New Everton Stadium

[EFC78]

In short, we have reached a point where we have to recognise that the original BMD financial plan looks to be in a lot of trouble. Ignoring that and thinking we can carry it through to fruition as it has been proposed is not helpful.

What evidence have you got to support this claim? Or do you mean that the financing of the deal has grown significantly since we had the update in March, as I wouldn't argue with that. However, new hurdles arising are common with projects such as these.

 

[CRIMHEAD]

I may be giving the board more credit than they deserve but you would hope, in the event additional debt finance was sought, that the club would want some certainty over interest rates.

Some kind of hedging would need to be put in place to achieve this, either by the lender or by the club. That will have a chunky cost itself and will be built into the effective cost of the financing.

The mortgage examples you quote will be for a very short fixed rate term. As the fixed term increases so does the risk to the lender and therefore the interest rate charged. In the case of a mortgage you simply wouldn’t be able to find a lender willing to offer a 25 year fixed rate deal. Interest rates for 10 year fixed deals are significantly higher than 3.5%

Also, default risk premiums will be built into the interest rates.

In the case of a standard home mortgage the lender has the security of knowing that in the event of non-payment they have the rights to an asset that should be roughly equal in value to the outstanding loan. The home owner is also usually required to put in a chunk of equity to further reduce the risks to the lender.

In the case of this stadium, in the event the club disappeared or defaults the lenders would be left with a half built or completed but empty stadium that isn’t going to be an especially valuable asset. The council have first dibs over most income streams like season tickets. A significant risk premium will therefore needs to be built in to the rates.

Finally the total cost of the project is still uncertain. Further inflation above £500m looks certain if the experience of other clubs is a guide. Anyone committing to provide finance now will want to build in that uncertainty into the rates they charge as it could affect the ability of the club to repay.

Given the likely length of the payback period I would personally be astonished if the club could achieve 8% for the bulk of that time. 12% -15% would be more plausible in the circumstances. It’s a moot and largely irrelevant point anyway. Be it 6%, 8% or higher, significant additional debt just doesn’t stack up.

Moshiri either digs deep or it just isn’t happening.

The worrying part is that the Club and Moshiri must have known this for a good while and yet here we are.

Still, at least the club is still paying Dan Meis millions to run his stadium porn tease-line via twitter. That should help deflect awkward questions for another 12 months or so.

Hold on a second. Commercial lending rates are like 5-7% I thought. Why on earth would a Council backed investment not achieve under 8%? That's the whole point of going through the council either directly or using them to help secure the note. Spurs got like 400M at libor + 2.25 to 3 % by all accounts, and that was purely commercial and AFTER cost overruns were spiraling out of control. Anything council backed would be even less.

Beyond that, are we seriously concerned about finding an extra 150M to 200M? With a brand new 55-60K stadium in that location? Naming rights could over that entire amount potentially. Tottenham thinks they are 400M for theirs. PSLs can be significant as well, although we aren't getting 800M like the NY Jets. On a separate note, that is just unreal BTW. Obviously, we want a real atmosphere and real fans that we don't want to price out of the building. But the prices for some of these things because they are treated as investments can get out of control very fast for the premium seats.

I think there are some concerns OF COURSE if cost overruns get it well beyond 500M. But again, how often does a stadium sit half completed? There is too much opportunity costs to not come up with the extra money and there are also contingency instruments that can be provided in emergencies. There seem to be plenty of banks willing to invest commercially in these projects, so I'm sorry guys, I see the new financing arrangement as an amazing deal with the worst case that the council reverts back to its previous position, which STILL saves a ton of money on interest rates. The only issue I see is the delays in getting a financial deal arranged like that. No one bank is going to take it on so it will take time to put a deal together.

Again, I don't have confidence in the Everton board. I'm not a pollyana. But I don't believe this new financing is a step backwards, it almost surely based on my financial knowledge of anything seems to be an even better deal.

 

[davek]

What evidence have you got to support this claim? Or do you mean that the financing of the deal has grown significantly since we had the update in March, as I wouldn't argue with that. However, new hurdles arising are common with projects such as these.

