In a further blow to the group that is hoping to buy troubled English Premier League team Everton, state authorities in Utah and South Carolina are pressing five insurance companies to decrease their financial stakes in the Miami-based investment firm 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 Football Club.
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.
A-Cap’s portfolio includes Sentinel Security Life, Haymarket Insurance, Jazz Reinsurance, Atlantic Coast Life Insurance, and Southern Atlantic Re, all found to breach the prescribed investment limits. The situation is further complicated by 777’s legal challenges and increased regulatory attention due to its diverse investment practices.
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.
The Premier League’s vetting process for new club owners has put 777’s bid under the microscope, amidst Everton’s financial struggles highlighted by their recent financial disclosures.
The Florida firm was started in 2015 by Miami dentist’s son Josh Wander and ex- Deutsche Bank’s Steve Pasko – and since then the 777 Re’s PE owners’ self-described mission has been to “build a self-sufficient company that is not dependent on banks and third-party investors in order to overcome the inherent compromises they saw in the prevailing model.”
The firm has certainly been keen on soccer investments – a successful Everton purchase would bring its stable of teams to eight – including well-known names like Italy’s Genoa, Hertha Berlin in Germany, Standard Liege in Belgium and Brazilian side Vasco da Gama.
Concerns have been raised over what some commentators are calling a pattern of late payments to 777’s investee companies, with Keiran Maguire, a lecturer in the management school at the University of Liverpool and a specialist in soccer finance telling the NY Times “It’s a red flag to a potentially more significant cash-flow issue, or incompetent management”.
Everton’s current owner Farhad Moshiri, has spent nearly $1 billion on the team since 2016 – and has already borrowed $25 million from 777 to help fund the club that is languishing just three points (one win) from the relegation zone of the English Premier League while facing a second potential points deduction of the season. Relegation (dropping to the next tier down) could cost the club $100 million in lost revenue.
