This article focuses on the Bramley Moore stadium and the details provided regarding the proposed funding arrangements.
I suppose the first thing to say is that it is clear that there are still a huge number of variables, many beyond the control of the club, so pinpointing precise numbers is all but impossible. However, it is possible to make some observations about where we stand now.
Back in March (covered in detail here) the City Council announced a heads of terms agreement with Everton Football Club essentially offering to guarantee £300 million over 40 years to assist the building of the Bramley Moore stadium. In doing so, a SPV would be created holding a 200 year lease, the first 40 years sub-let to Everton with the club then having the option to pick up the remaining 160 years of the original lease. Everton had to find the funding and the City Council would provide a financial guarantee in return for receiving a fee around £4.5 million a year. The City Council would have a charge over all of Everton’s assets and income in the event of default.
The first real sign that this might not be the case came in late November with the news that Everton announced the exchanging of contracts between Everton Stadium Development Limited (ESDL) and Peel Land and Property (Ports) Limited for a 200 year lease on the Bramley Moore site. This is covered in detail here.
At the Everton shareholders’ Annual General Meeting on Tuesday evening (9th January), Robert Elstone, CEO Everton announced that “2/3rds of the funding” required for the stadium had been agreed in principle with Liverpool City Council. Therefore, no longer would they (LCC) act as guarantors but they would be the lenders, the providers of finance for a significant proportion of the monies required for our new stadium.
Everton would still be required to provide (or find) the remaining finance.
Mayor Joe Anderson also spoke at the AGM confirming this, subject to Cabinet and full Council approval plus all the usual caveats about due diligence etc. He also spoke at great length about the advantages to the City, revenue for the Council, and the positive effect the stadium will have on the regeneration of the North Liverpool area, the acceleration of the Liverpool Waters project and the City as a whole.
Further details from Mayor Joe Anderson
In numerous press and media calls yesterday (Wednesday 10th January) Joe Anderson went further with his details confirming £280 million of funding over 25 years. This would create an annual profit of £7 million for the Council.
As lender, the Council would face no greater financial risk than being guarantor, yet the potential income or profit increases significantly.
It’s worth summarizing the change in the Council’s offer to Everton:
|Council role||Amount||Term||Annual Council Income*|
|March 2017||Guarantor||£300 million||40 years||£4.5 million|
|January 2018||Lender||£280 million||25 years||£7.0 million|
The City Council, as do all local authorities, have its own borrowing sources allowing borrowing for capital projects and increasingly in recent years, development work to assist regional development and generate income for councils. The Council therefore would borrow £280 million, lend it to Everton and receive a profit from the difference in interest rates charged and paid.
From the information provided by Joe Anderson, it suggests an interest rate differential of around 4.2 % over the course of 25 years – it will be interesting to see what ultimately the figure will be, and thus the cost to Everton.
By doing this Liverpool City Council significantly improve the terms of their original offer to Everton in March 2017.
As a result their financial exposure is smaller (£280m v £300m), their time exposure shorter (25 years v 40 years) and their income greater (£7 million v £4.5 million).
Of course, it has to be said this is still subject to agreement by the Liverpool City Council, due diligence and finally acceptance of the terms by Everton.
The remaining funding – further equity investment from Moshiri?
In further comments yesterday from Mayor Joe Anderson it was mentioned that Everton would be looking at equity, possible debt and any contribution from the appropriate naming rights partners to meet the remaining costs of the stadium. It is understood that Mr Moshiri may contribute a further £150 million in equity. The remaining amounts required can not be commented on publicly given the huge variables including inflation, fit out detail, technology, infrastructure and any other development expenditure. It should be noted that at the AGM, Bill Kenwright suggested costs in the order of £500 million.
Financial impact on Everton?
Borrowing directly from the City Council should prove no more expensive than the original option of borrowing from an alternative source with a guarantee provided by the same. The major change, and therefore impact on cash flow through higher annual repayments is the shortened term of 25 years versus 40. However in the long term that is a considerable saving, and the annual servicing costs remain a lower amount than the increase in turnover arising from a new stadium.
Benefits to the City
There’s no doubt that the Council providing funding is viewed as controversial by some. However the reality is that Councils are forced to be more creative in generating income to meet Central Government cuts in order to continue essential services.
It is also an inescapable fact that a huge development like Bramley Moore Stadium would drive the redevelopment of North Liverpool and the Liverpool Waters bringing in much needed investment and jobs.
However ultimately it is the vision and desire shown by Everton that creates the opportunity for Liverpool City Council to generate income for itself and for the club to be the cornerstone of an enormous redevelopment and regeneration project.
On the basis this arrangement is comparable in cost to other lending alternatives elsewhere,then this is a fabulous deal for the club. It cements our role, and my belief as the senior club in the City. It, and all the other development work, redevelopment of Goodison, extension of Finch Farm, and corporate headquarters in the Royal Liver Buildings demonstrates our commitment to our City.
The additional funding required to complete the stadium, most likely provided by a further equity injection by Mr Moshiri demonstrates his commitment to the club, and thus the City. We should always be proud of our past, how we have represented the best of the City, now we can more than ever, contribute to its regeneration and future development, whilst most importantly having a club positioned to win trophies with the development of Bramley Moore.
Categories: Everton finances