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http://www.liverpoolecho.co.uk/news/business/inside-evertons-plan-finance-bramley-12834720
Inside Everton's plan to finance Bramley Moore Dock stadium
University expert says council is acting like a parent on a mortgage application
BYALISTAIR HOUGHTON
Kieran Maguire, of the University of Liverpool’s Management School, says banks could “flatly refuse” to lend £300m to a football club, but would be likely to lend to a local authority.
And so, he says in his post on the university’s website, the council is acting like a parent guaranteeing their child’s mortgage application.
Mr Maguire, a lecturer in economics, finance and accounting, says that “in theory, everyone’s a winner” from this deal, though there are risks.
Everton Bramley Moore Dock stadium cash deal SEALED
University of Liverpool Management School lecturer Kieran Maguire
New Everton stadium - where is the money coming from?
Here’s a closer look at what he has to say...
Bank could ‘flatly refuse’ to help
Many people have asked why Everton, backed by billionaire Farhad Moshiri, can’t take out the loan itself. Mr Maguire spells out why.
He said: “Imagine you are a bank manager, and you receive the following loan application:
“Amount to be borrowed? Up to £300,000,000
“Purpose of loan? Sports stadium
“How often is asset used? 20-25 days a year
“Income of borrower: Operating losses of £114 million in last 10 years
“Key risks: Could be relegated and lose 70% of income. The most valuable asset apparently wants to depart the business.
“Would you lend to that business?
“The above scenario is that of Everton Football Club and the proposed new stadium at Bramley Moore dock.
“Under normal circumstances a bank would either flatly refuse to lend, or charge a prohibitive interest rate.
“So a cunning scheme is therefore required to keep the bankers happy.”
Everton's new Bramley Moore stadium - early plans for 50,000 seater ground
Everton football club major investor Farhad Moshiri and Bill Kenwright and Mayor of Liverpool Joe Anderson at Bramley Moore Dock on the waterfront for plans to provide Everton with a new stadium.
What is the cunning plan?
That plan, as revealed last month, will see the creation of a “Special Purpose Vehicle” that sits between Everton and its lender. Everton pays the SPV, then the SPV pays the lender – while taking an annual security fee of more than £4m that can be passed on to the council.
So why is the council getting involved?
Bramley Moore Dock (Photo: Colin Lane)
As Mr Maguire explains, “The council are seen by the financial markets as a lower lending risk than Everton, and so can borrow money at a lower interest rate. They can pass on these interest savings to Everton.
“What is being proposed is that the council therefore act as a guarantor for the monies required by Everton, in a similar way that parents might guarantee to a bank for a mortgage application in relation to their son/daughter.”
‘Everyone’s a winner’...
Mr Maguire says that should give Everton lower repayments and give the council money.
He adds: “In theory, everyone is a winner”.
Mr Maguire points out that Everton’s key revenue streams – season ticket sales, hospitality and naming rights – will be put into a separate bank account to minimise risk. The council gets first dibs on that money before the club, to ensure the loan gets paid.
What Blues fans think of Everton's Bramley Moore Dock stadium plans
Aerial view of Bramley-Moore Dock
Mr Maguire says: “This will minimise the risk to the council”.
...though there are risks
Mr Maguire says there are some “unknowns”
He says there is a risk of a budget overrun, as happened with the new Wembley, while steel costs could go up if the pound falls against the dollar.
The lecturer also says it is “not clear” yet how much Mr Moshiri himself would invest in the stadium project.
Another obvious risk is relegation – though Mr Maguire points out Everton’s proud record of top flight survival. If the worst did happen, the “parachute payments” Everton would receive would go into an account held by the council. That could be worth £50m in the first year.
Inside Everton's plan to finance Bramley Moore Dock stadium
University expert says council is acting like a parent on a mortgage application
BYALISTAIR HOUGHTON
- 05:00, 3 APR 2017
- UPDATED07:35, 3 APR 2017
Kieran Maguire, of the University of Liverpool’s Management School, says banks could “flatly refuse” to lend £300m to a football club, but would be likely to lend to a local authority.
And so, he says in his post on the university’s website, the council is acting like a parent guaranteeing their child’s mortgage application.
Mr Maguire, a lecturer in economics, finance and accounting, says that “in theory, everyone’s a winner” from this deal, though there are risks.
Everton Bramley Moore Dock stadium cash deal SEALED
University of Liverpool Management School lecturer Kieran Maguire
New Everton stadium - where is the money coming from?
Here’s a closer look at what he has to say...
Bank could ‘flatly refuse’ to help
Many people have asked why Everton, backed by billionaire Farhad Moshiri, can’t take out the loan itself. Mr Maguire spells out why.
He said: “Imagine you are a bank manager, and you receive the following loan application:
“Amount to be borrowed? Up to £300,000,000
“Purpose of loan? Sports stadium
“How often is asset used? 20-25 days a year
“Income of borrower: Operating losses of £114 million in last 10 years
“Key risks: Could be relegated and lose 70% of income. The most valuable asset apparently wants to depart the business.
“Would you lend to that business?
“The above scenario is that of Everton Football Club and the proposed new stadium at Bramley Moore dock.
“Under normal circumstances a bank would either flatly refuse to lend, or charge a prohibitive interest rate.
“So a cunning scheme is therefore required to keep the bankers happy.”
Everton's new Bramley Moore stadium - early plans for 50,000 seater ground
Everton football club major investor Farhad Moshiri and Bill Kenwright and Mayor of Liverpool Joe Anderson at Bramley Moore Dock on the waterfront for plans to provide Everton with a new stadium.
What is the cunning plan?
That plan, as revealed last month, will see the creation of a “Special Purpose Vehicle” that sits between Everton and its lender. Everton pays the SPV, then the SPV pays the lender – while taking an annual security fee of more than £4m that can be passed on to the council.
So why is the council getting involved?
Bramley Moore Dock (Photo: Colin Lane)
As Mr Maguire explains, “The council are seen by the financial markets as a lower lending risk than Everton, and so can borrow money at a lower interest rate. They can pass on these interest savings to Everton.
“What is being proposed is that the council therefore act as a guarantor for the monies required by Everton, in a similar way that parents might guarantee to a bank for a mortgage application in relation to their son/daughter.”
‘Everyone’s a winner’...
Mr Maguire says that should give Everton lower repayments and give the council money.
He adds: “In theory, everyone is a winner”.
Mr Maguire points out that Everton’s key revenue streams – season ticket sales, hospitality and naming rights – will be put into a separate bank account to minimise risk. The council gets first dibs on that money before the club, to ensure the loan gets paid.
What Blues fans think of Everton's Bramley Moore Dock stadium plans
Aerial view of Bramley-Moore Dock
Mr Maguire says: “This will minimise the risk to the council”.
...though there are risks
Mr Maguire says there are some “unknowns”
He says there is a risk of a budget overrun, as happened with the new Wembley, while steel costs could go up if the pound falls against the dollar.
The lecturer also says it is “not clear” yet how much Mr Moshiri himself would invest in the stadium project.
Another obvious risk is relegation – though Mr Maguire points out Everton’s proud record of top flight survival. If the worst did happen, the “parachute payments” Everton would receive would go into an account held by the council. That could be worth £50m in the first year.
