Everton have suffered a huge blow to their plans to fund the construction of their new stadium after the collapse of a deal to allow MSP Sports Capital to invest £150 million, which would have given them a 25% minority ownership stake in the club, according to Matt Slater.
The journalist’s report has revealed that the breakdown of negotiations has created uncertainty as to whether the club can raise the funds required to complete the construction of its new stadium. The financial situation is having a direct effect on recruitment at the club, and further delays could cause the Toffees to be relegated in the coming years.
Everton Ownership Deal Collapses Following MSP Sports Capital Withdrawal
The Toffees’ Financial Struggles Deepen
The club had hoped to receive £150 million in convertible debt, which MSP Sports Capital would be able to convert into a 25% in the ownership of the Blues. This money would then allow owner Farhad Mashiri to repay a £40 million bridging loan, with the rest of the money intended to go directly to Everton’s Stadium Development Company.
Slater’s article states that a deal between the parties was blocked by an existing lender of Everton: Rights and Media Funding Limited. RMFL were concerned that the Toffees would not be receiving enough money for the equity they were prepared to give away. As a result, the journalist has claimed “the deal is dead”.
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RMFL were unwilling, under the proposed conditions, to give up its protections against a possible default on their existing £200 million loan to the club. Their agreement places charges on club assets. They also previously secured the power to demand repayment of their debt before Moshiri’s ownership takes out any further loans.
Delays to Stadium Move Increase Risk of Relegation
The development of the new 52,000 seater stadium has been a vast expense for the club, with officials estimating a £500 million construction cost for the project. A rise in inflation, and construction costs, as well as the rise in interest rates which affect the cost of borrowing, may well make the development even tougher on their finances.
Prioritisation of funding the project, as well as previous costly and unsuccessful transfer windows, and the sanctioning of former financier Alisher Usmanov by the UK Government, has left Sean Dyche’s side on an extremely tight budget.
Despite narrowly surviving the risk of relegation on the last day of the 2022/23 season, Everton have only recruited one player for a transfer fee, with £15 million spent on former Sporting Lisbon forward Youssef Chermiti. Jack Harrison and Arnaut Danjuma have joined on loan deals, while 38-year-old veteran Ashley Young was recruited as a free agent this summer.
The club have suffered a difficult start to their season, with two defeats including a 1-0 loss to Fulham at Goodison Park and a demoralising 4-0 defeat to Aston Villa. Dyche’s side has a severe lack of creativity and finishing quality in the squad, especially as Dominic Calvert-Lewin continues to suffer a string of injuries.
Financial Fair Play is also a significant concern for the team, as they could be at risk of a points deduction or a fine this season.
Potential FFP Sanction Could Spell Disaster for The Toffees.
Everton have recorded losses of £371.8 million over the last three years, according to analysis by Sky Sports in May of this year. The current rules set by the Premier League allow clubs to lose a maximum of £105 million over three years.
As a result of an alleged breach of the regulations, they have been referred by the Premier League to an independent commission, which will form a judgement on whether they have broken the rules. Club officials deny any breach of financial fair play regulations.
Despite their financial difficulties, the 120-year-old club may hope for a financial sanction if found guilty, as a points deduction could see them relegated and thrown into turmoil on and off the pitch.
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Potential Effects of Relegation on the Club
Estimates from the end of last season suggested they would lose almost £70 million in broadcast revenue if they were relegated to the Championship. While the Blues would receive parachute payments they would undoubtedly need to cut costs.
Most clubs would look to shift assets to raise funds for a reinvention of the squad, but sales of players such as Andre Onana and Abdoulaye Doucoure could be needed simply to repay loans and the costs of the development of a new stadium. A stay in the Championship in such a scenario would put them in serious financial difficulties and could even put the club’s ability to continue at risk, according to their own auditors.
Everton are one of six founding clubs to have never been relegated from the Premier League. The collapse of the proposed agreement between MSP and club ownership could put this record and their very existence at risk, if an alternative source of funds is not found quickly.
Main Photo Credit: Kathrin Mezger on Flickr, CC BY-SA 2.0
