Just over six years ago I wrote a piece about Farhad Moshiri and him kicking the can down Goodison Road (here). Never in a million years did I think in 2024 the charge would still stick. In fact, not just stick but become something that if chargeable would see Moshiri become a multiple offender.

The protracted potential sale of the club (to the most unsuitable partners) exemplifies this most baffling of characteristics. Announced on September 15th 2023, initially thought to be completed in “10 to 12 weeks” we have had numerous briefings as to the likely completion date. In the midst of this, investigative journals such as Josimar, my own analysis, and valuable contributions from the media including the FT, Bloomberg, The Athletic, New York Times, Washington Post, the Guardian, The Times and many others as well as insurance trade journals have built a compelling body of evidence as to why it wouldn’t happen.

In the meantime, through various PR agencies Moshiri and 777 have insisted it would. Moshiri, never the most willing nor (it has to be said) capable of communicators has treated the Everton fanbase with utter contempt. Faced with the PSR points penalties and a largely uncompetitive squad, this last season would have been difficult enough without the associated ownership and financial issues surrounding the club and the lack of communications to their most important stakeholders..

The Fan Advisory Board requested a meeting with  Farhad Moshiri in February which was ultimately held in mid-May. In the meeting, it is reported that Moshiri apologised for the delay in engaging with the Fan Advisory Board and for the lack of regular communication with fans generally, insisting whilst bound by the terms of the share purchase agreement (SPA – valid until 31 May 2024) he could provide no detail of the status of the proposed sale to 777 Partners other than he had been approached by other parties regarding the sale of the club. 

It seems extraordinary to me that under Moshiri’s ownership (I am ceasing to use the word leadership any longer) that we find ourselves in the position we are in.

Moshiri claims that up to the 31st May, he can’t talk to other parties because of the share purchase agreement. No doubt, back in the late summer of 2023, when this deal was cobbled together, 777 Partners will have insisted on such a provision given that they were (as they hoped) funding cash flow for a short period in expectation of a speedy approval.

As we all now know, that approval has not been forthcoming, not as a result of the Premier League per se – (although the DAOT is surely not fit for purpose), but as a result of 777 Partners inability to meet the initial requirements and then the further requirements, the so-called “minded to approve” conditions at the end of March 2024. 

Throughout this period, 777 Partners’ already poor initial condition at the beginning of the process has deteriorated markedly (as predicted) to the extent that they have gone from an organisation boasting (at least claiming) initially perhaps $10 billion or more of assets, albeit with a reputation for tardy or non payment of bills and some questionable business practices to the point that

 (i) they have had to appoint their own corporate restructuring advisors 

(ii) dispose in a fire sale of multiple assets and/or have assets clawed back by their previous backers, A-Cap 

(iii) Seen their principal Partners, Josh Wander and Stephen Pasko step back from running their businesses and perhaps most damaging of all 

(iv) facing serious civil allegations(among others) in the Southern District of New York Court, of double pledging assets, real or otherwise, as security for loans to London based Leadenhall Capital whilst knowingly having pledged the company(ies) assets to A-Cap and others as collateral against their loans. 

All whilst continuing to draw down funding from A-Cap (and associated parties) to keep Everton and their proposed purchase afloat. All in all, a considerable stretch from Moshiri’s initial justification – claiming they remained the “best partners to take our great Club forward, with all the benefits of their multi-club investment model”. 

Everton’s ability to remain in business, to remain a going concern, has been dependent on the provision of loans from 777 Partners and furthermore, the additional  goodwill of several creditors in extending existing loan agreements – the denial of such extensions would have placed the club into administration. 

The question is, what happens when the share purchase agreement (SPA) lapses on 31 May 2024?

The simple answer, initially at least, is probably nothing. The cash flow issues and capital constraints upon Everton, of course, continues. June is a difficult month for the club. We have considerable trade creditor payments to make, we have to meet any operational cash flow shortfalls including interest costs, and continue the Laing O’Rourke payments regarding the stadium. 

However, the transfer window opens mid-June and represents an opportunity (not welcomed by fans) to sell players. It’s a difficult balance, and in footballing terms alone, difficult to justify, but sadly cash-flow and PSR compliance means sales are inevitable before the end of June. 

All of the above assumes the continued support of Everton’s existing creditors, including MSP who are beyond their original mid-April (subsequently extended) repayment date. 

With regards to selling the club, the ending of the share purchase agreement should open the doors to other bidders (those waiting in the wings) to formally approach Moshiri. However, given the deterioration of Everton’s financial position, the prospect of any buyer offering Moshiri anything like the terms proposed by 777 Partners (and confirmed by the Premier League’s previous “minded to approve” conditions) seems minimal if not impossible. 

Much however, will depend on the terms within the loan agreement between 777 Partners and Everton, as to what happens once the SPA lapses. Equally what happens in the Southern District, New York, District Court may well determine what happens next. To the creditors of 777 Partners (i.e. those who are owed monies) the loan provided to Everton represents an asset.

It is important, not least to GlassRatner Advisory & Capital Group, LLC dba B. Riley Advisory Services, 777’s appointed corporate restructuring advisors, and to A-Cap (the originator of the funds provided by 777 Partners to Everton) that this loan is not seen as impaired in any way.

Papers presented to the Court suggest that 777 Partners assets are as little as $3 billion (a figure provided by A-Cap). $609 million is owed to Leadenhall, $185 million to a subsidiary of Credigy, numerous other creditors and independently, I believe A-Cap has provided as much as $3 billion in loans/unspecified funding. Assets have been sold or re-captured by A-Cap, yet from a distance, their exposure to 777 Partners et al is significantly greater than the sums likely to be recovered.

Difficulty facing incoming purchasers

The extent of Everton’s indebtedness is a real barrier to a future investor or purchaser. Any incoming purchaser will not countenance paying all outstanding debts and provide the future working capital required.

People point to the gleaming stadium nearing completion at Bramley-Moore as an asset set to attract investors. However, it’s only an asset when paid for. There’s a huge difference between paid for and financed. The truth is that in combination with all the accumulated losses, the stadium has been financed using short term, unsustainable debt.  Everton’s on-going debt burden is greater than the debt the stadium can sustain. A debt burden significantly increased by Moshiri’s choice of 777 as would-be investors.

So, what will happen?

Sadly, and frustratingly, I can only see the can being kicked down the road, albeit for a small number of months – 3 perhaps?

Moshiri may blindly hope 777 can somehow acquire the club. The reality is (as I have said since day one) that that is not going to happen. Everton’s creditors are reluctant to pull the plug – for different reasons. 

Incoming investors, not only those of the vulture kind – we can do better than that, will not want to carry the existing debt burden given the Capex still required, so not only does Moshiri have to take a total write down of his unsecured shareholder loans, other lenders – of which 777 Partners are the most vulnerable and therefore will carry (after Moshiri) the greatest losses, must feel some pain too.

Despite all of the above having been obvious for many months, the reality has not hit Moshiri. Player sales in June will forestall any thoughts of administration, however avoiding administration is hardly the standards or expectation our club should set itself.

If we don’t want to see another exercise in can-kicking, which (as proven) benefits no-one, least of all the club – Moshiri has to be decisive and use the end of the SPA to conclude a deal with credible buyers. He and other creditors, including 777 Partners, will lose money, but that’s because of their poor judgement, nothing else.

In the meantime we have a football club, to be run properly and as always supported to the nth degree by its true custodians – the fans.