VIEW FROM THE BLUE

Margin Call on the Everton Gamble

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It's taken a while – the best part of a decade, I'd say... and the mobilising power of social media, and two full years without the purchase of a single first-team player – for enough Evertonians to be fed up with what's going on at Goodison to do something meaningful about it and in a manner to turn the heads of enough "Blues on the street".

The Blue Union's headline-grabbing publication of a transcript of most of the pertinent parts of their private meeting with Bill Kenwright this past week may have been ethically questionable and enormously counter-productive to further dialogue with the Goodison administration – that's if they taped the discussions without the Chairman's knowledge; I don't know the full story here – but it threw aside the curtain and revealed more narcissistic, inconsistent, hubristic, even childish sides to avuncular old Blue Bill than many might have believed existed.

Along with a deeply disconcerting impression of a Chairman horribly out of his depth and either too petrified or too consumed by pride to bring himself to relinquish control of his beloved Everton – a view that many with sources close to the Club have been chuntering away about on the pages of ToffeeWeb, the People's Forum, NSNO, and parts of the Bluekipper forum for years now, dismissed as a bitter, BJ BK-hating fringe element – Kenwright's revelations laid bare the scale of the credit crisis engulfing Goodison and the Board's near-total inability to resolve it without taking on more and more debt.

With debts of £44.5m, net liabilities hovering around £95m per the 2010 accounts, Barclays threatening to pull the rug from underneath the Board if they don't start raising cash from players sales, and now, apparently, a fresh £13m loan added to the debt burden, the Club's immediate future hasn't looked so grave since the twin relegation escapes of the 1990s.

In a desperate chase for the elusive Champions League gravy train, the Kenwright Board has multiplied the debt, stripped the Club to the point where the only assets still at its disposal are Goodison Park and the players that make up a squad too small to sustain a consistent challenge across gruelling League and cup campaigns, and saddled the Club with a crippling payroll by raising the wage ceiling to unsustainable levels in recent years.

That's what we all wanted and tacitly supported, though, right? We'd finished in the top four once, done our best to keep up with the Joneses to assemble the best squad in a generation and, as we stood on the threshold of the 2010-11 season, the Champions League looked so achievable we could almost taste it.

But then it all came crashing down with the cold realisation that the team which had surged through the first half of 2010 on a run of title-challenging form didn't have what it took to withstand the burden of massive expectation; that the manager who had done so much to save the Club and restore pride on the Blue side of Merseyside lacked the crucial breadth of coaching skills, adventurous spirit, and ability to adapt, to rescue an appalling start to last season. Come January of this year, our financial situation was so tight that, instead of adding to the team, we had to sell and loan out players to bring in or save badly-needed funds.

In short, it was one big gamble carried out by the Kenwright Board at the behest of an impatient fan-base desperate for the Blues to keep pace with their peers in a Premier League drunk to the gills on BSkyB money and foreign investment. Like a gambler or desperate stock trader (let's not forget, they weren't alone in the Premier League) they took on more and more debt to fund an increasingly risky strategy. Had it paid off, it would have done so handsomely but now they face the big margin call and the inquisition as it all starts to unravel.

How you assess the recklessness or otherwise of that gamble depends very much on your opinion of Bill Kenwright himself; how much you trust his ability to run this great footballing institution – in the absence of any real knowledge of what role Jon Woods, Robert Earl and even Sir Philip Green play in steering the club, that's really where the buck stops... no matter how much the Chairman claims he should or shouldn't know about the minutiae of the annual accounts – and how much you believe what he actually says.

Bill Kenwright's credentials as a Blue-blooded Evertonian cannot be questioned. The man clearly loves the Club with every fibre of his being; he made enormous sacrifices to acquire the Club 11 years ago, appears to have made no money from his directorship, has made many a heart-felt gesture to ordinary fans over the years, and – given his opinion of his importance to Everton – I have little doubt that everything he does is done in what he believes to be the best interests of Everton FC. I don't hate the guy in the least – likewise, I have no personal gripe with Earl, Carter or Woods – I've never met him, and I'm sure if I did we'd get on very well, just as I did when I had a private meeting with Peter Johnson 13 years ago.

