With a great deal of media interest surrounding possible investment into Everton for a minority stake (more later) and with the caveat that the 2021/22 accounts are yet to be published, the scale of Farhad Moshiri’s financial commitment, yet the unresolved issues at the club, are significant.
With Farhad Moshiri’s introduction to Goodison Park against Chelsea in the FA Cup 6th Round in March 2016, amid the euphoria of a Lukaku inspired victory, Moshiri famously said (relating to funding Everton) “I give them whatever I have.”
So, how much has Farhad Moshiri spent to date?
As a result of the accounts to June 2022 not yet being published the figures quoted only include commitments made (and quoted in the 2020/21 accounts). They do not include any financial commitments made from July 1 2022 to present date.
Farhad Moshiri has funded Everton in two specific ways – shareholder loans and the issue of new shares paid for in cash or through the conversion of some of the shareholder loans into shares.
The loans have always carried no interest and there is no commitment from Everton to repay the shareholder loans. The loans are provided from an Isle of Man Company controlled by Farhad Moshiri, Bluesky Capital.
The table below sets out the loans provided by Farhad Moshiri plus the financial commitment made for 2021/22 as recorded in the 2020/21 Strategic Report contained within the accounts.
Amount contributed £m
|Total outstanding shareholder loans £m||
New shares issued (aggregate) £m
The drawdown facility is included in the Strategic report (signed on 29th October 2021) and is reported as follows:
Post year end, the Majority Shareholder has made a further £242m of financial support available for drawdown and use by the Club via an extension to the interest free Shareholder Loan. At the date of signing these accounts, £97m of this has been received by the Club (see note 21), with the remaining £145m to be drawdown by the Club when required and as included in management’s forecasts
Assuming the full drawdown facility was used in the financial year 2021/22 that brings Farhad Moshiri’s commitment to 30 June 2022 to a staggering £692 million.
Where has all the money been spent?
Moshiri’s funding has repaired the balance sheet to a degree, funded losses and partially paid for the stadium development. We will talk about the stadium financing later in the article.
Bear in mind these figures will be superseded by the publication of the 2021/22 accounts on or before 31 March 2023. As of 31 May 2016 (the first year end of Moshiri’s ownership) shareholder funds showed a negative value of minus £43.4 million. As of the last published accounts shareholder funds stood at £49.7 million – a positive change of £93 million. (Shareholder funds include fixed assets, current assets/liabilities, capital and reserves).
Aggregate losses for the period 31 May 2016 to 30 June 2021 increased from £68 million to £423 million, an increase of £355 million, reflecting every year bar one being loss making, despite the profitable sales of Stones, Lukaku, Deulofeu, Lookman, Vlasic and others in that period. A reflection of the appalling recruitment and some losses attributed to Covid-19.
The cost of the stadium & recent transfer activity
It is impossible to extrapolate precisely how much has been spent on the stadium to date, particularly with the last published accounts to June 2021. However, Moshiri has indicated the total cost of the stadium, and from various sources involved in fund raising, a fairly accurate estimate of what has been spent can be made.
Moshiri informed the Everton Shareholders Association in a private meeting that the total cost of the stadium was estimated at £760 million, a considerable uplift of previously reported figures of around £500 million. This figure was subsequently confirmed in Farhad Moshiri’s recorded interview with the Fan Advisory Board Chair, Jazz Bal in January 2023.
People close to the efforts to raise funds to complete the stadium put Farhad Moshiri’s Bramley-Moore expenditure at the end of December at £450 million. This tallies with the estimated cost and the reported funding short fall of approximately £300 million (more on this below). It also suggests that the £142 million drawdown facility mentioned in 2020/21 accounts will have been largely used. Additionally (profitability and sustainability regulations aside) it explains the minimal expenditure in the summer of 2021, and 2022’s January and summer expenditure being funded by the Richarlison sale and extended credit terms on those purchases.
