 Partners that is was ‘minded to approve’ the deal provided four conditions were met.

Those conditions were that 777 loans provided to the club for working capital since the turn of the year, which now stands at just north of £200m, have to be converted into equity; that funds are required in an escrow account to meet financial obligations for the remainder of the season; proof of funding for the new stadium completion; and a £158m loan to be repaid to MSP Sports Capital.

The Premier League has repeatedly stated its position that it does not provide running commentary to such proceedings, but given what has transpired since the initial conditional approval, it is unfathomable that they would not revisit the situation.

Everton owner Farhad Moshiri had given 777 Partners to the end of this month (May 31) to find the capital required to complete, but given the fires being fought in other areas, sources told the ECHO last week that there was no longer any hope of completion and that the focus was on what happens with the assets they own, although Wander himself was said not to have given up hope.

But all hope, in reality, is gone for 777 who will remain attached to the Blues due to the £200m in interest-bearing loans they provided. Those loans were done via unsecured, junior debt, meaning that they fall behind other major secured creditors such as Rights and Media Funding Limited, MSP, and Metro Bank.

Even if the funding was found, the ECHO understands that the approval from the Financial Conduct Authority (FCA) that arrived back in December was time-limited, and that has now elapsed, meaning that they would need to pursue a fresh application to the FCA, which likely wouldn’t be as straightforward.

It is hardly a staggering development that 777 Partners won’t be meeting Moshiri’s deadline, but the focus now turns to what happens next and how the club meets its short to medium-term working capital requirements.

Part of minding the shop may come down to financing being provided by MSP, who are understood to be continuing to assess their options with regards to their next move, while other interested parties have emerged in the form of US billionaire John Textor, who is currently in the process of trying to sell his minority stake in Crystal Palace, and who has already gone on record with his interest in an Everton deal.

777 are also looking to sell off sporting assets, instructing investment bank Moelis to seek expressions of interest in some of its football clubs, including Standard Liege.

Whether or not Moshiri provides anymore financing remains to be seen, but having lost some £700m-plus, he is facing the prospect of having to walk away with nothing from a sale given the current state of play, as well as a portion of his wealth tied up in his stake in Russian firm - and former Everton sponsor - USM. Moshiri removed himself from the USM board following Russia’s invasion of Ukraine.

The deal with 777 Partners that had been in place allowed Moshiri to have the Blues financed by a third party for a period until a sale was completed, but given what has transpired, and the timescale of it, what was seen as the solution has now become part of the problem.

Everton will have cash through the door for working capital commitments for the coming months, with the Premier League merit payments due imminently, while the broadcast money will also land in the coming weeks, with a total package due of some £130m.

But with profit and sustainability rules continuing to cast a long shadow over the club after being found guilty of two separate breaches for the last two financial years, player trading could be key this summer for Everton, who will still need to be able to put a competitive team on the pitch next season to ensure lucrative Premier League survival, so they can begin the debut campaign at Bramley-Moore Dock as a top-flight side.

The Blues will have new owners by then - and they won’t be 777 Partners. The club has a little time to try and make things move forward in the next few weeks and for key stakeholders to find common ground, but the window of opportunity will be fleeting.