The Friedkin Group reaches agreement to buy Everton

[malcson]

But in this example that you give, the two creditors seek to obtain the assets that the loans were secured on, they don’t try and obtain the money from wherever the debtor has spent their money. Say the debtor spent the money on a holiday, the creditor doesn’t get to ask Jet2 Holidays for their money back.

I appreciate that 777 didn’t spend the money on a holiday with Jet 2 Holidays, but they have used their money to provide an UNSECURED loan to Everton. Said loan to Everton has no security from Everton, and no security to either of 777’s creditors. Everton have never been used as an asset to secure any loan involving 777.

My conclusion is that it’s a bit of a reach for either creditor, whether it be A-Cap or Leadenhall to claim they have a right to the money loaned to Everton, when the security for their loans to 777 were other assets, and not Everton Football Club.

Separately, and I know you haven’t made this claim, I don’t for one minute think Everton could possibly be liable when it comes to proceeds of crime or whatever. That’s like saying I would be liable if I took a loan from HSBC, and HSBC were later found to be involved in criminal activities. The FBI would not be looking at me in such circumstances!

I agree that in the case of Everton it’s not that the money has been secured against assets, so no issue of either party claiming Everton assets (unless we go into administration).

In this case the loan is the ‘asset’ and Leadenhall and A-Cap dispute who should have first claim on owning the loan.

The issue isn’t about who to pay so much as that with no clear owner, who do you negotiate with to try and reduce the amount to be repaid. It would seem the agreed terms are not that favourable eg interest rates and early payment clauses. So in the Friedkin example he deemed it a barrier to restructuring the clubs finances to be more manageable and walked away.

This is all conjecture and personal interpretation so may not represent the full story as I don’t have any inside knowledge.

 

[Dymak]

The security (per the chart) is the same as RMF, it's just junior to it.

The money is owed, I'm not sure why anyone would question that.

The matter is who it's owed to. If Friedken wanted to settle that debt now (I agree I doubt we will be paying the full amount back) who would he negotiate with?

Again, it's the uncertainty (risk) of the situation that would scare a buyer off.

If a prospective buyer wants to take that risk on and give Moshiri the payout he desires, then more power to them. We haven't seen evidence of that yet.

Fair enough, and it’s good to clarify their actual security. Although it sounds like 777 have accepted a junior level of security that the likes of Leadenhall find unacceptable, inasmuch that the same security is being used twice.

If the contract says we need to pay back 777’s successors, then that’s who the money is owed to in my view. I don’t see any situation where Everton end up paying Leadenhall via a contract that has nothing to do with them.

Regardless, I don’t see that much uncertainty. It is certain that Everton will either have to pay back all of the money that they owe (so bloody what, that’s standard practice ffs), or Everton will benefit from only paying a fraction of what is owed.

 

[pfim]

Fair enough, and it’s good to clarify their actual security. Although it sounds like 777 have accepted a junior level of security that the likes of Leadenhall find unacceptable, inasmuch that the same security is being used twice.

If the contract says we need to pay back 777’s successors, then that’s who the money is owed to in my view. I don’t see any situation where Everton end up paying Leadenhall via a contract that has nothing to do with them.

Regardless, I don’t see that much uncertainty. It is certain that Everton will either have to pay back all of the money that they owe (so bloody what, that’s standard practice ffs), or Everton will benefit from only paying a fraction of what is owed.

This is the issue though. They can't negotiate a restructuring right now and feel confident that the party they're negotiating with own the debt.

Say Acap is willing to settle for an immediate payment of 100 million, and it turns out that Leadenhall is actually owed the money, the club would still be on the hook for the 100 million (and would have to get the 100 million back from Acap). The numbers are fictional but illustrates the uncertainty.

 

[Dymak]

I agree that in the case of Everton it’s not that the money has been secured against assets, so no issue of either party claiming Everton assets (unless we go into administration).

In this case the loan is the ‘asset’ and Leadenhall and A-Cap dispute who should have first claim on owning the loan.

