Liverpool Echo explains how they believe potential stadium will be funded

Thursday 23 March 2017  18 Comments  [Jump to last]
Funding model explained

According to the Liverpool Echo, Liverpool City Council is setting up a company, called a Special Purpose Vehicle, that will sit in between Everton and its lender.

The SPV will get an annual payment from the club, a year in advance. Most of that will go back to the funder to pay off the stadium costs and more than £4m a year will go to the council.

It will be the lender, rather than Everton FC, that buys the Bramley Moore dock land on a 200-year head-lease. The funder will then lease the stadium to the council's SPV for 40 years. And the SPV will then lease it to Everton for 40 years, less one day.

Everton will then pay an annual rent to the SPV so that company can pay off the funder and get an annual “fixed security fee” — that's the £4m-plus that will go to the council.

And at the end of those 40 years, Everton will have the option to buy the lease for Bramley-Moore Dock from the funder.

» Read the full article at Liverpool Echo

Reader Comments (18)

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Joseph Terrence
1 Posted 23/03/2017 at 19:36:18
Excuse my ignorance, but what is the purpose of having the council involved?
Dermot Byrne
2 Posted 23/03/2017 at 19:43:10
They underwrite or guarantee our finance and we give them annual sums to ensure they make some money for services or at least do not lose out. Also, they see a bigger picture that football. That is regeneration of one of the poorest areas in the country. Win-Win!
Colin Glassar
3 Posted 23/03/2017 at 20:46:15
I've read quite a bit of related news today and it all sounds good to me. And as our lovely neighbours are becoming increasingly hysterical, it can only be for the good.
Steavey Buckley
4 Posted 23/03/2017 at 21:12:11
Can Everton generate more match day revenue to pay for the rental of a new stadium?

And is it in the interests of a future generation in having to buy it out right in 40 years time?

Brent Stephens
5 Posted 23/03/2017 at 21:33:47
Steavey "And is it in the interests of a future generation in having to buy it out right in 40 years time?"

Spunk the kids inheritance and sod them. I'll be dead by then.

Damian Wilde
6 Posted 23/03/2017 at 23:39:06
Why do we need the SPV? Why can't we just pay the lender direct? That way, we don't have to give the Council £4 million every year. Like Vibrac again or whatever it was called. Unless the Council is the lender. Or the £4 mill is a sweetener for them (a) allowing it, and (b) doing all the roads, etc.

I haven't got a clue!

What about the stadium, will we own that?

Peter Lee
7 Posted 23/03/2017 at 23:54:07
I know that money borrowed by government is cheaper, ie, borrowed at a significantly lower rate of interest, than by other borrowers.

Local government is the same. The reason is that there is a secure return. Large investors balance their portfolios between different levels of risk.

Given that, I suspect that the arrangement will enable EFC to borrow at a significantly lower rate then it could do so commercially. The payment to the council, it looks like 1.5% on 𧷤m, is either the difference or part of the difference.

If it equals the difference then it can be seen as facilitating a loan. If is less then the extra makes the deal cheaper for EFC.

The Finch Farm deal did this.

Craig Walker
8 Posted 24/03/2017 at 09:30:35
I know nothing about business lending but I've read it three times and I still don't understand it. I get the bit that we pay the council £4m each year, up front and the SPV sits between Everton and the lender. I'm failing to grasp the "funder" and "lender" terms though. Can anyone put it in layman's terms for thickies like me?
Shane Corcoran
9 Posted 24/03/2017 at 09:44:19
No offence to Lyndon or Michael, but the Echo piece itself goes into much further detail and explains it all pretty well I think.
Ciarán McGlone
10 Posted 24/03/2017 at 09:55:18
Where does Moshiri sit in all of this?

This reminds me of a certain 'enabling' scheme.

Great if we get a shiny new stadium out of it, but I'm a little sceptical. Forgive me.

