Analysis of Everton's Business position only highlights the sins of the past,
 says Paul Holmes 

 FOOTBALL BUSINESS: UNPALATABLE TRUTHS

With the members of the ESA and other interested parties collectively being asked to consider funding a £15M rights issue, it is important that Evertonians understand how we got here, and who was responsible.  These factors are crucially missing from Ian Macdonald's report, which casually absolves the Board of any culpability.  To have history airbrushed so casually, particularly given its timing, is an insult. 

There are other choice statements in the commentary that need some alternative light shed upon them:  

• The Board “think we're ungrateful” ... for what exactly?  Ruining a treasured institution inside three years?
• Kings Dock “a dead duck”.  It never had life other than in the minds of out-of-control delusional fantasists.  The money was never there; it was all a sham.  To hide behind increasing costs... but we digress.
• “Save the club from the abyss”?  The current Board have raced towards it, had a good look and due to their best efforts have ensured that's exactly were we're headed.  The Nationwide inside two seasons.

Ands what's this about players' salaries:  “What decent player would come to us for an average salary of of £750k — what top-class player?”  Well, we currently have sub-standard players on twice that.  Heh!  Super Kev!  It's your birthday, party like it's your birthday.  Please don't be concerned that all the season's revenue from the Park Stand pays your wages!

The average salary of a Premiership player is in fact below the sum quoted.  EFC therefore could build a very credible squad based on that salary level.  Are EFC not suggesting an internal salary cap of £20k per week?  If so presumably they have done their homework and know quality players are available at this salary level given the recent contraction in the marketplace.

Yobo`s signing is not fully paid up, therefore there was some serious misinformation regarding the amount available in summer for new players.  Please tell me Sean Davis was not a new twist on the Ravenelli episode?  His injury was hardly life-threatening.  EFC could have structured a deal on the basis of his recuperation.  Hardly ground breaking. 

The Business Model

In the expert's summary, he calls for investing in infrastructure and not new players.  Spot on, no arguments.  Then why request more funds for player purchases? 

• Work to a three-year plan?  Well that’s already past its sell-by date.  EFC were never working to a plan or blueprint, just a general “bumble” anyhow. 
• Shareholders to lead the campaign not to spend?  Well what's the point in exploring other methods of raising finance if nothing is going to be spent?  

The illustrated model is to raise £60M by 2005.  No chance; far too much blue sky.  Realistically what is achievable?  Perhaps 10-15% of this figure — obtained only by an increase in the cost of season tickets and walk-up revenue to raise an extra £4M.  With that we would nearly break even.  Simple.  Other TV/merit commercial opportunities... forget it! 

Charge more — let's see just how loyal we fans are?  Particularly in light of the not too sophisticated public auction caused by EFC (with the able assistance of his agent) for Rooney's services in the summer.  Oh and yes, we realise our Deputy Chairman gets a feeling that he can't explain every time he sees “the lad” in a blue shirt.  We're all familiar with the rules of Monopoly; it's called a Get out of Jail Free card, Bill.  Although perhaps not in this case.

The NTL Deal that never was

If anyone else mentions the failed NTL deal as the Holy Grail that could have saved Everton, then I'll lose the will to live.  Coming so close after the highly visible takeover by True Blue Holdings, they offered £5M for a 10% share of EFC — nothing more.  That valued the club then at £50M, significantly more than the wholesale price in relation to TBH's purchase of approximately 70% of the Club for around £20M.  If Kenwright used this as a hook to get others interested in investing then that is a matter between them as individuals.

The Millstone of Securitzation

“At the time it seemed good business sense to secure the funds through securitisation; now it seems a bad decision.”   So, after two years, the realisation now is that it’s a bit expensive?  Can this really be explained rationally?  Does anyone have trouble with the imagery that we were somehow hoodwinked by a “cheap suited salesman” into signing on the dotted line for 25 years at £2.5M in interest per year?  Perhaps Dunford at last reached for the NTL paperwork in his in tray and signed the Bear Stearns letters of agreement by mistake. 

At the time, EFC were desperate to realise £5M of capital and under pressure from their former bankers.  That’s why the decision was made to enter into the arrangement so hastily without much discussion or reference.  It also offered a fantastic and unmissable opportunity to sweep all the financial mistakes of the recent past under the carpet and break the chain of accountability revealed by anyone following closely the past 5 years of published accounts from EFC Co Ltd.

LONDON, England — 22 March, 2002 - Everton Football Club is pleased to announce that they have raised £30 million in new funding.  The financing, sole-lead managed by Bear Stearns International Limited, is a securitisation of Everton's current and future season ticket receipts.  The proceeds will be used by the club to repay existing bank debt, develop training facilities and make transfer funds available to their new first team manager, David Moyes.