The issue isn’t about who to pay so much as that with no clear owner, who do you negotiate with to try and reduce the amount to be repaid. It would seem the agreed terms are not that favourable eg interest rates and early payment clauses. So in the Friedkin example he deemed it a barrier to restructuring the clubs finances to be more manageable and walked away.

This is all conjecture and personal interpretation so may not represent the full story as I don’t have any inside knowledge.

I understand. But Leadenhall aren’t mentioned in Everton’s loan from 777, and they are not 777’s successors at this time. Quite frankly, they have sod all to do with Everton.

People are claiming that Leadenhall would have a right to claim money back from Everton (even if Everton had already settled with 777’s successors) in the event that they won some long-winded legal action that was settled in the future.

I don’t believe this to be true, as Everton would have fulfilled their end of their contract (which doesn’t include Leadenhall).

Leadenhall could not retrospectively seek money via a contract that has already been fulfilled, and has never involved Leadenhall. If Leadenhall did want to claim such money, they’d have to chase 777’s real life successors. They can’t chase a historic debtor that has already completed the terms of a historic loan agreement.

 

[Dymak]

This is the issue though. They can't negotiate a restructuring right now and feel confident that the party they're negotiating with own the debt.

Say Acap is willing to settle for an immediate payment of 100 million, and it turns out that Leadenhall is actually owed the money, the club would still be on the hook for the 100 million (and would have to get the 100 million back from Acap). The numbers are fictional but illustrates the uncertainty.

I feel their confidence in A-Cap being the successor and owner of the debt to be well founded, and the speculation that Leadenhall will somehow be able to chase historic debtors that have already fulfilled the terms of their contract to be extremely far fetched, in my humble opinion.

Leadenhall would have to chase A-Cap and not Everton in such circumstances, imo.

 

[Neiler]

Yes, thats what I thought as well. Though a few posters seemed to think that wasnt an option.

The fact as i see it is if TFG wanted to pay off the loan, they could have done so. Theyve chosen to walk away based on not wanting to provide any more short term capital.

Timewasters.

Putting £200 mill into an escrow account is possible but would be stupid mate.

Firstly - there is a strong chance 777 and ACAP themselves go into administration or are sanctioned - therefore as a buyer you fancy your chances of negotiating down your debt with ACAP better to get a bit of something now then a whole of something down the line. The bigger question there would have been who would have got that benefit Moshiri or The Fredkin group. However that's impossible now after the court ruling on July 10th.

Secondly - its really bad business to put £200 million somewhere, you have no control over, doing absolutely nothing for you, for an indefinite period of time. Its not an insignificant amount of money and their thinking is - they can use that to invest elsewhere for a return. Think about it logically - if they end up eventually buying Everton is that £200 mill better spent investing in the playing squad in terms of asset appreciation or even at Roma as opposed to sitting in an escrow account for years doing nothing. Putting in escrow is possible but its makes 0 business sense. Id query their competency if they did it.

Why would you anyway the loan doesn't fall due until 2026.

 

[AndyRJ]

I feel their confidence in A-Cap being the successor and owner of the debt to be well founded, and the speculation that Leadenhall will somehow be able to chase historic debtors that have already fulfilled the terms of their contract to be extremely far fetched, in my humble opinion.

Leadenhall would have to chase A-Cap and not Everton in such circumstances, imo.

As I understand it there is a court injunction against ACAP which I believe prevents them from negotiating a settlement on the loan or indeed allowing us to settle it in full.

Friedkin don't want to pay the full amount, which i assume would be £200m plus a large chunk of interest, so putting the money into an escrow account in the interim while the case goes through the courts is out of the question.

Then there are the potential issues with fraud, proceeds of crime act etc that could cost them more money and reflect badly on them in the long run. I assume their lawyers weren't able to get the responses they needed to questions asked on that front. Hence Friedkin stating that the whole thing was 'unresolvable'.

 

[jamieni]

The end game for him is to make the most money out of the deal (I know that seems obvious).

