Everton hires JP Morgan, MUFG for stadium
JP Morgan and MUFG have been appointed Everton FC’s financial advisers to arrange roughly £500m ($651m) of financing for the football club’s new stadium at Bramley-Moore Dock in Liverpool. One source close to the prospective deal told GlobalCapital “all options are on the table” regarding funding routes.
“MUFG and JP Morgan will structure and arrange a financing package in the region of £500m, which will draw upon some combination of senior debt, junior debt, and equity,” said another source close to the situation.
Whether the two banks will provide a bridge facility for the stadium is yet to be determined, but MUFG’s debt capital markets and structured finance teams are working with Everton on the prospective financing, while JP Morgan has deployed its public finance desk.
“A detailed due diligence package covering key areas such as legal, technical and commercial considerations is being prepared by Everton FC and its advisers so that the funding process can be launched to the market and credit ratings agencies by the time the planning process has been completed,” the second source added.
Everton submitted planning proposals for a new stadium on December 23 and expects a determination from local authorities this summer. The plans are set to have a transformational impact on northern Liverpool, where the club is based, with property consultancy firm CBRE stating that the new stadium would deliver a £1bn boost to the local economy and provide as many as 15,000 jobs in the area.
The club is going through a period of financial fluidity. It reported a £111.8m loss for the past 13 months at its annual meeting on Tuesday evening. The club put the record loss down to, among other things, the acquisition of a series of expensive players for about £100m in total, failing to make it into European competitions that year and accounting for 13 months (as opposed to 12) in the last financial year.
“The set of accounts released today [Tuesday] reflect our ambition and position as a club in the early stages of an investment programme,” said Denise Barrett-Baxendale, chief executive of Everton FC, in a statement. “We have been aware of and planned for the impact the investment would have on our short-term profitability and this is part of a long-term sustainable business plan that demonstrates our commitment to operating in a financially sustainable manner. Looking forward, investment in a world-class new stadium at Bramley-Moore Dock offers us all an insight into the future of our club and underlines our ambition to take the club forward.”
Football financing became a hot topic last year, with different teams using various forms of debt and equity instruments. Private equity firm Silver Lake bought a 10% stake in Manchester City’s holding company, City Football Group, for $500m in late November.
Italian football club Juventus closed a €300m rights issue in mid-December. This was intended to strengthen the firm’s balance sheet — after the €100m acquisition of Portuguese striker Cristiano Ronaldo, the club filed a a €39.9m financial loss in its 2018 financial year.
But the only relevant stadium financing that occurred last year was that for Tottenham Hotspur FC, which issued £525m of US Private Placements to institutional investors in late August. The proceeds paid off £400m of bank loans that had funded the construction of the stadium.
Farhad Moshiri, majority owner of Everton, said at the club’s general meeting last year that its proposed stadium at Bramley-MooreDock would be financed largely with debt from “private markets”. This could mean Everton will follow London rival TottenhamHotspur into the USPP market.
During the speech, Moshiri, who owns more than three-quarters of the club, said: “We will complete this stadium and I will throw as much money at it as needed... The private market will give us £350m, a naming rights partner will give us some more and maybe equity capital of £100m.”
Though “private markets” could mean several things, many financiers thought the most likely debt financing instrument Moshiri was referring to was a USPP.
Tottenham’s transaction, arranged by Bank of America, HSBC and Goldman Sachs, had tenors of 15, 20, 25 and 30 years. Coupons ranged between 2.6% and 2.9%, according to a person familiar with the deal.
An institutional investor in London, who was close to Tottenham’s transaction, told GlobalCapital in December: “When I heard about Bramley-Moore I thought [USPP debt] would be a suitable candidate, especially after Tottenham’s success. Obviously we are interested, but we haven’t heard anything yet.”
Selling equity in the football club would be against the direction of travel of Moshiri, who has been building a stake in Everton since he bought 49.9% of the shares in February 2016. He upped his stake to 68.6% in September 2018 and then to just over three-quarters last summer.
The Financial Times reported on January 3 that Alisher Usmanov, the Uzbek-born Russian billionaire and a business partner of Moshiri, was open to taking a stake in Everton.
Usmanov bought a stake in London club Arsenal FC in 2007, though it is said that he sold this in 2018.
His holding company, USM, sponsors Finch Farm, Everton’s training ground. When asked by the FT about further financing, Usmanov said: “They are going to build a new stadium. Why not the USM Arena?”
Another institutional investor close to the Tottenham deal said, when asked about Usmanov’s rhetorical question: “Who needs Usmanov when they have us?”