777 Partners bid for Everton collapses
777 Partners, whose troubled Bermuda-based life insurance subsidiary 777 Re has suffered a ratings downgrade and legal challenges, is no longer a bidder for English Premier League football club Everton.
The bid to buy Everton, which brought the Miami-based investment firm to prominence, expired on May 31.
Everton said in a statement it is assessing "“all options for the club’s future ownership”. The Guardian newspaper reported that the club’s owner, Farhad Moshiri, was tied into a period of exclusivity with the troubled US investment group until May 31 and could not enter into alternative discussions. But 777 Partners’ purchase agreement with Blue Heaven Holdings for the sale and purchase of the majority shareholding in the club has now expired.
A club statement read: “The agreement between 777 Partners and Blue Heaven Holdings Limited for the sale and purchase of the majority shareholding in the club expired today.
“The club’s board of directors recognises the considerable level of financial support 777 Partners has provided the club over recent months and would like to take this opportunity to thank them for this. The club will continue to operate as usual, while it works with Blue Heaven Holdings to assess all options for the club’s future ownership. The board of directors would like to thank everyone connected to Everton for their patience over recent months and reiterate its commitment to providing further updates when it is appropriate to do so through the club’s official communication channels.”
Everton may now be bought by American businessman John Textor, who wants to sell his 45% stake in EPL club Crystal Palace. 777 Partners lent Everton more than $200 million. The club reported losses from 777 Partners, on top of other debts, and reported net losses of £89mn for the year to June 2023.
The end of the bid comes after 777 Partners last month called in turnaround and crisis management experts B Riley Advisory Services to help the company deal with accusations of fraud and the unravelling of the reinsurance financing that underpinned many of its acquisitions, the Financial Times reported.
The Miami-based group appointed a team from B Riley Advisory Services to assist with “various operational challenges”, according to a 777 memo reviewed by the FT.
“We have retained a team of professionals from B Riley Advisory Services (a division of B Riley Financial) to assist with managing through various operational challenges,” the memo said. It added that 777 was working to “rationalise” the business and “select the most profitable path forward for our investments”.
The appointment comes after London asset manager Leadenhall Capital filed a lawsuit that alleged that 777 co-founders Josh Wander and Steven Pasko were “operating a giant shell game at best, and an outright Ponzi scheme at worst”.
According to the Leadenhall lawsuit, filed in a federal court in New York in early May, Wander pledged more than $350 million in assets that “either did not exist, were not actually owned by Wander’s entities, or had already been pledged to another lender”.
777 Partners has said it “vehemently refutes” the claims in the Leadenhall court filing.
777 Partners has also come under pressure because US regulators have pushed insurance group A-Cap to cut exposure to the group. A-Cap has set out a plan to take back control of assets ceded to 777 Re, the Bermudian reinsurer that funded the Miami group’s football deals.
777 Re has seen its rating cut to C- by ratings agency AM Best in February and has been taken under administrative control by the Bermuda Monetary Authority.
AM Best said then: "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.
"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."
It said it had also adjusted its view of the company’s operating performance and business profile downward "reflecting its diminished ability to write new business while simultaneously planning to address existing liabilities".
It added: "The company is working with the Bermuda Monetary Authority to reduce its exposure to affiliated assets, which is the primary driver of the material decline in its risk-adjusted capitalisation.
"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. The ratings will remain under review with negative implications until the company successfully executes on its plan to reposition its asset portfolio and bring its risk management practices in line with AM Best’s expectations."
AM Best itself has run into a legal battle with another US insurance group, A-Cap Group, over its decision to lower ratings of the group's operating subsidiaries, which it says are exposed to 777.
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