Leadenhall versus A-Cap should be a headline relevant only to football supporters if it was a cup-tie in the early qualifying rounds of the FA Cup or perhaps one of the senior business leagues that used to be dotted around the country. For Evertonians, if only that was so.

Its relevance comes about from the fact that during 777 Partners’ unsuccessful attempt to acquire Everton Football Club, 777 Partners’ lent Everton £200 million in working capital and stadium financing debt. To fund these borrowings, 777 Partners borrowed from a closely linked US insurer A-Cap, run, controlled and owned by Kenneth King.

To fund 777 Partners’ portfolio of businesses, losses and acquisitions (including football clubs) 777 Partners borrowed funds from a UK based global asset management group collectively referred to as Leadenhall. They also borrowed from other financial institutions including Credigy.

In order to borrow such sums 777 Partners and associated companies offered their unencumbered assets as security to both Leadenhall and Credigy. When, following an anonymous tip off, it became apparent to Leadenhall that (i) the securities offered were worth less than the sums borrowed (ii) many assets offered were also pledged to other parties and (iii) some of the pledged assets didn’t exist, the inevitable lawsuit ensued.

Thus a major civil case was brought to the US District Court, Southern District of New York. To give it its full title it is:

LEADENHALL CAPITAL PARTNERS LLP and LEADENHALL LIFE INSURANCE LINKED INVESTMENTS FUND PLC, Plaintiffs.
vs.
JOSH WANDER, STEVEN PASKO, KENNETH KING, 777 PARTNERS LLC, 600 PARTNERS LLC, SPLCSS III
LLC, SIGNAL SML 4 LLC, INSURETY AGENCY SERVICES LLC, DORCHESTER RECEIVABLES II LLC, SUTTONPARK CAPITAL LLC, SIGNAL MEDICAL RECEIVABLES LLC, INSURETY CAPITAL LLC, SUTTONPARK SERVICING LLC, SIGNAL SERVICING LLC, INSURETY SERVICING LLC, and ADVANTAGE CAPITAL HOLDINGS LLC, Defendants.

Civil Action No. 1:24-cv-03453-JGK

On 3rd May 2024, Leadenhall issued a complaint against A-Cap et al. That original complaint can be found in full, here: Leadenhall Capital Partners LLP v Wander, Pasko, 777 Partners etc.

The complaint was last amended on 6th September 2024 Amended complaint

The case, to date, has been long and complex, but in order to assist in the future recovery of funds owed to them, Leadenhall secured a Preliminary Injunction.

One of the impacts of the preliminary injunction is that it limits A-Cap’s ability to dispose of assets. As 777’s businesses collapsed earlier this year, A-Cap gained control of the assets owned previously by 777 and associated companies. This includes the loan to Everton – more of which below. However, as mentioned, A-Cap’s ability to dispose of assets without the approval and knowledge of the Court and Leadenhall is extremely limited.

Friedkin Group

In 23rd September 2024 it was announced that the US investor group, The Friedkin Group had agreed to acquire Farhad Moshiri’s 94.1% of Everton Football Club.

Part of the agreement to purchase Farhad Moshiri’s stake, held in Blue Heaven Holdings, was to to reach an agreement with Everton’s creditors (the people Everton owe money to).

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.

It is widely accepted that these loans will not be repaid and will be written off or converted into a minority equity stake.

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 by Everton to be efficient and professional operators.

A significant portion of this facility is expected to be paid down when the sale is completed.

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 2024. Standard charge for UK bank against Everton Football Club Company Limited’s assets.

Tdf Capital Management, L.L.C.: Tdf Capital Management L.L.C., incorporated in Texas, USA is the security agent relating 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 in May 2024.

The Friedkin Group loan is thought to be in excess of £200 million.

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

The charge relating to Everton Stadium Development Company has recently been revised to reflect changes (unspecified) in the loan agreement.

777 Partners/A-Cap:

This is the loan that is relevant to the Leadenhall case mentioned above. In total, the loans are believed to be in the order of £200 million. The interest rates, charges and possible redemption charges are not known.

From a security perspective these 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.

The settlement of these loans falls within the conditions created by the Preliminary Injunction. The settlement and what the terms of the settlement are, is effectively a disposal of assets by A-Cap. The conditions of the Preliminary injunction are heavily disputed by the defendants (A-Cap et al).

Ultimately, this is the unresolved issue (aside from Premier League and regulatory approval) relating to the Friedkin takeover. Does it form a significant barrier? That’s unknown although the balance of probabilities is that it shouldn’t. The issues surrounding the Leadenhall case were known to the Friedkins before they re-entered the arena. The hope is that the Friedkins have a strategy to deal with the uncertainties – the Leadenhall case is going to run for a considerable period of time. Resolution of the Everton loan shouldn’t be dependent upon resolution of the Leadenhall case. Those strategies might include placing funds in escrow to cover the eventual settlement.

However, it remains the case that whatever has been agreed between Friedkin and A-Cap, neither the Courts or Leadenhall were party to the details of that agreement. In order to satisfy the terms of the Preliminary Injunction and Leadenhall’s position as a secured creditor it seems that they ought to be.

The decision of the Court not to amend the terms of the Preliminary Injunction (Denial) and now the subsequent appeal (A-Cap Appeal) by A-Cap to that denial further complicates and lengthens matters in the NYSD civil case.

The case for communication

The Friedkins are not renowned for excessive communications. At this time though, particularly given how sensitive the takeover is to Everton Football Club’s future and the uncertainties Everton fans have had to deal with for more than two years, clarity on what happens next would be a wise divergence to their usual communications strategy.