Unfortunately, with the exception of the appointment of David Moyes – which his most vehement and harshest critics will say was Walter Smith's parting suggestion anyway – the failures of Kenwright's tenure have superseded the successes. The unforgivable bungling over the deal with NTL was on his watch and the club's debt has spiralled out of control during the past 11 years as its tangible assets have been dumped to service that debt.

Bellefield is gone, the proceeds from the sale of which were touted by former CEO, Keith Wyness, as a key enabling factor in the Club's ill-advised Kirkby proposal but ended up being handed straight to the bank. The new training ground at Finch Farm, admittedly a glowing testament to Everton's tradition of excellence, is now another annual line item lease-back charge on an expense sheet totalling £85m.

The Kings Dock, a pivotal moment in the Club's modern history, is a painful apparition in the rear-view mirror; the Destination Kirkby farce a more immediate reminder of the ineptitude, desperation or self-interest infecting the Everton Board.

While the Kirkby debacle is now water under the bridge, it nonetheless crystallizes the debate over the transparency of the Kenwright Board in ways that the Kings Dock, Rooney controversy, and the Fortress Sports Fund ruse in isolation do not.

Firstly, because of the methods the Board employed in an attempt to railroad the project past the fans with a desperate spin campaign that helped secure a "Yes" vote in the ballot that included scare-mongering about the short-term viability of Goodison Park, blatant mis-representation of the financial benefits to EFC of the new ground, and outright fallacies concerning the financing of the scheme from Everton's side of the bargain.

Secondly, the questions that – while they remain definitively unanswered to this day (in addition to what exactly makes up that large £24m bucket listed as "Other Operating Costs" in the Club's 2010 accounts) despite the continuing efforts of KEIOC and the Blue Union coalition – cast doubt over just whose interests are really driving the Club:

• Was the motive for Everton's involvement in the proposed scheme borne out of an acknowledgement that it was the Club's only chance at securing a new stadium, because more powerful retail and entertainment interests were the driving force, or because the Club would be seen as more saleable asset with a new ground?
• Why did Knowsley Metropolitan Borough Council refuse to reveal the identity of an unnamed silent investor "not previously identified" with the Destination Kirkby proposal until, following pressure by the Information Commissioner's Office under freedom of information statutes, they coughed up an email between KMBC head, Sheena Ramsey, and Robert Earl. As someone who, as a director at Everton FC, had very much been "previously identified" as being involved with DK, was Earl put forward as cover for someone else with deep interests in the retail sector but with no interest in being seen to be an investor in Everton?
• Why was Kenwright telling shareholders at successive Annual and Emergency General Meetings, and again to supporters via the press, that Everton was for sale when the Destination Kirkby proposal specifically specified in black and white that none of the directors of the Club intended to sell their shares?
• And why, when pressed for an answer as to the price tag on the club (at the last AGM before the Board terminated them to escape further scrutiny) did Kenwright refuse to answer the question, eventually dismissing the shareholder in question by telling him that he was bored of the question?

Could it be that Everton FC hasn't really ever been for sale, that the distinction between a "24/7" search for 'investment' and a search for a 'buyer' is as important as many have said? If the Club wasn't for sale because that was what was required by the Kirkby exclusivity agreement, why not just say so?

Is the price tag that's been placed on the Club – rumoured at one stage recently to be between £150m and £200m – too high given the size of the debt and the complications of the stadium issue? Or are the terms of any sale so dependent on Kenwright sticking around that it has cut many negotiations for a takeover off at the knees? Bill has said that he'd gladly hand over complete control of the club if he could find a billionaire... but the theme running through the transcript of his chat with the Blue Union betrays a man who believes that Everton can't succeed without him.

It all comes down to what you believe and how much – and, sadly, not since his "absolutely definitely" speech to then Sky Sports reporter, Andy Myers, in the wake of the sale of Rooney to Manchester United, have I personally been able to believe a single word that has come out of Bill's mouth... a feeling that has only been reinforced by ensuing years of mis-information, half-truths and outright deception. "Watch this space!"

