Roll up. Roll up. 777 Partners are being forced to auction off all of their shares in all of their football clubs, with a sale to be completed this week.
By Paul Brown and Philippe Auclair
Tomorrow, on Friday 6 June at 10:00 Eastern Time in the USA at the offices of Cadwalader, Wickersham & Taft LLP in New York, a public auction will take place.
Up for sale are all the shares still held by 777 Partners in Genoa CFC, Sevilla, Standard de Liège, Red Star, Vasco da Gama, and Hertha Berlin. “Qualified bidders” are invited to submit offers by Zoom if they cannot attend in person.
Read also A letter from Philippe Auclair
How did it come to this? After all, back in August 2023, hadn’t Josh Wander, the co-founder of 777 Partners, rhetorically asked the Financial Times: “Is there anyone in the world that’s been more serious about buying football clubs in history?” To which the answer must now be: “Yes, probably”. The sad truth is that the company has been dying a slow death for months as creditors close in and judgements pile up ahead of what is now an inevitable bankruptcy, and for the football clubs at least, time has caught up with them. Josimar first revealed how, despite claiming they only spent their own money, 777 Partners were actually being secretly bankrolled by New York insurance firm A-CAP, which funded a series of risky investments Wander and Steven Pasko’s firm made in football as well as other industries like aviation, fintech and litigation finance. Those investments almost all failed so badly that there is little left of the company.
But it is one specific loan among many that A-CAP is now calling in here. It began as a simple 23 million-dollar facility made to a 777 Partners affiliate called Nutmeg Acquisition. But as more and more cash was needed to keep a growing stable of loss-making, debt-ridden football clubs afloat, it quickly ballooned. We know from a published analysis of A-CAP’s books carried out by the Utah Insurance Department that this 23 million-dollar loan has since been amended more than a dozen times, extending its maturity date, deferring or capitalising the interest, and increasing the outstanding balance. As of 31 December 2024, that outstanding balance stood at over 350 million dollars.
The auction
Pledged as collateral on the loan was everything held by Nutmeg – which includes all of the shares in all of the clubs still owned by 777 Partners (their shares in Melbourne Victory have already been disposed of). As a result of A-CAP suddenly now foreclosing on this loan, all of this collateral will be sold “to the highest or otherwise best qualified bidder” by the close of Friday’s auction, according to a court filing. The winning bid will be chosen at the “sole discretion” of the Secured Party (A-CAP’s affiliate ACM Delegate), the notice of auction says. A-CAP also reserves the right to cancel the sale without notice, or to adjourn it to a future date.
If this sale goes ahead, it will have far-reaching consequences for all of the clubs. And it was initially feared by some sources Josimar spoke to that it would have implications for Everton too, as it was via Nutmeg that 777 Partners, who were at the time trying to buy the Toffees, loaned the Premier League club around 200 million pounds (funding which ultimately came from A-CAP’s insurance policyholders). However, while the Friedkin Group settled this debt when they eventually bought Everton instead by offering 60 million pounds in cash and 130 million pounds-worth of preferred equity and warrants, none of this went to Nutmeg. Instead, it went straight to A-CAP. If that preferred equity in Everton had been allowed to go to Nutmeg, it would be by far the most valuable portion of Friday’s auction.
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“A drop in the bucket”
A-CAP, itself just trying to survive being dragged down along with the collapse of 777 Partners, has actually landed itself in hot water with this auction. That is because Leadenhall Capital Partners, upon being informed of it, immediately filed a Contempt of Court motion against A-CAP in New York. A rival lender to 777 Partners, Leadenhall claims it is owed over 650 million dollars by the failed Miami firm, and that A-CAP’s chairman Kenny King is secretly running both companies and siphoning away assets which could be used to settle that debt. Leadenhall was granted a Preliminary Injunction by the New York court against the dissipation of 777 Partners assets by A-CAP, and claims that injunction has already been breached at least twice. Leadenhall now claims this latest auction of all the collateral in Nutmeg is also a breach. But it is not asking the court to block the sale – only to make sure that any price paid for those assets represents fair market value, and that the proceeds are retained for all creditors and do not end up funnelled directly or indirectly to A-CAP. In addition, Leadenhall wants the court to impose “coercive and compensatory sanctions” on A-CAP to the tune of 11.8 million dollars, and describes this figure as “a drop in the bucket” when compared to the “profits A-CAP has siphoned” from the 777 Partners companies which guaranteed its own lending to Wander and Pasko’s firm.
