No football club is successful without hard work.
- Oct 19, 2015
In this article in the Echo, "financial guru" Joe sets out the basis of the deal:One of the Echo pieces characterized that as Everton paying £6-7M of interest per year - which at the 2.38% you note is going to be very close to the Year 1 interest rate obligation. It was the line that made me curious as to whether or not it was concessionary or even 0%, because it implied the City could just keep that interest payment.
If your guess is correct, that Everton will be serving principal and interest of ~£15M per annum for 25 years, plus paying a fee of £6-7M to the City, that equates to borrowing at about 6.5%. For an infrastructure project like this, that is rather poor - especially if you have to pay a second tranche of lenders an additional premium for the mezzanine position of £220M.
That's some real financial wizardry right there, an at best mediocre interest rate for part of what you need, while compromising a city's credit rating. Maybe defensible from the city's point of view, as long as it all works out right.
It is sort of striking in all the sources I have read that it is utterly unclear on how the principal is getting paid back.
"So what we are doing is looking at borrowing from the Public Works Loans Board, £280 million over 25 years and then we are going to loan it to Everton and that rate is cheaper than what they can get at a commercial level from a bank.
So we are going to be borrowing at about 1.2% and we will be charging Everton at about 3.4%, so it means that we will make £7m a year profit that comes into the council coffers every year and the loan will be repaid by Everton and not by us."
From this it is evident that Generous Joe is wildly inaccurate when it comes to his knowledge of the interest rates available from the PWLB, or the commercial rates currently available. So much for his grasp of financial matters.
However it does tend to conform to my understanding of the deal in that the £6.5 million to £7 million is the premium everton will pay over and above the repayments to the PWLB.