Furthermore, the data supports the financial reasoning behind not spending the funds received from the Gordon sale – those funds becoming a contingency against possible relegation and any unforeseen delays in the final funding of the stadium.
The remaining stadium funding
In the aforementioned FAB interview Farhad Moshiri commented that whilst looking for funding for the stadium, if necessary, he could fund it himself. It is clear though that this is not his preferred option. Whilst always prepared to fund the final costs of the stadium, Moshiri had always intended to use a combination of debt and a significant contribution from the assumed naming rights partner USM.
As a result of market conditions (partially attributed to the pandemic) and more specifically the very poor financial performance of the club, the debt markets tapped by Tottenham Hotspur so successfully in their stadium funding, have remained stubbornly closed to Everton. Equally, despite the £30 million naming rights option package paid by USM, the illegal invasion of Ukraine and subsequent sanctions applied to Alisher Usmanov put paid to an estimated further £150 million of naming rights payments.
Thus, Moshiri having already spent an estimated £450 million, requires a further £300 million to complete the stadium funding.
Despite denials of a total sale to new investors, it is well known that various groups have unsuccessfully attempted to acquire the club from Moshiri. An asking price, quoted in various financial journals of $450 million, seems unreasonable given the current losses, threat of relegation and future capex requirements of the stadium.
However the prospect of a minority investor seems much more likely. MSP Sports Capital have become favourites to acquire a minority stake in Everton Football Club. Run by Jahm Najafi and Jeff Moorad, US based MSP is an established investor in several sports teams, leagues and businesses. Perhaps their highest profile deal to date is their investment of £185 million into McLaren Racing.
It is thought that MSP will invest approximately £105 million into Everton Football Club. This is likely to be achieved by Everton issuing 45,000 new shares, giving MSP 25% of a new total issue of 180,000 shares. This in turn would reduce Farhad Moshiri’s stake in Everton from 94.1% to 70.6%.
MSP would likely demand perhaps two new board seats, appointing non-executive directors, and as is often the case with minority investors, have control over various financial matters, so-called “reserved matters”. From my perspective, the appointment of minority shareholder directors and one would hope a greater commitment to massively improved governance standards would be hugely welcomed and valued. Expertise in other sports and a global perspective would add so much to a board and executive lacking in such skills and experience.
The injection of £105 million and a strengthened board would open debt markets, as mentioned previously closed to Everton. It is understood that with the introduction of minority equity investors, Everton would be able to raise a further £200 million from debt markets, thereby completing the financing of the Everton Stadium. The cost of debt funding (the interest rate paid) has increased significantly in the last two years, and will be at least double, perhaps close to three times the amount paid by Tottenham Hotspur (based on current corporate bond yields in the US)
Given the timing of such investment and debt raising, it is not thought that either are contingent on survival in the Premier League. It is anticipated both capital raises would be completed well before the end of the season.
A successful funding of the stadium, in itself, obviously, removes a huge financial burden from the club and by implication, Farhad Moshiri, albeit at a price in terms of his reduced holding. It doesn’t however, address the continued issues of the management of the club, particularly at board level.
The sustained losses, the merry-go-round of managers, directors of football and the appalling recruitment of players has cost Farhad Moshiri dear. Indeed, until survival in the Premier League is assured this season, it may still go on to cost much more.
Assuming no additional financing in 2022/23, Moshiri’s reported commitment of £692 million in funding for the club and estimated £135 million of share purchases from existing Everton shareholders (Kenwright, Woods, Earl etc) have proved to be hugely expensive. Based on what would be a new holding of approximately 70% in Everton and a post investment value of £420 million, approximately £830 million of funding/investment has an implied value of only £294 million, a reflection on the appalling management of the club in the last seven years and at a time when football club valuations are soaring.
Recovery of more or all of his investment are contingent on Premier League survival, the successful completion of the stadium and a wholesale change in his approach to running the club. If all three are not achieved, not only does the club continue to face an uncertain future but his investment will remain “under water” as investors put it for many, many years.