There was the galling fallacy that was Russian paper magnate, Boris Zingarovich, his son Anton and his "encyclopaedic football knowledge", followed by the despicable Fortress Sports Fund red herring, accompanied as it was by apparent bald-faced lies fed to supporters about money appearing in Everton's bank account "within 48 hours". Both episodes were part of the successful effort to oust Paul Gregg – rightly or wrongly (we'll never know), the one person on the Board willing to put forward an alternative proposal to salvage the Kings Dock scheme – and concentrate power into Kenwright's hands with the acquiescence of the great silent question mark that is Jon Woods. Fine and dandy if it was to ease out a director whose vision for the Club was a potentially damaging one but, in hindsight, to what end... because Bill knows best for EFC?

And the pattern continued during the Destination Kirkby debacle, where Kenwright allowed Wyness to blatantly mislead the supporters over the terms and benefits to Everton of the scheme, robustly defended it at the outset as the only answer to the stadium conundrum, and then, as the heat escalated from Evertonians who saw through the whole sham (including many people connected to this website), deflected criticism with his "I'm just a fan like you, what do I know about the ins and outs of the proposal?" fakery.

So, when faced with a Chairman I desperately want to believe – and believe me, I would like nothing more than to see him succeed as Everton Chairman and deliver everything he would want for the Club... but I just can't after so many years of broken promises and misleading rhetoric – and an absence of answers, it's rumours and insider whispers, so many of which end up being substantiated by fact down the road, that, when taken as a whole, start to paint a different picture than the one presented by Bill's Board.

Like the well-circulated one where Amanda Staveley, the British financier who is best mates with Sir Philip, did indeed find a billionnaire buyer for Everton FC in 2008 and that the Middle Eastern consortium completed due diligence and were on the brink of a deal before one side, believed to be Kenwright, pulled the plug at the last minute for reasons unknown. That Arab buyer? None other than Sheikh Mansour Bin Zayed Al Nahyan – the man whose bottomless wallet has propelled Manchester City into the Champions League.

Or the one that holds that Everton were ahead of Aston Villa on Randy Lerner's list, and that he approached the Goodison Board and got nowhere before turning his attentions to Villa Park.

I want to believe that there hasn't been either deliberate obfuscation or just plain ineptitude when it comes to handling these negotiations but a correspondence with an investment broker from September 29, 2008, (which, coming just two weeks after the collapse of Lehman Brothers and the height of the global credit crunch, would seem to suggest that there is money out there no matter what the financial climate) doesn't fill you with confidence.

In the exchange, screenshots of which that were included here originally have been removed due to legal considerations, the sender describes how initially positive talks with Bill Kenwright and Robert Elstone stumbled when they insisted on a Non-Disclosure document that "tied me up in legal knots" but also would have required the disclosure of the investment firm's Middle Eastern clients.

As the sender went on to say, "My clients from the Middle East (in common with everyone else I know there) do not sign deeds of Non Disclosure before seeing any information eg., an Information Memorandum." They left the negotiations with the impression that either a sale was not the Everton Board's intention, there was another "mates deal" in the background or the inexperience of the Club's lawyers "in the commercial space" were hampering their forward progress.

The exchange concluded with: "I’ll let you know in due course whether I am able to work around these barriers to doing a deal."

Clearly, the deal broker in question was never able to work around those barriers because Everton remains untouched and – with no publicly acknowledged interest in buying the club – the Chairman would have you believe, unwanted. Of course, even without the proof of the above emails, I wouldn't believe for one second that there have been no serious approaches from viable buyers over the past few years. Nor am I naïve or desperate enough to suggest that Kenwright should have accepted any of them if they weren't right for Everton – I'm as petrified as the next Evertonian of the club being sold to the wrong person – but I have yet to be shaken from the belief that Bill, or the Board in general, are either holding out for too much money or just plain don't want to sell.

And if Bill's first priority is EFC, why – as the club's financial woes deepen and the dangers that Moyes may not be able to adequately replace ageing members of his squad to keep the Club in the top flight in the coming years – have the current custodians not at least entertained the prospect of a rights issue? Answer: because it would dilute the value of their shares... and, even if Kenwright could stomach that, it's unlikely Mr Earl would be able to – particularly, as I suspect, he only came on board because of the possibilities presented by Destination Kirkby.

