“Now this is not the end. It is not even the beginning of the end. but it is, perhaps, the end of the beginning.“
Less frequently quoted, but from the same speech is the line “we have a new experience. We have victory – a remarkable and definite victory.” Perhaps this is a more appropriate expression of Everton’s position and the failure of 777 Partners to fulfil their part in Moshiri’s most significant mis-judgement , that of making 777 Partners his preferred purchasers of his 94.1% stake.
Their failure to complete is a victory – a victory in the sense of how bad circumstances would have become had 777’s plan succeeded at any point in the last nine and a half months. What we are witnessing across the 777 portfolio of companies (and with much worse to come) would have been replicated at Everton without doubt. The fact that it hasn’t and now won’t is a victory. A victory of sorts, at least. The primary cause of our problems, Farhad Moshiri, is still in control of the club and whilst we remain solvent, our future remains in his hands.
It is worth repeating – it his errors of judgement that got us to this point and permitted over nine months of fruitless stagnation. Whatever the terms of the share purchase agreement and the restrictions it placed upon Moshiri to look elsewhere, it was of his doing.
What has to happen next?
I propose a 5 step plan to bring stability (and growth) back to the club.
- The appointment of external corporate restructuring experts to control our finances and create a restructuring plan
- The removal of Moshiri from the board and the inclusion of new non-executive directors, someone to represent Moshiri’s interests, someone from (1), someone to represent the collective interests of the external creditors and finally an experienced football executive/past owner/senior advisor
- The appointment of a named investment bank to handle the sale of the club with a defined process and timeline
- Contingent plans, articulated publicly to re-assure fans and other stakeholders to see us through the summer
- The appointment of a small sub-committee with club representation, political representation (locally and nationally) and experienced developers to create an integrated development plan around Bramley-Moore with the New Everton playing the leading role in the regeneration of the North of Liverpool
All of the above assumes we can remain solvent and meet our costs in the coming months. Inevitably that means player sales.
The interim management of the club and the sales process has to be handled professionally and without the haphazard management style of Moshiri. Clearly the club is back on the market – it has to be sold given Moshiri’s unwillingness or inability to keep funding it, his definite unwillingness to manage the club or allow others to manage on our behalf. We can not rely upon the structure, people and processes of the past years
What exactly is on offer to would-be purchasers? A huge club with an incredible history, fan-base, connection with its city, unrivalled untapped potential. A new stadium (not without its commercial flaws) and a significant redevelopment opportunity surrounding it. On the flip-side, a wafer-thin squad, significant payments still to be made on the stadium, the need to sell players to continue funding losses in the absence of other funding options and a wholly unsustainable debt burden.
As suggested by the five step plan above, the company is screaming out for a complete corporate restructuring, financially and managerially (off the pitch). Much of this has to be done whilst looking for a new owner. The looking for a new owner has to be done professionally and in a structured manner.
The financial restructuring will be part of any new takeover, assuming the company remains solvent to the point new ownership is agreed and permitted by the regulators, the Premier League.
It has to include, the restructuring of debt. What does that mean? Inevitably, and particularly after the addition of £200 million of junior debt on unknown terms provided by 777 Partners that creditors ae not going to see an immediate return of funds owed to them. Footballing creditors must of course, as per the game’s rules but for the financial creditors it is a different matter.
The two main creditors, Rights and Media Funding (£220m approx. and MSP £160m approx.) see their positions as secure – MSP have fixed and floating charges over all of the club’s assets and income bar the Everton Stadium Development Company which is charged to Blythe Capital who act on behalf of MSP Sports Capital, Andy Bell, George Downing and a small segment of debt owed to Farhad Moshiri (roughly £22 million). Metro Bank debt is relatively inconsequential. Most junior other than the shareholder loans is 777 Partners who have a security arrangement through Rights and Media Funding but that is subordinate to Rights and Media). Then we have Moshiri’s shareholder loans of £450 million, unsecured and most likely to be written off in any future sale. However their treatment and the terms within are not quite as straight forward as many suggest.
Inevitably that means pain for most creditors, but that’s the nature of lending – sometimes you make bad decisions and get punished. You cannot charge a premium for risk lending unless you are not prepared to accept the risk. Everton’s creditor’s know this and must accept it.
Beyond the sorting of the existing mess, there are all the issues, especially commercial issues and importantly redevelopment issues (and opportunities surrounding the move to the new stadium which need to be addressed (as above) under new management and perhaps a little more imagination than has been seen before.
