777 Partners’ Everton takeover faces further delays
US investment company 777 Partners’ bid to buy English Premier League football club Everton faced more uncertainty after the Miami company asked for more time to complete the deal.
777 Partners, owner of troubled Bermuda-based long term re/insurer 777 Re, had been seeking to close the long-running takeover saga by the end of this week, with part of a £158m loan to MSP Sports Capital and two local businesspeople, Andy Bell and George Downing, due to be repaid by Monday under conditions set by the Premier League, The Guardian newspaper reported.
The Guardian said Sky News had reported that 777 requested an extension as it seeks to raise the funds needed to acquire Farhad Moshiri’s 94.1% shareholding in the troubled club. It is unclear whether MSP, who withdrew from talks to acquire a minority stake in Everton last year, Bell and Downing have responded to the request.
Moshiri agreed a deal with 777 eight months ago but the company, which has faced numerous legal challenges in the US and recent financial difficulties, has been unable to conclude the takeover, The Guardian said.
The Premier League said last month that it was “minded” to approve the takeover providing several conditions were met by 777. These include part repayment of the MSP/Bell/Downing loan by 15 April, the deposit of £60m into an account for use by Everton and the conversion into equity of at least £160m the company has already loaned to the club. Another condition requires 777 to prove it has sufficient funding to complete the construction of Everton’s new stadium at Bramley-Moore dock.
Sky reported that 777 has told the Premier League and prospective lenders it now expects to complete the Everton takeover late next month, having approached several potential lenders for help in funding the deal. One is understood to be Blue Owl Capital, a US-based private credit provider.
Blue Owl Capital announced plans to buy Bermuda-based long term re/insurer Kuvare Re’s asset management wing Kuvare insurance Services LP for $750 million.
Everton is battling for Premier League survival after being docked eight points for breaching profitability and sustainability rules.
Earlier this month, it was reported that state authorities in Utah and South Carolina were pressing five insurance companies to decrease their financial stakes in 777 Partners. The news broke following the exposé of a confidential memo accessed by the Financial Times.
The regulators say the move highlights their states’ efforts to safeguard the financial interests of individuals depending on annuities and insurance products, particularly retirees, widows, and orphans. This step is seen as a response to 777 Partners’ aggressive expansion, including its attempts to acquire Everton.
The targeted insurers, all part of the A-Cap group, collectively manage assets totaling $11.5 billion as of the end of the year, with $2.9 billion invested in 777-affiliated entities. These investments have caught regulators’ attention, and raised concerns due to the regulatory limits on single-issuer exposure, which A-Cap’s allocations have significantly exceeded.
In response to what they perceive as investment threshold breaches, regulators from both states have initiated “supervision orders” to compel A-Cap to address these regulatory breaches. Despite A-Cap’s contention that the memo “grossly overstated” their exposure to 777 and their optimism for a swift resolution, their compliance with single-issuer limits is under scrutiny.
Despite these challenges, A-Cap maintains that its operations adhere to strict standards of responsibility, emphasising its cooperative stance with regulatory bodies and its ongoing efforts to adjust its investment focus. The company is actively working to divest its concentration of 777-related investments, aiming to align with regulatory requirements promptly.
A major funding source for 777 Partners is its Class E Bermuda life reinsurer, 777 Re which was recently downgraded to C- by AM Best. This life insurance and annuity reinsurer, has been taken under the administrative control of the Bermuda Monetary Authority (BMA).
These developments have cast significant doubt on 777 Partners’ ability to complete the Everton takeover. The BMA’s action could restrict access to approximately £2.4 (US$3)billion in funds necessary for the acquisition.
Ratings agency AM Best downgraded 777 Re’s ratings for a second time in three months in February.
It downgraded the company’s financial strength rating to C- from B and maintained its under review with negative implications status for these Credit Ratings (ratings).
“The ratings reflect 777 Re. Ltd.’s balance sheet strength, which AM Best assesses as very weak, as well as its marginal operating performance, very limited business profile and weak enterprise risk management,” AM Best said.
“The rating action reflects a revision in 777 Re. Ltd.’s balance sheet strength assessment to very weak, due to a significant exposure to less liquid affiliated investments.”
AM Best said the company is working with the BMA to reduce its exposure to affiliated assets, which is the primary driver of the material decline in its risk-adjusted capitalization.
“Finally, the company’s risk management controls have shown some weakness, including the significant year-over-year increase in affiliated assets, which the company needs to address in the near term,” AM Best said.
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