Lots of questions... very few answers... but Bill is running out of wiggle room now – and his proclamations that Everton are not a selling club will surely need to be adjusted, and soon. If we aren't, we should be.

With the 2011-12 campaign already off to a rocky start, the Champions League dream is over, replaced by growing fears that the stasis currently gripping the Club foreshadows Everton's inevitable decline. In just 12 months, the Blues' prospects have changed dramatically: from being a side highly favoured to seriously challenge the top four in 2010-11, to being one whose medium-term survival in England's top tier must now be in question if no significant investment is made in the club.

It's time to cut our cloth according to our needs, meet the "margin call" and safeguard Everton's future. There is no room now for bravado over keeping our best players. If Arsenal will pony up £15m for Phil Jagielka and someone will offer north of £20m for Marouane Fellaini, then you have to sell them before another year on their contracts cuts their value. I love them both but no player is indispensable at this point; the debt burden is the more pressing issue and there is no room for stubbornness, particularly if the Club's very ability to continue trading is under threat.

Reduce the debt and attempt to rebuild on a more economical footing. At the very least, if they're serious about selling the club, it would make Everton a more attractive proposition to potential buyers without crippling the first team. Realistically, it's all about tough choices and making some wholesale changes from top to bottom... but, while there is no appetite to do that at Boardroom level, the good ship Everton is sailing headlong towards the iceberg.

I am genuinely fearful for what the next few years hold for Everton if these drastic changes are not made. As CEO Robert Elstone admitted last year, we cannot continue in this vein for much longer... but where is the tipping point and will the Board know when we reach it? You see, Mr Prentice, an awful lot more than Steven Pienaar has changed in the last 12 months...

Update

I have to admit that I'm a bit taken aback by the reaction to this piece... as if the majority of it, including the various rumours and conjecture, wasn't already kicking around the Web on various Everton websites and forums and has been for a while now. Much of it lay behind the Blue Union's line of questioning last week.

Rumours are just that... rumours and it would be dangerous to take too much stock in them. The story about Sheikh Mansour approaching Everton before Manchester City has been circulating for a few months now and was raised again by a shareholder on the BBC Five Live's 606 programme last night suggesting it was fact, but I can make no claim as to its veracity nor to the one about Randy Lerner.

Nor would it be prudent to hold up the two emails cited in the article as some sort of smoking gun – they're not proof of anything on their own, just one side of the story from someone who may or may not have had an agenda of their own. I included them not as something to point to and say, "See! Here's definitive proof!" but as one more facet to the narrative I was trying to establish in making sense of all this.

The Board may well have had very good reasons for not wanting to sell Everton FC when the pressure was building on them to do so. After reading the transcript of his discussions with the Blue Union, I can imagine that it was Bill Kenwright's fierce ambition to bring the glory days back to Goodison, that he be at the helm when David Moyes lifted his first trophy as the Blues' boss. And until a year ago, that was still a tangible dream and we were all along for the ride, demanding big-money signings and high salaries to keep our best players.

Likewise, if they couldn't counsel a sale while Destination Kirkby was still alive because they were bound by the terms of the proposal then it's clear why they might have thrown obstacles in front of any negotiations with potential buyers.

But as we're squeezed into the thin end of the wedge, with our borrowing capacity frozen and Bill Kenwright at a loss as to why the club can't be sold, we Blues, desperately worried about the current predicament, just want to know the reasons why none of this was explained at the time and to get some of the answers that the Blue Union went in search of but didn't get.

With the exception of the Club's shareholders, we're not entitled to answers by any means but if Bill wants to count on the support of the supporters in what is shaping up to be a very challenging time, he may need to start filling in some gaps, particularly if some forced sales of our best players are required in the coming months.

No one should be under any illusions that running a Premier League club without the millions at the disposal of clubs like Manchester United, Arsenal, Chelsea and Manchester City is anything but a massive challenge and that the cost of doing business in those treacherous waters often entails questionable practices and keeping the fans in the dark.

But Everton needs the support of its fans right now, it needs them engaged and on board with the vision and the plan for avoiding the looming crisis and they can't do that if they don't feel like the Board is being open with them. That is all we ask at the end of the day.

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