Everton’s plight worsens after investment deal appears doomed

If fans of bottom-placed Premier League club Everton thought things couldn’t get any worse, they just did, after potential US investor MSP Capital walked away from providing a £130m lifeline as part of a 25% equity deal.

In June MSP EFC Investors raised £130m in a planned investment towards providing £100m for the completion of the club’s new £760m riverside stadium and providing transfer funds for team manager Sean Dyche.

The injection would have given MSP – a consortium of 13 partners – a minority stake in the side, which has narrowly avoided relegation the past two seasons.

Farhad Moshiri, who owns 94% of the club, has been in talks with New York-based MSP, headed by Jahm Najafi, Jeffrey Moorad, and Peter Taylor, since the start of the year. MSP has enjoyed a period of exclusivity to run due diligence checks ahead of investment.

But that period of exclusivity has now ended and no deal has been announced.

A report by online sports outlet, The Athletic, claimed that what is described as a “complicated deal” is “dead”, blaming a “stumbling block being opposition from one of Everton’s existing lenders, Rights and Media Funding Limited.”

Everton reportedly has a £100m loan facility with the Cheshire-based firm that the club has extended to £200m this year.

The Athletic said that debt is secured via four charges on club assets and Rights and Media Funding has negative pledge clauses which mean the holder can demand repayment of its debt before the club takes on any further borrowing.

It said with Rights and Media Funding reluctant to give up its protection against possible default, MSP’s plan became unworkable.

The lender was concerned that MSP was not putting enough money into the club in return for its equity.

However, it is reported that MSP will continue with a £100m loan towards the cost of the stadium, although this is now just a straightforward loan.

This is believed to enable Moshiri to repay a £40m loan towards the cost of the stadium from Andy Bell, founder of Manchester-based investment platform, AJ Bell, which was announced in May this year, through his family investment firm Blythe Capital.

The club’s funding plight could mean that Moshiri now tries to resurrect links with another US firm, Miami-based 777 Partners, to guarantee more liquidity.

The club’s last published annual accounts, released earlier this year, revealed a fifth consecutive pre-tax loss.

In the accounts, club auditor, Crowe UK, ominously warned: “Should the club be relegated, it will require additional financial support from its majority shareholder, who themselves are reliant on support from their majority shareholder, who have indicated they are supportive of the group, but the support is not legally or contractually binding.

“These matters indicate that a material uncertainty exists that may cast significant doubt on the group’s ability to continue as a going concern.”

The club also faces possible sanctions on October 25, when an independent commission considers allegations it has breached the Premier League’s financial fair play rules which could result in a fine, or worse, considering Everton’s current form, a points deduction.

Everton FC has not commented.