It should be no surprise that seemingly Moshiri’s last act as owner of Everton Football Club, should be yet another significant misjudgement. A man who in seven and a half years has brought a proud footballing institution to its knees. Every single major decision during his ownership, including the brand new stadium, more than half built at Bramley-Moore, a result of pitiful strategic thinking, incomplete solutions, poor execution and an absence of leadership, challenge and accountability.
A man who has injected £770 million into Everton, regularly and with increasing desperation sold its best players, has required the club to borrow in excess of £370 million (and rising) from external sources at punitive rates, and forced the club to live hand by mouth. At the time of writing, we survive on regular monthly cash injections from an organisation desperately seeking regulatory approval to acquire Everton. An organisation owned by a Miami based partnership with an unenviable reputation, operating in some of the most unethical business sectors even by the US’s most dubious capitalist standards. An organisation with no meaningful track record in multi-club ownership let alone the corporate recovery skills and experiences to turn around our club, Everton.
Yet an organisation, in Moshiri’s words that “are the best partners to take our great Club forward, with all the benefits of their multi-club investment model”.
As a result of Moshiri’s misjudgements, his recruitment in the footballing business, lack of recruitment at board and executive levels, the reliance on a faded, inadequate, out of touch board and a hugely uncompetitive executive team, Everton’s footballing performance, financial performance, credibility and influence in the Premier League has deteriorated year on year with the deterioration accelerating alarmingly in the post Covid environment.
As of today, we have an operating business that remains cash flow negative. We have a stadium being built with no long term funding in place, let alone the reserves or cash flow to meet the regular payments to our contractor Laing O’Rourke.
We have a current owner who met some of his obligations (albeit not legal or contractual) laid out in his letter of comfort sent to the auditors of the most recent 2021/22 accounts, but now by early October 2023 has made clear he can or will not fund any further.
We have extended our credit facilities to the point where every asset of the club is encumbered –
- We have £490 million of shareholder loans – a certainty to be written off by whomever becomes the new owner of Everton Football Club.
- We have a £200 million rolling credit facility provided by Rights and Media Funding – funding provided by offshore entities ultimately controlled by Michael Tabor – at rates I am informed of, at 12% pa. This is secured against all assets of the football club, including bank accounts, bar the stadium (as below)
- We have £140 million of debt provided by MSP Sports Capital (including Andy Bell and George Downing as limited partners) – secured against the shares of the Everton Stadium Development Holding Company
- We have a small Covid related loan of approximately £25 million with Santander
In addition, we have emergency funding provided by 777 Partners as they proceed through the regulatory process, looking to acquire approval from the Football Association, the Premier League and the Financial Conduct Authority.
As a result of the above, the club, our existence is in the control of Rights and Media Funding. De Facto they control Everton’s finances – controlling capital movements, the issue of new debt and in the case of new shares, their issuance.
MSP Sports Capital control Everton Stadium Development Company until such a time as their indebtedness is repaid.
777 Partners as the potential acquirers effectively control cash flow, providing working capital loans until either their acquisition is approved or an alternative is agreed. (this is quite standard when an acquiring company is purchasing a company with cash flow problems)
As I reported on social media, Dan Dransfield, CEO of the 777 Partnership footballing operation, kindly agreed to meet me via Microsoft Teams during this last week. For the avoidance of any doubt I was meeting him in a personal capacity, neither representing nor purporting to represent any group of Everton fans. He did of course, meet with many other fan groups and elected representatives.
Due to the ongoing regulatory approvals being sought, it was not appropriate to record the meeting nor discuss outside of the meeting any of 777’s answers relating specifically to Everton. I respect that condition and therefore my comments will be of a general nature regarding 777 partners and its multi-club operations.
Prior to the meeting I published my areas of concern and the areas for which I sought answers. Given the Everton’s financial background and current operating difficulties it will be no surprise that the questions focused on:
* the future capex requirement is significant for any purchaser of Everton including existing debt repayment, future stadium funding, recapitalisation of the business, investment in the squad
*What are your funding plans? How do you propose to fund the above? To what extent will you reply on debt?
*It is not obvious where the level of funding required is sourced from. Within the constraints of usual confidentiality how is this funded?
* The board & executive teams need a complete overhaul. What are your recruitment plans and how do you propose to compete with the largest clubs for the best talent?
*What are your objectives for the business and as investors what is your medium/long term plan and exit route/time frame?
From a footballing perspective
*Within the constraints of existing PL regulations and given the P&L position of the club how do you meet the obvious investment needs of the squad?
*Recruitment has been Everton’s greatest problem for many years. How do you propose to improve that?
*To what extent does your existing multiclub model assist in the above?
*Your multiclub portfolio is expanding rapidly. How do you propose to allocate management resources to satisfy Everton’s considerable short & medium term transition needs?
*What will distinguish your approach to Everton compared with your existing portfolio?
More generally (and if we have time) I’d like to explore both your governance plans but also your fan engagement objectives?
To be fair, we had a discussion lasting nearly two hours covering most of the areas above.