Carl Rutherford
11 Posted 26/03/2017 at 14:15:52
I was hoping the stadium would be paid for through investment into the club, perhaps a share issue to dilute Kenwright's and Woods's holding and increase Moshiri's to make him the major shareholder. However, it seems the stadium will be financed through borrowing. Resulting in annual payments made by the club of ٢m to the council plus whatever the annual repayments are on the 𧷤m loan to buy the stadium.

This obviously has an impact on the club's ability to invest in the playing squad over the next 40 plus years until the stadium is paid for. We would, of course hope that additional match day revenue from the new stadium more than covers this. However, until the stadium is built and we start to generate revenue for it, there may well be a decrease in investment into the playing squad.

Matt Traynor
13 Posted 27/03/2017 at 06:44:24
Carl (#11). Corporate debt is not a bad thing, as long as the company has the ability to meet the repayments. Everton's current operating model would facilitate this – the only uncertainty being future broadcast revenue based on (a) size of future deals and (b) Everton's on-field performance.

Increased equity wouldn't be the way to do this as it would potentially dilute the value of all shares, and would need to be underwritten. In any event, football clubs are not typical businesses when it comes to valuations.

Whilst not sure of Moshiri's exact wealth, I believe he is worth more than ٟbn, but not much more than that. It's unlikely that he has that much liquidity (you don't get rich by sitting on money) therefore he's not going to benefit from directly paying for the stadium, unless he plans to sell the club on, based on increased value when the stadium is built – but why do that when the business that you have a controlling interest in can fund the purchase?

Matt Traynor
14 Posted 27/03/2017 at 06:47:46
Carl (#11) – forgot to add (and don't seem to be able to edit the comment):

Re player investment. Under current FFP, investment in the playing side is linked to total turnover. Infrastructure investment is treated as "allowable expenses" therefore as long as Everton manage the process – and bearing in mind secondary revenue has been the first thing to be impacted post-Moshiri – they should be fine.

And in 3-4 years the new stadium should of course enable Everton to increase turnover – sadly to just keep up with the hyper-inflation within footballers' and agents' salaries and fees...

Phil Walling
15 Posted 27/03/2017 at 16:38:19
So much for all the dough Moshiri was going to put in. He's just an enabler and clever talker who can access funds more easily than Bill and his merry gang of BVI financiers. The Club will pay a heavy price for the money and could be taken to the brink if we ever plunged down the table or the TV money dried up!

'Down in the Boondocks' by Billy Joe Royal, so to speak .

Brian Williams
16 Posted 28/03/2017 at 15:12:54
The SPV basically allows Everton to secure loans we wouldn't be able to on our own. Lenders will lend to councils where they won't lend to football clubs.

In addition to that, the council has played a big part in enabling Everton the chance to buy the land itself. The council will also weigh in with travel infrastructure etc.

Terry Underwood
17 Posted 28/03/2017 at 19:46:48
I don't quite understand all this, but kopites seem to be going into meltdown, so it must be okay...
Ian Bennett
18 Posted 28/03/2017 at 20:02:30
The SPV from the council is a potentially temporary thing to get the project operational. Joe Anderson confirmed on the radio that the funding was in place using the above noted structure, but the club could opt to replace with its own funding if it wanted.

This would avoid a repeat of the Kings Dock where Everton couldn't find finance in the 23rd hour, providing more certainty that the project could be completed. As noted, the council might have access to cheaper funding than Everton, but time will tell.

I have one concern that Everton will be paying a fair sum over 40 years, and not own it, and will still have to find the money to buy. This sounded a bit like the Kings Dock and something that haunts Coventry City FC.

I can only assume Moshiri is doing this as he's funding all of the project – but with only holding 49.9% of the shares – why should the other 50.1% benefit from his finance?

If that is the case, I could imagine the structure changes if he was to buy 100%. The Coventry City scenario could also fall away in any case if he finds a big name to sponsor the ground, and the increase in revenue from increased gate/corporate/and other uses for the venue – boxing, gigs etc.

Optimistic, I think – I just hope the money stays in the club/on the pitch.

Tony Draper
19 Posted 28/03/2017 at 20:07:37
Let me explain this in simple terms.

We (Everton Football Club) get a boss new pad.

Hope that helps.

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