As described on multiple occasions, particularly on these pages, Everton’s finances particularly during the Moshiri years have become increasingly complex. Multiple additional lenders, the new stadium companies and prospective takeover parties have only added to the complexity.

With, Dan Friedkin’s group now the preferred bidder, and future Everton owner (barring the most unforeseen of circumstances) a calmness has appeared over Everton’s affairs – a calmness absent for many, many years. However, there are many issues to be resolved and whilst our future looks secure, it is worth providing as detailed an explanation of Everton’s finances as is possible.

Everton’s capital structure and ownership:

Let’s start at the top. Everton Football Club Company, Limited. Everton Football Club Company, Limited is a private limited company incorporated in the UK on 15 June 1892. It currently has 135,000 shares issued, of which 94.1% (127,031) are held in the name of Blue Heaven Holdings Limited – an Isle of Man company. Blue Heaven Holdings Limited (BHHL) is wholly owned by another Isle of Man Company, Blue Horizon Investments Limited (BHIL). BHIL is wholly owned and controlled by Farhad Moshiri.

The remaining 7,969 shares are owned by approximately 2,119 seperate accounts. The largest of the remaining shareholding is the shareholding formerly owned by Bill Kenwright – deceased (now presumably owned by his estate). This shareholding numbered 1,750 shares.

The proposed takeover by the Friedkin Group involves the sale of Farhad Moshiri’s 127,031 shares to the Friedkin Group, and as is widely known, requires the approval of the Premier League.

Everton Football Club Company, Limited, has four subsidiary companies. Those companies are:

*Everton Stadium Development Holding Company Limited wholly owns Everton Stadium Development Company Limited whose principal assets are the leases at Bramley-Moore and the new stadium.

Borrowings:

This is where matters get slightly more complex. By virtue of Moshiri’s ownership, Everton’s accumulated losses, investment in the building of the new stadium, failed takeover bids and the current ongoing takeover by the Friedkin Group, Everton’s creditors are numerous and complex. Details exclude footballing and other trade creditors and debtors.

They are as follows:

Bluesky Capital Limited: BCL is an Isle of Man limited company, controlled (but not wholly owned) by Farhad Moshiri. In total BCL has £450 million of outstanding shareholder loans, owed by Everton. The loans (although treated as equity in Everton’s accounts) have no contractual repayment date, nor have any interest charges applied to them.

As a result of the Friedkin takeover, it is expected that these loans will be either (i) written off in their entirety or (ii) converted to equity. It is not anticipated that BCL nor BHHL will receive any consideration (repayment) for these loans. If the loans are written off, there are potential tax implications for Everton in the future (the writing off of the loans are effectively treated as income for tax purposes). There is a potential complication as to any conversion of equity – previously when loans were converted to equity, Blue Heaven Holdings were the beneficiaries of the newly issued shares despite the loans being provided by Bluesky Capital Limited and the different ownership structure of both companies.

Rights and Media Funding Limited: Rights and Media Funding Limited is a UK limited company. It is believed to be ultimately owned by Michael Tabor. Rights and Media Funding Limited have provided Everton with a series of “revolving credit facilities” for all but three of the last seventeen years.

As of the last accounts, dated 30 June 2023, the facilities included a 5 year £150 million facility, a 3 year £52.5 million facility and a 34 month €28 million facility. It is believed that these facilities have been or are close to being fully utilised. The loans attract interest of UK base rate plus 5% per annum.

The loans are secured by the following unsatisfied charges against the assets of Everton Football Club, Limited:

Generally, relationships between Rights and Media Funding, Everton and current creditors remain good. Despite their opaque ownership structure, offshore funding sources and high borrowing costs they are considered efficient and professional operators.

In addition (see below) there is an administrative and security relationship between Rights and Media Funding Limited and 777/A-Cap (or whomever gains control/ownership of their loans) – see below.

Metro Bank: Everton’s bankers and provides of a relatively insubstantial Covid-related loan facility which was due to be paid off before the end of the 2023/24 financial year on 30th June. Standard charge for UK bank against Everton Football Club Company, Limited assets.

Tdf Capital Management, L.L.C.: Tdf Capital Management L.L.C., incorporated in Texas, USA is the security agent for unspecified secured parties but is a clear reference to the loans provided by the Friedkin Group to pay off MSP Sports Capital, A J Bell, George Downing and the secured loan provided by Farhad Moshiri under the umbrella of Blythe Capital, plus Everton’s immediate working capital requirements. Blythe Capital’s previous security arrangements no longer apply given the repayment of their loans. The Friedkin Group loan is thought to be in excess of £200 million. The provision of these loans provided Friedkin with the exclusivity period granted by Moshiri. During this period due diligence will be completed and approval granted by the Premier League.

In addition to the security over the entire share capital of Everton Stadium Development Holding Company, Tdf Capital Management L.L.C. holds a charge over the entire shareholding of Blue Heaven Holding Limited – the vehicle that owns Moshiri’s 94.1% stake in Everton

777 Partners/A-Cap: During the course of 777’s unsuccessful bid to acquire Everton Football Club, 777 Partners were required to provide working capital loans to Everton, plus meet any payments due to Laing O’Rourke – Everton’s main contractors for Bramley-Moore stadium. In total, thee loans are believed to be in the order of £200 million. The interest rates, charges and possible redemption charges are not known.

There are no formal charges directly relating to these loans but it is known that through an administrative and security arrangement with Rights and Media Funding, the loans sit within the Rights and Media “Umbrella”. In a default position, these loans are junior to the funds owed to Rights and Media Funding. As such they are the least secure of the secured loans provided to the club.

Originated through 777 Partners, the loans are now assets on A-Cap’s balance sheet. As established in the Leadenhall case in the Southern District of New York District Court, A-Cap is the parent body of 777 Partners. However, as a result of the claims made by Leadenhall and others, it has not been established who has the ultimate security over what were formerly 777 Partner Assets. A settlement conference is due in New York on July 10th 2024 and this will establish either Leadenhall’s rights or that of A-Cap/777 Partners or administrators.

There are no formal documents in the public domain but it has been reported that the 777 Partners/A-Cap loan to Everton has a repayment or maturity date of 2026.

The structure of the Friedkin Group Takeover

There are no details in the public domain regarding the structure of the Friedkin Group takeover. It is thought that Friedkin will acquire the Everton shares held by Blue Heaven Holdings for a minimal consideration – certainly less than the reported initial payment of £64 million offered by 777 Partners. A minimum figure of £25 million has been suggested.

Everton’s secured debts (including funds owed to Friedkin) total more than £600 million. A further £150 – 200 million is likely to be required for working capital, completion of the stadium and squad enhancements.

It is almost certain that a combination of debt and equity will fund the acquisition and refinancing. Based on the figures above a likely breakdown would be £350 million of long term debt – secured against the stadium and with the potential to refinance within a relatively short period as circumstances improve – as per Arsenal (for example). The additional capital would be in the form of equity – perhaps a total of £450 million of equity.

Obviously, for the purposes of this article, the above is a much simplified view of the future capital structure, but it would create a healthy balance sheet with sustainable and affordable amounts of senior debt secured against the stadium plus a significant permanent equity base. Increases in revenues driven by the stadium, by enhanced on-field performance and better commercial income generation would place Everton in a far more favourable competitive position.

The completion of Friedkin’s due diligence and the approval of the Premier League cannot come quick enough, thereby providing some sanity to the future running of our football club. At an enterprise value (debt plus equity) of £800 million, possibly slightly less, the acquisition represents a fair value deal for Friedkin with plenty of upside if future on and off-field performance meets their and our expectations.