The likelihood of a new Government, more politically aligned with Steve Rotherham and regeneration of Liverpool is the ideal catalyst for the fifth part of the recovery plan. It has to be done and can only add value to the club and make it more attractive to new owners
An opportunity to recover and flourish
There is an opportunity to put the wrongs of the Moshiri era behind us – an opportunity to rise Phoenix-like from the awful position we are in. It needs boldness from Moshiri. It needs him to step aside and allow others to extract the club from its current mess and create the environment in which we can thrive as a club and as the driver of economic development in North Liverpool under new ownership.
There can be no more delay – no more of the complete unprofessionalism that has driven the club to the edge of a a competitive and financial cliff. We still may drop over it, but if Moshiri allows it, experienced, independent professionals can pull us back.
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At last some optimism! I agree totally with you, I hope Mr Moshiri will agree to this, if he remotely loves our club he will do, “ like a Phoenix from the ashes” Yes I hope so with all my heart
Thanks Allison, thanks for all you support. Let’s hope some adults can take over the process
Paul that is exactly what should be done, but with Moshiri.as we know him and with Texter, another Billionaire idiot , possibly getting involved the restructuring will not happen.The money is in the debt , funded by high interest rate and keeping that going will.be the priority
Unfortunately, Paul, your sensible 5-step plan sounds so unlike what Moshiri is likely to do next.
Usual sound, thoughtful and pragmatic approach Paul. Which is why the club will take no notice whatsoever. The penny just never seems to drop that the club needs a major overhaul, or if it does they won’t put their own positions in jeopardy. It’s not a bloody train set they’re operating, it’s one of the major football institutions for God’s sake. We fans will still be there when Moshiri and this board are just bad memories.
Paul, as sensible as your suggestions are, the unknowns about the loans are too numerous and murky for any straightforward solution. I fear there is a lot uncertainty still to come, and the stand offs between the known, and unknown creditors, will bring about a serious financial calamity.
And in a smaller way, any thoughts on where the purchasers of new season tickets, and hospitality seats in the new stadium stand?
Frank Brennan
You make a very valid point Frank. I hope in the event of the worst fans used credit cards where possible. In the worst case, one would hope fans be given every accommodation by any incoming owner – let’s hope it doesn’t get there
Great article Paul. Thank you. From your pen to Moshiri’s ears.
Thank you Paul. An excellent article and I would love the club to embrace your 5-step plan. However, sadly I have little confidence in this happening.
Also, I wanted to thank you for all of your articles and excellent podcasts regarding the financial position of the club. Despite unwarranted criticism in certain quarters, you have been consistent in your views about the unsuitability of 777 and I’m grateful that you’ve continued with your detailed and thoughtful analysis of the challenges that our club faces.
Thank you Mark for reading/listening and your kind comments. Much appreciated
Paul I know what it is like to have called the situation as it is and being correct ,to the point that you are even surprised how correct you are .Eventually the black and white of the situation comes into view and whilst a few will acknowledge you were right ,others knowing you are right will never acknowledge it.
The problem is Moshiri , or who he represents , which you have repeatedly pointed out.Way back you pointed out to me the lack of interest in engagement by Moshiri.
It is obvious what is needed as you suggest,but Moshiri still does not seem to be prepared to engage.His decisions repeatedly have made it more difficult to act as you suggest.There seems to be a ulterior motive ,which means we cannot be sure that Moshiri will not head off in some wild goose chase and avoid proper engagement.
Keep up the good work it will.be all be vindicated in the end.You
part of a Club whose History will be like no other, in the full glare of the Worlds Media and you will be seriously listened to.
Jerome thank you as always for your support and wisdom 🙏
Well written as always Paul and interesting thoughts.
Your last paragraph says it all to me. Don’t get me me wrong, I’m not a “Bill Basher” like some I speak to, although I was critical.
Moshiri should have done what you said when he took control and brought in professionals to run the club on his behalf. Not leave the old guard in charge spending his money irresponsibly.
How to solve Evertons money problems:-
1. Sell Bramley Moore dock stadium for as much as possible, have Everton sign a long term, high cost lease, retire the secured debt.
2. Sell at least 4/5 players for max possible transfer prices, retire as much debt as possible, from the proceeds .
3. Sell goodison for office development or apartments, retire more debt.
4. Sell the manager to Leicester city, retire more debt.
5. Since you’ve sold your best players, you will probably be relegated, so in the championship, use the parachute payments to repay as much debt as possible.
UNTIL the debt is lowered, Everton will be in world of hurt, for a long time, probably being a yo yo. Club at best.
If you think going into administration will be the easy answer, it certainly will not, since something like the above,but every saleable player/asset sold.
https://youtu.be/ySCM2Ebu-0c?feature=shared
Paul I have shared this link , which may explain the underlying reason why Moshiri is more interested in flapping about ,rather than properly addressing the current debt situation at Everton .