Essentially Everton have a number of requirements, some immediate, others more strategic and long term. From my perspective they are:
- The recapitalisation of Everton Football Club, the repair of the balance sheet
- Working capital to meet operating needs and future investment in the playing squad
- A long term funding solution to the stadium. Currently the stadium is financed by Moshiri’s contributions and short term debt. It has a significant capital shortfall to meet the future and final construction costs to completion
This requires equity funding – it requires an owner who is prepared to provide equity capital rather than provide or arrange loans. Especially in this interest rate environment, the reliance upon debt adds cost to the business not to the shareholder. Cost to the business results in higher ticketing and merchandising prices for fans. It reduces the funding available for player investment and wages.
Debt can also be performance dependent – relegation of a heavily indebted club has a double whammy effect – a massive reduction in income and usually a requirement to reduce debt levels. Often by the use of parachute payments and player sales, thereby reducing the prospects of immediate promotion.
If the investment is equity rather than debt – the above does not apply – investors take the hit as their investment is permanent not conditional.
Leadership and managerial requirements
For years we have called out for competent leadership, for a vision, a strategy, that (although increasingly difficult) leads Everton back to being one of the leading clubs in the country. Competitive for trophies, recognised as leaders in the game, a source of excellence and above all else a symbol of pride and joy to the legions of Evertonians, match-going or otherwise up and down the country and overseas. An institution that represents the best of our City, its people and our proud heritage, and yes, future.
What is there in the 777 Partners stable that demonstrates, either in their footballing businesses or elsewhere across their portfolio of financial services, aviation, fintech and lending operations that suggests they share any of the above ideals or qualities?
The overwhelming evidence is the exact reverse. Publications as diverse as Josimar and now the Washington Post have produced investigative journalist pieces with the most appalling allegations.
How do those alleged business practices sit with a club embedded in its community, a prime asset of a global city proud of its ethics, a club, a fanbase, a city which has held true to its ideals despite many telling and trying circumstances?
As described above, and has been the case for most of the last 30 years under the stewardship of Kenwright and then Moshiri, the declining competitive and financial performance of the club has been a result of successive mismanagement, poor leadership from the owners, poor direction from the directors and poor execution by the executive.
What is there in the 777 Partners multiclub model that suggests this major defect, this major reason why we have declined so significantly can be reversed?
There’s a lot of discussion as to whether the multiclub model is good for football generally and good for the underlying clubs. Even the best resourced financially and managerially have failed to date to justify the hype around the model.
Theoretically, of course there is a case. However it requires the correct strategy, resource and management at the very top and then the structure, governance and control models to ensure adherence to the model at club level. Difficult to achieve among disparate entities with strong individual identities and specific ,often local needs.
Do 777 Partners have the management resources to achieve this across seven clubs (eight with Everton). How do they allocate scarce management time and resources to the needs of individual clubs, especially clubs with difficulties – one of the key characteristics of 777’s acquisition strategy.
From the outside, the answer with regards to 777 Partners must be no. A small number of talented individuals, yes, but nothing like what is required collectively and in the case of Everton, specifically.
How can a club with Everton’s great management needs improve and compete with peers who don’t have to share management resources with co-owned clubs?
Back to Moshiri
It’s Moshiri’s belief that 777 Partners offer Everton “ the best partners to take our great Club forward, with all the benefits of their multi-club investment model”.
Where’s the evidence to back up such a claim? Where’s the evidence that the multiclub model is the appropriate model given Everton’s specific and immediate requirements? Where’s the evidence that 777 Partners are the best multiclub operators?
Where’s the evidence that 777 Partners can provide the financing needed to rescue and move the club forwards? Where is the evidence that the funding model will not be heavily dependent upon debt? Where’s the evidence that the partially completed stadium will not be leveraged to assist the 777 acquisition – the model used by the Glazers in acquiring Manchester United – use the club’s assets as collateral, but don’t use shareholder cash?
Where’s the evidence that 777 partners present the ethics, the business standards, the practices that create pride in our organisation. The practices that will add to, enhance even our pride inn our shirt, our badge, our club, our city, our name?
As with my meeting with Dan Dransfield, I can only represent my own views, my own opinions and use the platforms I have to promote those views.
The overwhelming evidence from my perspective is that Moshiri, despite the huge financial commitments he has made (which must be acknowledged) has failed us. His introduction of 777 as his chosen successors to his calamitous tenure is his final act of folly.
777 partners, in my opinion, are not appropriate buyers of Everton Football Club, from a moral, ethical, financial, managerial and immediate needs based perspective. I understand entirely the view (almost certainly, fact) that without an immediate or near immediate buyer the existential crisis Moshiri spoke of will occur. We, a 145 year old institution, will go out of business. However, that doesn’t mean that 777 Partners are the solution to our problems, the reverse is true in my opinion.
All stakeholders, supporters, investors, local business people with the means, politicians, even the footballing authorities must see what is ahead of us and act accordingly. A solution different to 777 Partners has to be found – even at this very late hour