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News
Everton backers have ‘exit clause’ as Dan Friedkin in talks with JP Morgan over £660m deal
Everton supporters have been locked in takeover purgatory for years now, with Dan Friedkin’s deal to buy the club from Farhad Moshiri one among several to have been agreed.
The likes of MSP Sports Capital, 777 Partners and Crystal Palace multi-club mogul John Textor have all previously signed heads of terms with Moshiri.
But, for various reasons, all of those deals eventually fell through. A blessing in disguise, perhaps, given that Dan Friedkin is seen by many as the most credible party to have held an interest in Everton.
The American billionaire, whose wealth comes from the automotive and entertainment sectors primarily, is expected to have completed his takeover of the Toffees by Christmas.
However, that timeline is contingent on several factors.
The takeover is arguably one of the most complex in Premier League history. There are so many moving parts – legal, financial, and regulatory.
As well as the need for a resolution in the lawsuit against former lender 777 Partners and their creditors A-CAP by London-based finance firm Leadenhall, Everton also need to iron out the structure of the deal.
Moshiri is unlikely to get anything in return for his shares. At the very most, it will be a token amount.
Friedkin is instead removing the burden of Everton’s mounting debt and running costs from the British-Iranian businessman.
Recent developments have signalled what structure the deal might take. And, with Everton flailing under Sean Dyche on the pitch in their last season at Goodison Park, clarity can’t come soon enough.
To get a read on the situation, TBR Football spoke to Liverpool University football finance lecturer Kieran Maguire, who is well-informed on what is going on on Merseyside.
Everton will likely pay penalty for early termination of loans, says finance expert
As relayed by late last week, Friedkin is in talks with JP Morgan about a debt restructuring deal.
In total, they have £660m worth in outstanding loans. Rights and Media Funding and 777 Partners – who have passed the debt on to A-CAP following their liquidation – are among the creditors.
The report suggests Friedkin is looking to consolidate the debt after paying back MSP Sports Capital and loaning the club over £100m for running costs.
The right approach. Yes, according to Maguire. But that will come at cost in the short term, even if the burden of interest payments is reduced going forward.
“Get all your eggs in one basket and get a degree of certainty financially,” the Price of Football author said.
“Remove, I wouldn’t say rogue lenders, but lenders who are opaque in nature. Go to a senior financial institution like JP Morgan, which is reputation enhancing.
“If there is a financial benefit to that as well, great. But here I am slightly more cautious in that we don’t know the interest rates that the lenders were charging.
“”The Friedkin Group have a good credit rating themselves, so that should potentially reduce the price of borrowing if they can leverage on that.
“But I imagine there will be clauses in the original agreements from Rights and Media Funding and 777 Partners, although they might not be in a position to dictate terms there.
“But there will be exit clauses if the loans are settled early.
“JP Morgan and Goldman Sachs have seen Macquarie open football departments. You can understand why they would go into this market.”
PSR and FFP: Will Everton be able to spend in January under Dan Friedkin?
Soon, Everton will move to the new stadium at Bramley Moore Dock and unlock huge new revenue streams in the process.
But their Profit and Sustainability Rules (PSR) nightmare is not over yet and Friedkin could be left counting the cost in months and years to come.
Everton will face a third PSR hearing later this season where, if the tribunal disagrees with their capitalisation of interest on loans for Bramley Moore Dock, they could face another PSR sanction.
As the interest has been accrued over several seasons, Everton could in fact be hit with multiple points deductions or fines.
While Friedkin has the liquidity to make a marquee signing in January, the Premier League’s regulatory framework and the situation he is set to inherit might make that difficult.
That said, the 59-year-old may take a calculated gamble and conclude that the risk of further PSR breaches down the line is far outweighed by the financial cataclysm that relegation would present.