The evidence is the huge leap from £300M to £500M in costs (for now!) and the fact that the local state are now being asked to provide rather than facilitate most of the investment.

 

[roydo]

The evidence is the huge leap from £300M to £500M in costs (for now!) and the fact that the local state are now being asked to provide rather than facilitate most of the investment.

The LCC loan will be off balance sheet, ergo, facilitated.

Its been a bit weird since the AGM, granted, but after reflection, and looking beyond the immediacy of GOT/EFC, (which we are all prone to do), way too much political and real capital invested and to be gained from the ground getting done at BMD.

 

[davek]

Hold on a second. Commercial lending rates are like 5-7% I thought. Why on earth would a Council backed investment not achieve under 8%? That's the whole point of going through the council either directly or using them to help secure the note. Spurs got like 400M at libor + 2.25 to 3 % by all accounts, and that was purely commercial and AFTER cost overruns were spiraling out of control. Anything council backed would be even less.

Beyond that, are we seriously concerned about finding an extra 150M to 200M? With a brand new 55-60K stadium in that location? Naming rights could over that entire amount potentially. Tottenham thinks they are 400M for theirs. PSLs can be significant as well, although we aren't getting 800M like the NY Jets. On a separate note, that is just unreal BTW. Obviously, we want a real atmosphere and real fans that we don't want to price out of the building. But the prices for some of these things because they are treated as investments can get out of control very fast for the premium seats.

I think there are some concerns OF COURSE if cost overruns get it well beyond 500M. But again, how often does a stadium sit half completed? There is too much opportunity costs to not come up with the extra money and there are also contingency instruments that can be provided in emergencies. There seem to be plenty of banks willing to invest commercially in these projects, so I'm sorry guys, I see the new financing arrangement as an amazing deal with the worst case that the council reverts back to its previous position, which STILL saves a ton of money on interest rates. The only issue I see is the delays in getting a financial deal arranged like that. No one bank is going to take it on so it will take time to put a deal together.

Again, I don't have confidence in the Everton board. I'm not a pollyana. But I don't believe this new financing is a step backwards, it almost surely based on my financial knowledge of anything seems to be an even better deal.

Commercial lenders to Spurs wont be second in the queue for club revenue streams should the club hit the buffers. They would be for the BMD *stadium*. Interest terms would reflect that.

 

[indieman1]

A new stadium will offer new opportunities to raise funds, naming rights being the most obvious, but a brand spanking new stadium in a prime location will offer lots of earning opportunities which I imagine would be attractive to potential lenders.

I would imagine that interest rates will be fixed for an extended period but probably not longer than 10 years and if so then doubling the cost of money sounds excessive to me. Inflation will eat away at the real cost of repayments as it tends to do with all long term loans.

I do agree that the uncertainty relating to the final cost of the build would be the biggest concern for lenders as they would certainly be nervous about going into a project which has no clearly defined overall cost.

There is however always the opportunity to bring additional wealthy investors/owners into the club as there is approx. 51% of the shareholding to be transferred from existing owners to new investors.

All a matter of opinion.

The enormous levels of interest( based on nothing other than guesswork) is going to outweigh the opportunity that a 60k new stadium in a prime location where billions are going to be invested in the next decade or so..... I don't think so.

Again, you are right, it is all conjecture but in the case of this council loan it is pretty educated conjecture.

I haven't worked alongside one for 18 months now but when I last did Local Authorities were able to access finance at a rate of just over 2% per annum. Assuming that hasn't changed dramatically and that the £7m per annum premium (£175m over the 25 years) is achieved then you can work back to prove that the rate differential would be around 4% based on a £280m loan. So I think we can say pretty confidently that the effective rate of interest faced by the club on this facility would be 6% of thereabouts.

So 6% is the 'cheap' loan facility. It isn't much of a jump to suggest that the rate on any additional loans would be a fair bit higher than this. And as noted previously, it just doesn't matter, it is very difficult to see how the club could afford an additional £200m of borrowing even at 6%.

 

[roydo]

Commercial lenders to Spurs wont be second in the queue for club revenue streams should the club hit the buffers. They would be for the BMD *stadium*. Interest terms would reflect that.

