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EVERTON pounds 20m LIFELINE: pounds 20m will buy extra breathing space; Business Editor Bill Gleeson reports on how Everton could best spend Bill Kenwright's cash injection.

Byline: Bill Gleeson

EVERTON chairman Bill Kenwright's promised pounds 20m cash injection would throw the club a lifeline that could be enough to see it survive in the Premiership for another season.

We are promised that the investors have begun the process of due diligence, and that their identities will be revealed when that process is completed at the end of this week.

In most corporate transactions, it is normal for the terms of any deal to remain up in the air until after the due diligence, which looks at cash flow, profitability, asset valuations and club debts, is concluded. The whole thing could fall through yet.

But let us suppose that an agreement is finalised. How far will pounds 20m go at Goodison Park?

Everton has in excess of pounds 40m in debts. Around pounds 30m of this is a long-term secured loan. The club only needs to find pounds 2. 4m a season to service this debt, so it is not a crucial issue, as it won't bankrupt Everton.

On top of that, there is a pounds 5m overdraft facility. Everton's bank, Barclays, is understood to be concerned that the club can see through the whole season while remaining within its limit. As we revealed recently, the bank has warned that, should Everton overstep its limit, it will consider placing the club in administration. One source close to the board has told the Daily Post that the crunch time for cash flow could be just two months away.

Up to pounds 10m is due to other football clubs this coming season for past player acquisitions.

Football finance expert James Dow, who runs corporate finance firm Dow Schofield Watts, in Warrington, explained that such debts come first in the queue of demands on club cash.

He said: ``These debts will have to be settled. Existing obligations to football creditors are well protected. Clubs owed money can go to the authorities to get their money. It's not discretionary. ''

Mr Dow also believes that any new money could end up doing no more than paying the club's wage bill. ``That's got to be significant. Almost certainly the club is continuing to consume cash at the basic operating level. ''

He added that he would not expect a due diligence exercise to be completed in the space of a week, as has been suggested.

``It would be nice to see it resolved, but I don't see it done in a week. A month is nearer the mark, '' said Mr Dow.

With all the competing demands on the club's finances, one insider at Goodison told the Daily Post that he expected manager David Moyes would only see around pounds 7m of the new cash for the squad.

The bitter pill for Evertonians to swallow is that this pounds 20m is, at best, only enough money to stave off the club's financial problems for just another season.

After that, it is almost certain that the colossal weight of paying the pounds 35, 000 a week salaries of strikers Duncan Ferguson and Kevin Campbell will be lifted once and for all as their contracts come to an end. That will ease the pressure to some extent, but it appears increasingly likely that it will have to cash in on its most valuable asset -- Wayne Rooney.

CAPTION(S):

Paul Gregg, left, and Bill Kenwright sat close to each other during Everton's defeat to Arsenal on Sunday; Six of the best -- Everton's attempted forays into the transfer market; CARRICK: Undecided; LAURSEN: Joined Aston Villa DAVIS: Joined Tottenham; COLIN: Stayed at PSV; FLAMINI: Joined Arsenal SAVAGE: Stayed at Birmingham
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Publication:Daily Post (Liverpool, England)
Date:Aug 17, 2004
Words:600
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