Everton FC suitor’s takeover bid hit by credit rating downgrade

A global credit rating agency has downgraded the financial strength rating of a company associated with Miami-based investment group, and Everton FC suitor, 777 Partners.

US-based AM Best is a credit rating agency, news publisher and data analytics provider specialising in the insurance industry.

It announced it has downgraded the financial strength rating of 777 Re Ltd, based in Hamilton, Bermuda, to C- (Weak) from B (Fair) and the Long-Term Issuer Credit Rating to “ccc-” (Weak) from “bb” (Fair).

Concurrently, AM Best said it has maintained the under review with negative implications status for these Credit Ratings.

It said the ratings reflect 777 Re Ltd’s balance sheet strength, which AM Best assesses as very weak, as well as its marginal operating performance, very limited business profile and weak enterprise risk management.

The rating action reflects a revision in 777 Re Ltd’s balance sheet strength assessment to very weak, due to a significant exposure to less liquid affiliated investments.

Additionally, AM Best’s view of the company’s operating performance and business profile were adjusted downward reflecting its diminished ability to write new business while simultaneously planning to address existing liabilities.

AM Best said 777 Re Ltd is working with the Bermuda Monetary Authority to reduce its exposure to affiliated assets, which is the primary driver of the material decline in its risk-adjusted capitalisation.

The company’s risk management controls have shown some weakness, including the significant year-over-year increase in affiliated assets, which the company needs to address in the near term.

The ratings will remain under review with negative implications until the company successfully executes on its plan to reposition its asset portfolio and bring its risk management practices in line with AM Best’s expectations, it said.

Everton FC owner, Farhad Moshiri, announced his intention to sell the club to his preferred choice of new owner, 777 Partners, on September 15, 2023.

However, the Premier League is still running the rule over 777, assessing its suitability as a “fit and proper owner” of a Premier League football team.

The process was expected to take up to 12 weeks, so five months of due diligence, so far, is almost unheard of, and suggests there are complex issues which could affect the success, or otherwise, of the proposed deal.

Those close to the process claim there are rival bidders in the wings should 777’s bid be rejected, but the matter is complicated even more with reports that 777 has already loaned Moshiri up to £150m to support the club, which is in the process of building a new £760m stadium next to the River Mersey.

It is understood that 777 Re Ltd has been the main funder of 777 Partners. The downgrade by AM Best is likely to lead to 777 Re Ltd having to offload businesses, reducing its ability to provide funds.

Josh Wander, 777 co-founder who has attended several games at Everton’s Goodison Park ground, has a colourful history, with three arrests between 2003 and 2018 – although only the first of these resulted in charges – and a history of court hearings into unpaid debts.