They would probably repo the ground instead. And either bulldoze it or get a new tenant in.

 

[davek]

The LCC loan will be off balance sheet, ergo, facilitated.

Its been a bit weird since the AGM, granted, but after reflection, and looking beyond the immediacy of GOT/EFC, (which we are all prone to do), way too much political and real capital invested and to be gained from the ground getting done at BMD.

There's still a massive lot of exposure for all parties. What's happened between April last year and now underlines the enormity of committing to this scheme. And political capital manifests itself in a number of ways. Joe Anderson's office and the chamber of commerce would obviously be desperate for it to happen. That doesn't mean it'll play well politically within the council and still less the city.

 

[roydo]

There's still a massive lot of exposure for all parties. What's happened between April last year and now underlines the enormity of committing to this scheme. And political capital manifests itself in a number of ways. Joe Anderson's office and the chamber of commerce would obviously be desperate for it to happen. That doesn't mean it'll play well politically within the council and still less the city.

Yep, that last sentence will deffo cause issues.

 

[davek]

They would probably repo the ground instead. And either bulldoze it or get a new tenant in.

A new tenant for a state of the art Stamford Bridge? Who would that be? Fulham!

I'm not sure stadiums are moveable feasts, tbh.

 

[roydo]

Commercial lenders to Spurs wont be second in the queue for club revenue streams should the club hit the buffers. They would be for the BMD *stadium*. Interest terms would reflect that.

A new tenant for a state of the art Stamford Bridge? Who would that be? Fulham!

I'm not sure stadiums are moveable feasts, tbh.

Mate?

Bed.

 

[EFC78]

The evidence is the huge leap from £300M to £500M in costs (for now!) and the fact that the local state are now being asked to provide rather than facilitate most of the investment.

Spurs' stadium costs increased. Is that project in trouble too? They're further on than us in their move but costs can escalate significantly and still be a success. I am not denying that the increase in cost hasn't made things harder for us, but an increase was always likely to happen, particularly given that the club are attempting to be more ambitious with their plan.

Your 2nd point has little credibility because you are just twisting the reality to make it sound like the new financing deal with the Council is worse. The benefit to the Council is better, the risk is the same as it was when announced in March...As Guarantor, if things went wrong for EFC under the original financing plan, LCC would still have had obligations to make sure payments were still made to the funder. That is still in place with the new deal where LCC can access season ticket sales etc in the event that Everton default on the payments.

If the change in deal with the Council benefits both EFC and LCC even more, why are you making it out to be a worse deal? You're manipulating the reality by using words like 'provide rather than facilitate' to make it sound like LCC are more at risk.

 

[catcherintherye]

There's still a massive lot of exposure for all parties. What's happened between April last year and now underlines the enormity of committing to this scheme. And political capital manifests itself in a number of ways. Joe Anderson's office and the chamber of commerce would obviously be desperate for it to happen. That doesn't mean it'll play well politically within the council and still less the city.

We will get lent money, but what worries me are the repayment charges if we have to make them. Back of a fag packet figures suggest £5-£7 million p/a interest and around 11 million p/a on capital repayments on capital (over 25 years) for the council part. The other part, around 1/2 of the council amount, could well attract similar interest (which could be a best case position) and capital repayments of around £5/6 million. We are looking at repayments of around 25-30 million pounds p/a which could well increase significantly if costs aren't kept under control.

This should be manageable by the money we bring in. Increased stadium revenues on tickets alone and additional boxes should account for up to 25 million pounds p/a at least. Likewise stadium sponsorship, given Spurs were apparently pitching at 40 million, we ought to be looking at something equivalent.

What worries me in all of this, is that Elstone is already making worried noises. He's talking about rising costs like he has no control over it. His job is simple, keep costs under control and start raising commercial sales to offset the interest costs. I have little faith in him to do either particularly effectively.

 

[toffee-boy]

More importantly has there been anymore sightings of rubble by the docks?

 

[kev]

More importantly has there been anymore sightings of rubble by the docks?

Saw him down there yesterday with Fred