MSP: Minority stake until the stadium is complete and hopefully the value of the club appreciates to the point that he can take more money out
777: Sold to completely unworthy, in every sense, buyers because they differentiated themselves by paying him more than anyone else would (which ironically is a red flag)
Friedken: Perhaps you can say the 777 debt killed the deal, but he was still getting a payout and could have done more to close the deal.

In each instance, he buys himself more time by having the prospective buyers loan the club money. With Friedken, he bought another 12 months.

In your view does this improve his position in terms of selling down the line? I suppose the club is worth more with new stadium and better revenues etc but does the complicated debt scenario then become a negative for prospective buyers?

Seems totally doolally for him to have gone into business with 777 but there we have it.

 

[pfim]

In your view does this improve his position in terms of selling down the line? I suppose the club is worth more with new stadium and better revenues etc but does the complicated debt scenario then become a negative for prospective buyers?

Seems totally doolally for him to have gone into business with 777 but there we have it.

I would think at this point, with how far construction is, that the additional cash flows from BMD are already built into the valuation of the club. Valuations are opinions based on projections, obviously, so they will differ. It seems like Moshiri has a much different valuation of the club than anyone else, which is problematic when you're trying to sell the club...

The Friedken loan helps as we were in default (or granted a waiver) of the MSP etc loan. It buys him another 12 months to sort out the ownership situation.

From the outside, without having any information to the cash position, but basing on the comments made and the two debt maturities, there's less urgency to finding a buyer than there was 2 months ago.

 

[Dymak]

As I understand it there is a court injunction against ACAP which I believe prevents them from negotiating a settlement on the loan or indeed allowing us to settle it in full.

Friedkin don't want to pay the full amount, which i assume would be £200m plus a large chunk of interest, so putting the money into an escrow account in the interim while the case goes through the courts is out of the question.

Then there are the potential issues with fraud, proceeds of crime act etc that could cost them more money and reflect badly on them in the long run. I assume their lawyers weren't able to get the responses they needed to questions asked on that front. Hence Friedkin stating that the whole thing was 'unresolvable'.

That may be Friedkin’s stance, but I don’t agree with it. I can believe that this injunction may exist, but Everton’s maximum possible liability will only ever be to repay the loan in full. I don’t think Everton have anything to answer for when it comes to alleged proceeds of crime. If anything, we would be categorised as a victim.

 

[Goat]

I appreciate you all discussing the options DFG had available and I'm sure they looked at all options, but for now it seems as tho they just didn't want any piece of what could be a messy and drawn out legal battle.

 

[Hellerad]

Just a reminder. Unsecured debt is still debt. The distinction between secured and unsecured only matter at the point of bankruptcy/administration/liquidation.

 

[Dymak]

I appreciate you all discussing the options DFG had available and I'm sure they looked at all options, but for now it seems as tho they just didn't want any piece of what could be a messy and drawn out legal battle.

But Everton would never really be part of that legal battle, other than being referred to as a debtor, which everyone already knows about anyway.

The legal battle will only determine who is owed the money, it makes no difference to our liability. We borrowed money, and we will either have to pay it all back, or some of it back. The legal battle doesn’t change this.

 

[pfim]

That may be Friedkin’s stance, but I don’t agree with it. I can believe that this injunction may exist, but Everton’s maximum possible liability will only ever be to repay the loan in full. I don’t think Everton have anything to answer for when it comes to alleged proceeds of crime. If anything, we would be categorised as a victim.

Well he's got the money, so...I don't see how the club would be labeled a victim however, other than Moshiri's mismanagement.

We'll know if someone else puts a bid in and closes the deal. Although to me, I'm not sure that's going to happen for a few months at the very least.

 

[Goat]

But Everton would never really be part of that legal battle, other than being referred to as a debtor, which everyone already knows about anyway.

The legal battle will only determine who is owed the money, it makes no difference to our liability. We borrowed money, and we will either have to pay it all back, or some of it back. The legal battle doesn’t change this.

Evertons name will be dragged into this.