The statement could not have been clearer — EFC get the opportunity to put their financial house in order by restructuring all debts.  No need to repeat in the near future a “Ball and Jeffers” exercise and all the sickening character assassination that accompanied it.  In short, we get time to rebuild and re-create on a solid financial footing, whilst putting down the foundations of one of the finest training/academy centres in the UK.

Nearly two years on, has the securitisation of all the debts led to an improvement in the financial state of the club?  Have funds been released for David Moyes?  Has the building of the “state of the art” academy commenced?  The fact that Mick Rathbone still has at his disposal at our “rehabilitation training and fitness centre”: a stretching rack, a blood letting bank and a leech farm tells its own story.

Perhaps Sean Davis took a look in the summer and very quickly had second thoughts.  It's hardly conducive to protecting the well-being of our prized young asset.  Who surely will, at some stage, need to enjoy the standards of recuperation available to Owen and Gerrard at LFC.  We shouldn't worry though.  His new employers will ensure he gets the very best at Man Utd.

Two years on from this exercise in supposed financial prudence, EFC have used the facility to singularly stay in business and remain arguably solvent.  There have been no extra funds for David Moyes.  EFC have managed to keep up the yearly interest payments to bondholders (well one; the others due inside a month) roughly £2.5M a year.  However, when your home ground can be considered collateral and potentially called in at any time, it does tend to concentrate the mind.  “You don't need £5M to buy a 5M player!”  That`s right Bill, highly quotable as ever; we prefer to conduct a little shell game and hand it over to bondholders every two years to cover up the financial mess you've got yourself and the club into.

It must be a crippling pain in the current cash-strapped circumstances when you hand over such a large sum to cover some of the outrageously poor judgements made in relation to financial decisions in the past.  It's impossible to imagine the feeling of utter abject failure.  Not using it for a healthy down payment on a Sean Davis or a Scott Parker is criminal, but to cover the tracks of a situation that was so needlessly created through misguided ambition compounds the pain and embarrassment.  However, when you're searching down the back of every polyester-covered seat in the Alex Young Suite for spare change to pay for Rooney's lost matchday balls, it illustrates the obvious predicament.

Since TBH took control, the inherited and documented debt of circa £13M was incredibly doubled inside 2 years.  The suggested inference at the time was that selling Ball and Jeffers would go a great way to wiping the slate clean.  Within a year EFC is then £30M in debt, that doubled again the next year, with the long term 25 years x £2.5M payments.

When Bill Kenwright, through the vehicle of TBH, took control of the club, he will have ensured that through his oft mentioned “due-diligence” exercise, he knew exactly the overall debt and the state of the finances.  Any pathetic re–writing of history does not wash.  The current “owners” of the club are solely responsible for the debt — not Peter Johnson or Walter Smith.  The club was not close to administration under Johnson.  He would have not let that happen given that he only had to step in with a smaller cash injection to protect his own valuable position.  EFC has sailed a lot closer to the abyss under TBH's control — a fact that many will testify to.

Securitisation is big business these days and surprisingly simple once you “get it”.  As house-owners, our own mortgages are traded in this manner unbeknown to most of us on a daily basis.  Bear Stearns have also identified the healthy growth market of stadia-building as a massive opportunity.  How gut-wrenching when you realise that LFC are also considering securitisation to obtain the funds to build their stadium.  They are attempting to secure £75M0.

However, here's the killer application in contrast to EFC.  Their repayments will be met by the extra 25,000 season tickets.  They get a new stadium, we get to pay off a mountain of debt created by the stupidity of the current directors; the comparison is a vicious blow.  Perhaps LFC will turn some "state of the art” Bose speakers in our direction on their opening day so we can hear the collective laughter from their management and boardroom as they finally leave us for dead whilst we entertain Port Vale.

They're not really considering allowing us to play at their new stadium, but Rick Parry is just too cute an operator to announce this until they have received their inevitable planning permission.  He'll play the political game up to the death.  They'd rather forego any handout from the council than share with us.  By the way, who at the council is suggesting that a huge handout would be provided?  Was any one else aware Mike Storey was now officially the Chancellor of Liverpool?

Everton fans, especially those who are shareholders, have every right to be very concerned about the recent past and how this once-great Club got into such a parlous state.  Questions still need to be asked, no matter how discomforting for the establishment.  And their answers need to be heard and analyzed by the fans who will be the ultimate judges.

Paul Holmes
18 February 2004

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