So what exactly would any “qualified bidder” be buying? How much are the various holdings in the six football clubs really worth? The shares in Genoa were diluted to less than a quarter of their original value when a Romanian group led by Dan Sucu came in with a capital raise which gave them majority control. A-CAP failed to annul this takeover in a civil court, but a separate, independent criminal investigation into the matter was launched and is still ongoing in Italy. The shares in Vasco are the subject of an administrative court order in Brazil which stripped 777 Partners and A-CAP of any control in the club. The minority shareholding in Sevilla is similarly of suspect value because of a legal dispute involving the Nutmeg subsidiary Sevillistas Unidos. Hertha Berlin and Red Star narrowly avoided relegation to the third tiers in Germany and France respectively this season. And Standard’s financial position remains precarious, despite an announcement that the club would be taken over by a Belgian consortium – with money seemingly advanced by A-CAP themselves – in a transaction which will presumably not now take place.
In addition, there is a large debt pile weighing heavily over the whole portfolio. And remember, A-CAP have been trying unsuccessfully to sell these clubs individually since they first instructed investment bank Moelis to help them do so months ago. When they did actually manage to dispose of Melbourne Victory, they did so for no return at all. Under these circumstances, it will be interesting to see what bids actually do come in at auction. It would surprise no-one, however, if A-CAP themselves submit a “credit bid” on these assets – whereby a secured creditor can use its existing debt as currency in an auction to acquire the assets of the debtor. Essentially, this would mean A-CAP purchasing its collateral (the clubs) without having to pay any additional cash. Given that a public auction process like this usually involves a 45-day notice period, and given that this Notice of Sale was only posted on 29 May and does not seem to have been widely publicised, it is open to question just how seriously A-CAP have tried to drum up interest.
If an outside buyer were to bid, another consideration for them is that in the event of 777 Partners going bankrupt, a US Trustee would be appointed to navigate the growing list of creditors with a claim, and would have the power to unwind any sale that takes place on Friday if necessary. Josimar has been told that there is at least one group of creditors currently pushing to force just such a bankruptcy to occur, and that there may be others.
All this is going on at a time when both 777 Partners and A-CAP remain under investigation by the Department of Justice and the Securities and Exchange Commission. But the timing of the auction is even more interesting when you consider the latest developments involving the Utah and South Carolina state regulators of all five of A-CAP’s insurers.
To recap, both Utah and South Carolina issued Orders at the end of last year stating that A-CAP’s insurers, largely because of the vast sums they had loaned to 777 Partners, were in such dire financial condition that they posed a danger to the public and must cease writing any new business. A-CAP challenged this in court, and scored what appeared to be an early victory over South Carolina, overturning their Order pending an appeal. But Utah continued to fight their case, going a step further by issuing a Rehabilitation Order accusing King and others at A-CAP of a range of offences, and a trial was due to take place in May. This was then pushed back to August at the request of the judge. But since then, the tide appears to have turned in A-CAP’s favour.
First, Utah agreed to mediation. Then, on 23 May, Judge Amber M. Mettler signed an order to dismiss the case. Utah’s petition two months earlier had demanded that Regulators be allowed to “take possession” and “control” of the three A-CAP insurers in its state. That will not now take place. So what happened? It appears a settlement has been reached, though quite what this can possibly be remains a mystery given the serious nature of the allegations made by the Department. Previously, A-CAP would have needed Utah and South Carolina’s permission for this auction, as it was under a supervision order from both states. Now, it does not. It is unclear whether South Carolina, which was working closely with Utah but did not join them in mediation, will take any further action against the two A-CAP insurers on its books. But for now, the pressure from Regulators appears to have eased, and for fans of the football clubs still under the influence of what’s left of 777 Partners, all eyes will now be on Friday’s auction in New York.
