To some extent lost in the maelstrom that is Everton’s pursuit of a new manager and another appalling performance in the Europa League, Everton announced the exchanging of contracts between Everton Stadium Development Limited (ESDL) and Peel Land and Property (Ports) Limited.
This agreement provides ESDL with a 200 year lease for the land on Bramley Moore Dock. Completion is subject to planning permission and financing being secured for the new stadium. If neither were to be achieved then there is no obligation to proceed.
Significant differences to the original Heads of Terms
There are significant differences to the new arrangements when compared to the agreed Heads of Terms with Liverpool City Council published back in March this year. The details of such are covered here.
The original proposals proposed that Peel would offer a 200 year lease to the stadium finance providers via a special purpose vehicle (SPV), created by the City Council. The SPV would then in turn offer Everton Football Club a 40 year lease which could be extended at the end of the 40 years once the original financing had been repaid. The City Council were to act as guarantors and in doing so would earn a fee estimated to to be around £4.5 million a year. In the event of Everton defaulting the City Council would take ownership of the lease and continue the loan repayments to the lender(s).
Within that document there was a commitment to finalise the agreement and it anticipated that would take in the order of 3 months to complete. That date came and went with no comment from any party as to why it had lapsed.
Industrial and Commercial Bank of China
In June of this year, Everton entered into a 3 year £60 million credit facility with ICBC London. ICBC is the Industrial and Commercial Bank of China, the largest bank in the world by assets and ultimately owned by the Chinese Government. The facility (like an overdraft in simple terms) was “to support the Club in managing its working capital requirements throughout the season”.
As part of the agreement with ICBC, several (four) charges were created to provide the bank with security in the event of Everton defaulting. Included in the charges is an assignment of Premier League domestic payments and also the overseas broadcasting payments received via the Premier League for season 2018/19. Parachute payments in the event of relegation in 2017/18 were also charged but I’m sure it never crossed anyone’s mind they may ever be a reality!
The final charge of the four (Charge 58) also included among other provisions a floating charge over “all the property and undertakings of the Company.”
This is where it gets interesting.
ICBC potential stadium funder?
Assuming the lease is completed after planning permission is granted, it will be owned by a subsidiary, Everton Stadium Development Limited. This company is 100% owned by Everton Football Club Company.
Therefore, ICBC will have a floating charge over the land and ultimately the stadium when built. The floating charge can be turned into a fixed charge very readily.
Now unless the stadium and the land is specifically excluded from the charge (those details are not in the public domain) it wouldn’t be possible for any stadium funder other than ICBC to have security over the stadium.
Thus, it is not an unreasonable assumption to suggest that the provider of the stadium finance will indeed be ICBC itself.
In the press release issued at the time of the 3 year credit facility in June, Sasha Ryazantsev stated ” The new relationship with ICBC also represents an important step for us into the Chinese capital market, and we hope to develop further commercial opportunities in China in the future”
“very positive news” – Elstone
In yesterday’s statement Robert Elstone, Everton CEO stated “Clearly, this is very positive news. Gaining control of the site was essential for us to be able to move forward with the next stages of the project – finalising the funding agreement with the Council and preparing for the submission of a planning application – both of which we hope to do in the new year.”
The mention of the funding agreement with the City Council suggests their role as guarantors will continue.
I am led to believe “in the new year” is late January.
I believe this announcement is hugely significant. It is not an attempt to cynically deflect from criticisms elsewhere. If the assumptions made above are correct then it would appear we have our financing partner in place although final agreements are not concluded yet, and with planning permission not thought to have significant barriers, the stadium confirmation is closer than ever.
As I say, a very significant day.
Categories: Everton finances