The financial trajectory of Everton Football Club has taken a considerable hit with the withdrawal of MSP Sports Capital from discussions concerning a potential minority stake investment in the club.
MSP Sports Capital, a New York-based investment group, had entered into an exclusivity agreement with the Premier League team back in May. The arrangement aimed to see a substantial investment of up to £150 million ($190 million) in convertible debt, subsequently translating into a stake of roughly 25% in the venerable 145-year-old club.
The intricate deal allocated £100 million of this investment towards the Everton Stadium Development Company, a subsidiary founded by club owner Farhad Moshiri in 2017, primarily responsible for supervising the construction of Everton's new Bramley-Moore Dock venue. The remaining sum was earmarked for the club's operations.
However, this period of exclusivity has concluded, and the arrangement has fallen through. The main obstacle stemmed from opposition by one of Everton's existing lenders, Rights and Media Funding Limited.
The club, presently positioned at the bottom of the Premier League after a goalless start to the season, had extended a loan facility with the Cheshire-based firm to a value of £200 million this year. The debt is secured through four charges on club assets, complete with clauses that allow the holder to demand debt repayment before further borrowing is undertaken.
As Rights and Media Funding Limited resisted relinquishing its safeguards against potential default, MSP Sports Capital's proposal lost viability. The lender's key concern revolved around the perceived inadequacy of MSP's financial injection into the club in exchange for equity, highlighting Everton's urgent need for additional funds.
While this assertion might hold merit, the club will not receive any infusion from MSP going forward. Despite this, the U.S. group is still proceeding with a £100 million loan to the stadium company, although it will no longer be in the form of convertible debt, but a straightforward loan.
This move is anticipated to enable Moshiri to settle the £40 million loan borrowed from English businessman Andy Bell in May. The loan served as a temporary solution for the larger MSP investment. The question that remains, however, is whether the MSP loan will unlock the necessary funding to finalise the stadium.
Originally, the funding plan involved securing the remaining £260 million through a five-year construction loan facilitated by global banks JP Morgan and MUFG, contingent on MSP's equity involvement.
The club's fans, however, have more immediate worries. In the previous seasons, they navigated through closely contested relegation battles, and the new campaign has presented challenges, with Everton losing their first two matches. During the summer transfer window, the club only acquired four new players, with the solitary signing incurring a fee — 19-year-old striker Youssef Chermiti, who is reportedly not match-fit according to manager Sean Dyche.
In light of MSP's departure from the investment front, Moshiri is now exploring alternative avenues, including the resumption of discussions with Miami-based investment firm 777 Partners. The extent to which these talks progress beyond earlier negotiations conducted this year remains to be seen.
Yet, Everton's difficulties extend beyond the inability to secure fresh investments and a sluggish start to the season. The club has incurred losses exceeding £400 million between 2018 and 2022 and currently faces an investigation by an independent panel over potential violations of the league's spending regulations. A verdict is expected in due course this year.
Moshiri, a 68-year-old British-Iranian businessman, acquired Everton in 2016, having previously held a minority stake in Arsenal alongside his business partner Alisher Usmanov. Despite injecting a substantial £750 million into Everton, Moshiri's aspirations have not yielded significant results, apart from the ongoing construction of a half-completed stadium along the Mersey River.
His expansive financial approach had been sustainable during his association with Usmanov, until the latter's financial support was severed when he was sanctioned due to Russia's incursion into Ukraine. This abrupt cessation resulted in Everton canceling several lucrative sponsorships with Usmanov-owned companies and left a void in the stadium-financing strategy, as Usmanov was intended to be a naming-rights partner.
Everton, a founding member of the Football League, has participated in the English football's top flight for an unparalleled 120 seasons. Despite a trophy drought extending over 28 years, the club retains a noteworthy legacy of success.
MSP Sports Capital, established by sports agent Jeff Moorad and investor Jahm Najafi, identifies itself as a private equity firm specialising in investments in teams, leagues, and sports-related enterprises. The group has holdings in Spanish football side Alcorcon, German team Augsburg, Portugal's Estoril, as well as interests in F1's McLaren and the NBA's Phoenix Suns.
A statement released by Everton on Thursday indicated that the club remains committed to securing complete stadium financing. The statement further noted that discussions on new investments will continue in alignment with the club's future development, in line with the majority shareholder's prior pronouncements.
Both MSP and Moshiri were approached for comments but declined to provide any statements.