ToffeeWeb - Season 2007-08

The Mail Bag

Credit Crunch

Does anyone out there have the financial acumen to predict what effect the so called 'credit crunch' could have on Everton FC?

I'm thinking along the lines of the money required for the new stadium and financing on the pitch as well. I know the Sky deals should be fixed income, but I don't know how Everton will fare on other investment/borrowing plans, considering past attempts at attracting investment.

I know for a fact that things arn't good in the world of lending ? I can't sell my house, it's even been in the paper! (by the way it's a nice little two-up/two-down if anyone's interested...)
Ian Edge, Waterloo Posted 25/04/2008 at 13:19:34

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Shaun Brennan
1 Posted 25/04/2008 at 14:25:40

Yeah,

I do. The amount of interest added on by the banks for lending money to built said stadium.

The current price of steel rising every day. Still it probably be made of smoke and mirrors!!!!!!!!

Dan Parker
2 Posted 25/04/2008 at 14:29:08

Hard to predict but it won’t be the same impact it has on the average man on the street. We’re talking much bigger loans etc, a corporation so the rules around risk and lending a bank will use will be slightly different. Trend generally the same though, we’ll prob. have to pay a higher rate of interest.

By the time it comes to something actually happening, we’ll probably be in another boom again!

Dave O'Brien
3 Posted 25/04/2008 at 15:10:33

No-one can be sure, but my industry (mortgages) has been decimated and it?s a real struggle at the moment. If you believe what you read the whole globe will be affected and several more banks will close. The Newcastle and Spurs chairmen both lost stacks recently as a result of the crunch. Best bet for us to stay at Goodison and let everyone else panic at their mounting debts...

Gordon Blair
4 Posted 25/04/2008 at 15:06:31

There will be compounded issues for our Stadium due to the manner in which we are planning to fund it.

Not only will our loans of somwhere in the region of £50M become more expensive. [50M assumes 30M realised for naming rights, 8M for Bellefield and GP - bearing in mind planning issues and depressed market, and an approx. 8% overspend on the Stadium], but we will also struggle to realise the £52M cross-subsidy if the Credit Crunch bites the consumer market as is widely anticipated over the next couple of years.

There are going to be far fewer ’Premium Fashion’ Retailers prepared to splash out on these new premises in financially straitened times.

Perhaps we’d be better off pitching the retail to Netto?

What all of that means is that it’ll be a lot harder to securitise the extra £52M against these future rentals... more debt at higher rates.

or we could redevelop GP bit by bit, sustainably, with minimal risk and debt exposure and the money markets couldn’t touch us. We might even stop calling each other names on t’internet too

Albert Dock
5 Posted 25/04/2008 at 15:26:21

Nothing to worry about.

I’ll give you forty quid for your house.

Brian Baker
6 Posted 25/04/2008 at 15:57:01

Gordon, re: your joke about Netto. Has it ever occured to anybody that Tesco would be too posh for Kirkby? Lol!

Only kidding.

I know I’m struggling to sell my house at the moment.

Dan Parker
7 Posted 25/04/2008 at 16:13:00

I wouldn’t worry about it, Bill will still make money from his pantos and pile 2p into transfers ;-)

Ian Edge
8 Posted 25/04/2008 at 16:13:08

Albert - let me think about it.

Andrew Steen
9 Posted 25/04/2008 at 16:52:47

The credit crunch will have a massive impact on the proposed funding for the Kirkby project

With the securitisation market closed and liquidity scarce, there will be few lenders out there who will be looking to fund the Kirkby project. 18 months ago, the funding lines would have been oversubscribed with various lenders fighting to provide the funding. Margins would have been priced in the high 5% region.

Currenty, Cattles PLC (who announced a £200mn rights issue this week) are borrowing from the wholesale funding market at the 8.5% interest rate. Cattles are a company with an excellent track record of profitability / management and delivery (can we say the same for EFC?)

As it appears that EFC will be borrowing in the region of £78M secured against GP / Naming-rights contract / Season Ticket Sales etc, the price will be high as the security is now classed as high risk. The only certainty in the current climate is that the price of the funding will be much higher than when Tesco/Everton started talking about the project.

Whilst it is common knowledge that Steel prices are shooting up and that a one-year delay will add circa £10M to the price what we dont know is where wiill the UK / Global economy be in 12 months time????

If we are in a recession (which we are not far off - assuming negative GDP growth for two consecutive periods) then will there be companies around who will spend £6M per annum on naming a stadium in Kirkby??

Will corporate boxes sell??? The first thing a company will cut down on is the hospitality side!!! In my financial plan for 2008 I have allocated £20k to spend on corporate tickets at Goodison for the 08-09 season. I have now cancelled this expenditure in anticipation of what is to come later this year!

Given the economic uncertainty, I would be very tempted to sit tight and stay put for five years. This week the UK's largest house builder (Persimmon Homes) suspended all new building sites in the UK as they can't shift what they have already built.

The skies are definately grey at the moment!