Let’s hope that now is a turning point in terms of doing what is necessary for greater performance and appropriate future management – wholesale changes at board and executive levels. If not the option of a complete sale must be the only solution, for all concerned.
Categories: Everton finances
Very information summary,Paul. Quick question. What ever happened to the much vaunted ‘fixed-price’ build contract with LOR?
I’m assuming only an element of it was fixed, nobody really believed it did they? Despite the claims? Would be a great question at an AGM…….
Moshiri was only bragging about it in his recent interview. I didn’t believe the claim for one minute. LOR’s shareholders would go ballistic!
Another informative article Paul, and whilst my view isn’t always strictly aligned with yours, I do agree on the points for success as we have previously discussed.
PL survival (ASAP), whilst not an absolutely crucial factor, will ensure everything else runs along far more quickly and smoothly and of course provide some much needed financial confidence from the investment and debt markets.
I hate to quote or agree with him but FM is clearly heavily reliant on the successful launch of BMD. Again, another factor relying on PL status being maintained in the final season at Goodison and the first season at BMD. There are numerous very attractive commercial / sponsorship deals that accompany it. It is such a shame that much of it will initially go on repaying loans and investment (and therefore won’t be available for team rebuilding). If anybody hasn’t seen it yet – search for the EFC “ALL” articles for the club site. A very shiny, attractive project to lure money into the match day experiences and high end facilities offered at BMD.
MSP’s interest looks solid and it’s clear they invest for a reason and that’s a return. Some may consider this as “not football” but it’s exactly what we need. Two new board members would revolutionise the way it operates and I believe will mark the start of the end for BK with a fanfare farewell orchestrated by the legend himself as we leave Goodison and enter BMD. The sooner his operational influence over EFC diminishes the better for all and perhaps we can start some sort of healing process.
Finally, you know I’ve been banging this drum for a while but the research I did on “fixed contractor deals” did turn up smaller projects where a “premium” was paid to the construction company to offset their risks in volatile building markets. This guarantees the completion dates, reduces profits for the construction co. If they don’t meet those deadlines and allows for costs to be fixed in stages of construction.
We have previously discussed that I could not attribute one comment regarding the circa £550m cost DIRECTLY to the club. Lots of nods and winks but nothing coming directly from them (par for the course some might say). But you can also understand that for sensitive commercial reasons EFC would be reluctant to commit to a cost in the early years.
So there is a real prospect that EFC secured fixed costs (within parameters) to the stages of the build (could be as far back as 2019/20). Described as “fixed” there could still have been some considerable wriggle room for over the top market changes. What we can see and what is probably fair to accept is that it does appear to be on time, to spec and maybe on budget. The development site is remarkable.
In my research there were industry reports, blogs and insider material commenting that fixing the deal was a “stroke of genius” by Moshiri (not something we normally associate with him), but nevertheless there were plenty commending the deal as an “industry leading contract solution to large projects”. Something I have heard FM make direct references to.
The only other thing I would add to this in politely disagreeing with finchfarm1 would be that I’m sure Laing O’Rourke investors would have been delighted to secure such a long term very lucrative development deal from a world renowned architect in such a prestigious site using their latest techniques and methods (to assist in securing the costs and construction off site etc). The finished product will have an extremely positive effect on their profile and portfolio.
Am I thinking this is good news for a change?
Paul, great analysis of where the business is at. I think that any significant minority shareholder taking Director roles and having impact on the management of the business, adding the experience you mention, must be good. Clearly the existing board are out of their depth and seem to act as lapdogs to an owner who, himself seems not to have a consistent plan. That said, the owner has had to deal with a huge financial setback but seems committed to the stadium project being completed. The question will be, who owns the stadium? Will it be a separate company leasing it on unfavourable terms to the football business?
Moshiri has always said the stadium would remain in the ownership of the club. Realistically it is the only way he can ever generate a return out his Everton shareholding