In mid-May last year Everton FC was fighting for its life in the world’s richest football league. The nine-times English champions had just lost by three goals to nil against Manchester City, putting them at risk of relegation. Things were looking bleak.
Across the Atlantic, however, a group of Miami investors drawn to sports and high stakes business bets fuelled by other people’s money saw something else: opportunity. To the men behind 777 Partners, the lossmaking club looked like a lottery ticket that, if it paid out, could solve problems elsewhere in their operation.
Senior executives at the firm and its football investment arm gathered that month to debate a bid for Everton, a far bigger prize than the other teams 777 had snapped up in Italy, Brazil, Germany, Belgium, France, Spain and Australia.
Josh Wander, the 777 co-founder who in a few years had gone from partying with basketball star LeBron James to running one of football’s biggest “multi-club” owners, pitched Everton as a solution to a problem inherent to such second-tier trophy assets: their need for cash. The Liverpool club’s place in the elite Premier League would not only attract new investors: it would also help 777 raise funds for the rest of its sporting empire.
Not everybody at the meeting was convinced. Don Dransfield, a high-profile hire from the group that owns Manchester City, asked whether buying Everton could instead end up damaging 777’s ability to fund the other clubs.
Dransfield, who declined to comment, was overruled. Everton narrowly avoided relegation and last September 777 agreed to buy the club from British-Iranian owner Farhad Moshiri.
If fans felt relief at the prospect of an end to Moshiri’s free-spending reign, which had brought high-profile players but little on-pitch success, it was soon replaced by questions about the prospective new owners.
Wander brushed off as “absurd” the doubters’ fears that 777 was not a serious buyer. Talking to the Financial Times before the deal, he asked: “Is there anyone in the world that’s been more serious about buying football clubs in history than Josh Wander?”
Eight months on, the deal is in limbo, forcing Everton to sell players this summer and casting uncertainty over other parts of 777’s portfolio.
Despite lending more than $200mn to Everton to help pay bills at the cash-strapped club, 777 has so far failed to meet the Premier League’s conditions for completing the deal, such as clearing debts Everton took on to build its new stadium.
The glare from association with one of the world’s most watched sporting contests, meanwhile, has invited damaging scrutiny of the once obscure firm. Lawsuits are piling up from 777 creditors, chasing unpaid debts and airing allegations of fraud.
Instead of collecting on a winning lottery ticket, 777 called in restructuring and bankruptcy experts this month, to help it work through “operational challenges”, “rationalise” its business and “select the most profitable path forward for our investments”.
As 777’s problems have mounted, its reliance on a web of insurers to fund its deals has raised questions about regulators from Bermuda to US states, suggesting that on their watch everyday Americans have become unwitting financiers of an unsustainable spending binge.
Josh Wander had already made one lottery fortune. He was just 34 when he and former banker Steve Pasko led the buyout of SuttonPark Capital in 2015 and began building what became 777 Partners. Their speciality was investing in esoteric financial assets such as “structured settlements”. Offering lottery winners or accident victims cash upfront in exchange for them handing over annuities designed to pay regular income over many years “created a lot of excess cash”, Wander said last year.
More traditional routes into finance may have been limited by Wander’s 2003 cocaine trafficking arrest — a “stupid college thing” for which he was put on probation, he told the FT. Pasko was the “grey haired . . . father figure” as they accumulated about 60 businesses in industries from aviation to insurance and media, according to a person who knows both men.
777 Partners’ annual revenues shot from $43mn in 2016 to $489mn in 2019, according to fundraising documents reviewed by the FT. Over the same period, its assets multiplied from $310mn to more than $3.4bn.
A key source of funding emerged in 2019, when 777 set up a reinsurer in Bermuda, the sunny British overseas territory once famed for shipwrecks that has become a hub for managing risks for the world’s insurers.
Long established as a centre for reinsuring properties against hurricanes, Bermuda also has a growing, but lower-profile, life reinsurance sector. The new 777 Re was joining a rush to the island that put the Bermuda Monetary Authority, its financial regulator, in charge of more than half a trillion dollars in offloaded US life and annuity reserves by the end of 2021.
777 Re’s pitch was simple. Insurers would “cede” assets through reinsurance deals with the Bermuda-based entity, which would take on higher-yielding investments that matched the long-term liabilities to their customers: typically widows, orphans and retirees.
The reinsurer presented familiar faces to the regulator. 777 Re’s chief executive was Will Rinehimer, a veteran of Bermuda’s life sector and an adviser to government, while Shelby Weldon, who had spent 15 years at the BMA, later became an independent director.
Fundraising documents from 2021 showed that 777 Re would provide the balance sheet for 777 Asset Management, a 777 Partners affiliate. The presentation also laid out an aggressive approach that targeted returns on equity exceeding 40 per cent by allocating more of the group’s investment portfolio to “proprietary assets” while cutting down on the safe but pedestrian government and corporate bonds insurers traditionally favour.
