PSR could be ripped up as Everton battle with £200m issue - Kieran Maguire
09/13/2024 12:00 PM
Everton fans are probably sick to the back teeth of hearing about PSR and have more pressing things on their mind in the midst of their takeover saga with John Textor.
But if and when the American multi-club tycoon takes the wheel on Merseyside, Profit and Sustainability Rules mean that he will not be able to spend freely.
Last season, Everton faced two separate sanctions for breaching PSR in previous campaigns and the Toffees now face a third PSR hearing later this year.
To explore the latest with the Everton takeover and how it intersects with Everton’s existing PSR anxieties, TBR Football spoke exclusively to Liverpool University football finance lecturer Kieran Maguire.
The £200m Dan Friedkin issue
Before John Textor, there was Dan Friedkin.
Like Textor, Friedkin had entered into a period of exclusivity with Everton owner Farhad Moshiri and was confident enough that a deal could be done that he lent the club £200m to meet its cash flow needs.
Now, as well as a legally complex situation involving a third previous Everton bidder and lender in 777 Partners, Textor must come up with a plan to eventually settle that debt.
“Given that the Friedkin group lent Everton £200m and then walked away, John Textor is being unduly confident of completing the acquisition,” said Maguire.
“It could be that he is choosing to disregard legal advice. It could be that he is more of a high-risk investor. It could be that he knows something about the 777 Partners situation than everyone else does.
“Off the back of that, he is prepared to invest money in confidence that there will be no repercussions from the Moshiri links to 777.
“If this does go ahead, I think most Everton fans will be cautious.
“It can’t be worse than what they have had to deal with from Moshiri in recent year, you can understand the cynicism when someone as brash as Textor starts making these proclamations.
Textor ‘90% confident’ of Everton deal – but will it get done?
In a recent interview, Textor said he was “90 per cent” sure that he could get a deal to take over Everton done in the coming months.
Everton have since taken the unusual step of responding with an official statement, saying that talks are progressing well but that Textor’s view is not a representation of where they are at with negotiations.
Textor is famously outspoken and, while this has endeared him to supporters of some of the clubs he owns, there are others for whom this is an issue.
Asked about Textor’s bombastic approach to handling the media, Maguire said: “In M&A deals, the important thing is to get it over the line.
“There have been many would-be acquirers of clubs such as Chris Kirchner, who came in, made a lot of noise and then failed to complete the deal.
“We’ve seen 777 be very bullish about 12 months ago and then the deal started to unravel.
“Then there are people best viewed with a huge degree of caution like Laurence Bassini and William Storey, who have made noises about acquiring clubs historically only for the deals to collapse without much progress being made.
“Textor can at least claim to have already acquired clubs previously, although his relationships with the fanbases of some of those clubs is volatile to put things mildly.
“After all that Everton fans have been through in recent years, they want some stability and certainty with regards to club they love.
“Textor will never be dull as an owner, but a more sedate and circumspect approach might be better for all parties involved.
The future of PSR
Continuing the theme of Textor’s outspoken approach, the 58-year-old recently went on something of a tirade against PSR, or financial fair play as it used to be known.
He also namechecked Everton’s rivals, Liverpool, in that critique, saying they were of the clubs who unduly benefitted from the system.
“It seems very strange that the cost control measures written up over a decade ago and that could be ripped up quite easily by Premier League owners if two-thirds of them choose to do so still remain in place,” said Maguire.
“PSR and their equivalents in Europe or in the EFL, all of these measures were introduced at the behest and request of club owners and were approved by club owners.
“Now that the rules are starting to show their teeth and lead to more sanctions, some clubs who historically have had a break-even approach financially are now backing out.
“That is because they have new owners and want to spend as much money as possible, in some cases.”
Cash flow, Bramley Moore Dock, and the possibility of even more debt
Perhaps the most pressing element of the takeover is Everton’s cash flow needs given that it appears that Moshiri’s money has dried up.
CEO Colin Chong has said the move to the new stadium at Bramley Moore Dock is fully funded, but there are still associated costs and a payroll to fund.
Most analysis suggests they have a few months to find a new source of funding before they start to face issues.
Could they take out yet another loan, adding to the £600-700m debt pile they already have? Maguire analysed the situation.
“In terms of Everton’s liquidity needs, the club did make some sales during the summer window.
“It also has instalments due on players sold in previous windows. It has also received season ticket money from fans and the first instalment of the 2024-25 broadcast deal.
“All of these are positives. The downside is that the club has a payroll bill probably in the region of £12-14m per month.
“In relation to Bramley Moore Dock, there are further costs being incurred before the stadium can be fully signed off.
“We don’t know how significant they are but they have to be paid or their contractors won’t do the work.
“All of this has a negative drain on cash, so it’s probable, although not certain, that Everton will need physical cash to pay for its operational and infrastructure requirements before the end of the year.
“Realistically, that money is not going to come in the form of a share issue from Moshiri.
“The alternative is that Textor or someone else is going to have to provide fresh loans. But remember, these loans are likely to be junior forms of debt and will be classified as high-risk.”
