“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.