Kieran Maguire issues ‘risky’ Everton claim amid £250m talks
Everton could improve their balance sheet by taking out a loan – but that strategy comes with a financial risk attached.
That is the view of finance guru Kieran Maguire, speaking exclusively to Football Insider about the Toffees’ spiralling financial issues.
Everton have had pre-existing financial fair play problems exacerbated by the forced cancellation of Alisher Usmanov’s sponsorship deals.
Per the Financial Times on Wednesday (16 March), the Toffees are in talks over measures to offset the £250million they have lost across the last two financial years.
It is claimed that one option currently under discussion is increasing the club’s debt, while raising equity is also understood to be a possibility.
Maguire assessed the pros and cons of borrowing money to improve the Toffees’ balance sheet.
“The are merits to raising debt if you can obtain loans in a similar manner to Spurs,” he told Football Insider‘s Adam Williams.
“Those loans are interest-only for at least the next 15 years. Some of those loans aren’t repayable until 2051. That way, you have certainty of cash flows.
“Let’s say, for example, you buy a house for £200,000 and you borrow £150,000 and put down £50,000.
“If the value increases to £250,000, your equity doubles to £100,000. This is what’s known as a multiplier effect.
“By having debt involved in a bid, if you are an equity investor, it accelerates your financial return should you choose to sell the asset.
“That is the benefit from an investor’s point of view. The disadvantage is that it will come with a coupon rate as far as the interest charge is concerned.
“There will be interest to pay and the interest charge will be determined with regards to the market perception of risk in relation to Everton.
“Everton in the Premier League is far less risky than if they were in the Championship. The other con is that loans will eventually have to be repaid.”
Everton are currently 17th in the Premier League going into the international break.
Their next league match is at West Ham on 3 April.
In other news, pundit suggests “lazy” Dele Alli set for talks after “rocking up in a Rolls-Royce” to leave Everton fans fuming.