Nick Heady
10 Posted 25/04/2008 at 17:44:25

First bit of luck we've had all season.

Simon Templeman
11 Posted 25/04/2008 at 19:19:24

Nick, I agree totally; we would be fools to borrow in the present climate. We own Goodison, so let's sit tight while the rest who have borrowed too much (and their creditors worry!!). We will be in a strong position in 3 years time.

By the way, COYB on Sunday!!

Gavin Ramejkis
12 Posted 25/04/2008 at 20:48:27

Have to agree with Nick and Simon replies to Tommy - when does putting the club heavily into debt for a poor stadium in a town that couldn’t even support a Northern Counties football club when a gradual and yes frugal slow redevelopment of Goodison Park wouldn’t cripple the club financially and leave sufficient Sky funding to pay for that slow part build work plus players. Moving to Kirkby at high interest rates would give the lion’s share of any money the club raised through the Sky deal and league position going solely to service that debt. A dangerous business decision on a par with the Leeds suicide move of just a few years ago. I ask again why run before we are even walking? When would 37,000 or so supporters become 50,000 overnight and if they did knowing Kirkby’s only previous football club moved to Huyton before disappearing how would they get to and from the stadium?

Anthony Newell
13 Posted 25/04/2008 at 21:09:53

I’m curious as to whether the Bear Stearns long term loan securitised on season ticket sales will be affected. With Bear Stearns going belly up who is now the other counterparty to the loan and can they change the terms of it?

Gavin Ramejkis
14 Posted 25/04/2008 at 21:47:50

Anthony Newell, JP Morgan (Chase Manhattan) bought Bear Stearns which would have given them their entire portfolio. I?m pretty certain they would be within their rights as new owners to renegotiate the terms in line with whatever rates they offer rather than the original deal.

Duncan McKenzie
15 Posted 26/04/2008 at 05:34:09

J. H. Christ, I have seen some rot posted by your good self, Gavin, but that last one went beyond the pale. Since when has a loan company ever renegotiated a loan to offer more unfavourable terms than what we are repaying now bearing in mind we arranged the loan (and by the way entered into a legal agreement) with Bear Stearns in the first place (n0ot Chase Manhattan)? As always Gavin I find your input into the discussion both negative and without proper thought as to the outcome of your comments. Get a grip, Lad.

Terry Maddock
16 Posted 26/04/2008 at 09:21:50

GAVIN...as always: Negative, scaremongering....ridiculous....

Neil Pearse
17 Posted 26/04/2008 at 10:32:36

Gavin, to put your mind at rest, I can assure you that no major financial loan would ever be entered into on the basis that the other party could unilaterally offer new terms if their ownership changed. Others may know better, but I suspect that this may even be illegal.

By the way, on Kirkby not being able to support a pub team or whatever, I wasn’t aware that only Kirkby residents would be allowed to go to the new stadium and watch the Blues. Is that in the deal with Tescos? If true, it certainly is worrying to me. I was under the impression that people across the whole of Merseyside would be allowed to go the match in future, and even people from elsewhere.

Gavin Ramejkis
18 Posted 26/04/2008 at 12:09:47

Unlike you, Dunc, I don?t need to use a psuedonym to hide behind, grow some balls then tell me if anyone on this website has ever had a credit card and that company has been bought out by another company or bank and then exactly as it happens in real life the new company by law has to contact you to advise you they are now the owners of the contract having bought it out and yet again in line with FSA regulations are well within their rights to advise you of their business rates and not the former owner of the debt as they no longer exist/sold on the debt to them.

Get a grip? Try getting in touch with the real world mate, it happens every day. I haven?t said it has happened but am pretty certain it isn?t beyond the realms of fantasy to happen. When JP Morgan bought out Bear Stearns, they were much smaller but held a stronger portfolio not having gambled on that market sector. They are not a charity, they are a business and they have to earn a dollar as any other business. The current credit squeeze still means that they have to offset this portfolio against other lenders (they lend from each other - they don't have a big vault filled to the brim) and they recoup enough profit to make it worthwhile and still pay the establishments they borrowed against. The lending rates even amongst these is higher so they will need to increase even if by small margins to maintain a profit.

Banks and finance houses that buy bad debt can only recoup by repossessing the equity the loans were secured against. The securitised loan with Bear Stearns could be renegotiated if JP Morgan can?t maintain a profit margin from it. Terry how was that scaremongering? Stick to Pravda if you can?t handle reality.

Neil my point about Kirkby Town FC then Knowsley Utd shows that Kirkby had a football team and they weren?t interested hence it went to another town before going to the wall, even if every single resident of Kirkby went to the new stadium it still wouldn?t fill it.

Duncan McKenzie
19 Posted 26/04/2008 at 14:49:29

Gavin as the old saying goes ’ I might not agree with what you say but I will defend to the death your right to say it ’ well the same applies here but everyone of your posts is following the same pattern all the time. You start with a consistant and well thought out argument and then descend into name calling and personal abuse when someone actually stands up and questions your argument.