It has been revealed that Everton football club is planning to leave Goodison Park which has been home for more than 100 years. Under plans which have been in the pipeline for many years, the club will build a £300 million stadium at Bramley Moore dock on the Mersey. The deal itself is a little complicated to say the least and the fact the club’s billionaire owner is not contributing to the stadium funding is a little difficult to understand. So, how will Everton football club finance a move away from Goodison Park?
Local council backing
It is believed that the club will be working with the Liverpool City council to redevelop part of the docklands much sooner than expected. The owner of Bramley Moore dock, Peel Holdings, had planned to redevelop the area over the next 30 years but this deal with Everton/Liverpool City council would bring that forward. So, how is the deal structured and who will benefit in the longer term?
Despite the fact that Everton football club’s major shareholder Farah Moshiri is not contributing to the fundraising, despite his billionaire status, plans are already in place for the £300 million plus loans required. This will be structured using a Special Purpose Vehicle (SPV) company which would effectively allow Liverpool City council, one of the most asset rich councils in the UK, to act as guarantor for Everton football club.
Is the SPV safe for taxpayers?
Next Friday will see Liverpool City council debating the SPV arrangement with Everton football club. The SPV is being created and backed by Liverpool City council to obtain more favourable terms when raising the £300 million plus loans required. The lenders will acquire a 200 year head lease on the land being sold by Peel Holdings and lease the stadium to the SPV. The SPV would then sublease this to Everton football club for a period of 40 years.
This could actually be a very interesting deal for taxpayers because the council will not physically pay any cash into the SPV. However, the council would receive payments expected to be in the region of £4 million per year from Everton football club for acting as guarantor. There is has been no mention of redeveloping Goodison Park but no doubt this information will follow in due course.
Loan repayments
As well as the guarantors fee to Liverpool City council Everton football club will be repaying the stadium loans through the SPV. At the end of the initial 40 year lease period, assuming all loans have been repaid, the football club will have the opportunity to buy the remaining 160 years on the head lease from lenders. This should be more than incentive enough for Everton football club to ensure the loan is repaid on time and the security payment is honoured.
In addition to the security payments and the loan repayments, Everton football club will also be paying into a security package acting as a buffer in the event of non-payment of rent on the stadium. If for example the football club was relegated from the premiership this would have a detrimental effect on its financial position. If the club was then unable to meet its financial liabilities Liverpool City council would be forced to repay the debt, after acting as guarantor, but would become sole owner of the SPV, the stadium and the land. This in itself would have a significant value going forward so in reality there is a fallback plan.