Three groups climbed aboard; Singapore Life; Silac, a Utah insurer run by a friend of Donald Trump who had led another insurance company that collapsed into bankruptcy; and A-Cap, the New York owner of a handful of insurers and reinsurers which was led by industry veteran Kenneth King. Every month customers across America contributed to life insurance products, probably unaware that some of their money would end up funding 777’s ambitions.
In King, Wander found an enthusiastic partner. A-Cap became a major lender to 777, alongside the billions ceded to 777 Re. It made King a significant stakeholder but also magnified the risk for an insurance group that amassed $11.5bn in assets by 2023.
As Wander prowled the world for more deals, he pursued a trade that was gaining popularity with institutional investors. US investors’ £2.5bn takeover of Chelsea and RedBird Capital’s €1.2bn acquisition of AC Milan had grabbed most of the headlines, but others were clamouring to put cash into teams big and small.
When the Covid-19 pandemic struck, forcing matches to be played in empty stadiums, the loss of ticket revenues prompted many clubs to seek capital. 777, attuned to the value of cash to the desperate, stepped in.
Wander and Pasko’s firm had already taken a small stake in Spanish side Sevilla in 2018. But in September 2021, it embarked on a buying spree with few precedents in international football. In little more than a year, 777 agreed to hundreds of millions of dollars worth of investments in Italy’s Genoa, Brazil’s Vasco da Gama, Belgium’s Standard Liège, Germany’s Hertha Berlin, France’s Red Star, and Australia’s Melbourne Victory.
777 found other bargains, including stakes in two budget airlines — Canada’s Flair and Australia’s Bonza — and a deal to take scores of Boeing’s ill-fated 737-Max jets. But it was an investment strategy others saw as flawed, arguing that it relied on turning around companies, many of which didn’t have the cash flow to service the debt underpinning the deals.
“It simply doesn’t work,” one finance expert said. “The insurer ends up holding impaired loans to 777 that fail to make principal and interest payments. Eventually, the policyholders are left holding the bag.”
As 777 Re became more exposed to 777 Partners’ illiquid investments, warning signs began flashing. As early as late 2022, Silac, one of the insurers on which 777 Re was relying, said it would stop offering new business to the firm, according to people familiar with the matter.
“They cut the tap,” one of those people said of Silac. “They weren’t happy with some of the assets that [they were being exposed to].”
A-Cap, however, remained watchful but supportive. A lawsuit from 777 creditor Leadenhall, filed in early May, alleges that A-Cap continued to support 777 Partners in a “‘Whac-A-Mole’ fashion to keep its creditors at bay, if only temporarily, and to avoid the entire scheme from being laid bare in public”.
In that environment 777 bid last September for Everton. According to a later A-Cap fundraising document, the hope was that the club’s premium valuation and a new stadium to replace its Goodison Park home would, by association, “materially increase” the value of 777’s entire football portfolio.
Two months after the Everton bid, the Bermudian regulator quietly stepped in, people familiar with the actions said, appointing a former non-executive director to run 777 Re and sending in independent investigators. By the end of 2023, Rinehimer, Weldon and another executive had all left the reinsurer. Weldon declined to comment while Rinehimer could not be reached for comment.
Signs of trouble also surfaced in public that November. AM Best, a rating agency that specialises in measuring the health of insurers and reinsurers, downgraded 777 Re, citing “significant exposure to investments” originated by Wander’s investment firm. 777 Re finished 2023 with around $3.8bn of assets, almost half of which were related to 777 Partners, according to people familiar with its finances. Of that sum, around $270mn was loans to Nutmeg, the vehicle 777 Partners used for its football deals.
This year, as Everton battled for Premier League survival in the face of points deductions for historic overspending, King has found himself fighting for the future of A-Cap. It too was downgraded by AM Best in February, and announced plans to raise capital with officials breathing down its neck. US state regulators pushed A-Cap to cut its exposure to 777, concerned that out of $11.5bn of assets at the group’s five insurers, $2.9bn related to 777 entities.
777 Re’s own portfolio of deals linked to 777 Partners is reeling. Football clubs are fighting to contain the damage while 777-backed budget airline Bonza entered voluntary administration in Australia in April and Flair said in May said that an affiliate of its largest senior lender was buying part of 777 Partners’ stake.
As the headlines got worse for 777 Re, Singapore Life and Silac took back their ceded assets. The two companies did not respond to requests for comment.
In a statement to the FT on Thursday, A-Cap said its own “recapture” of 777-exposed assets was now complete, and that it had “sufficient capital to meet all policyholder needs”. It added, however, that it was still looking “to raise strategic capital to help grow” A-Cap.
Like several 777 creditors, A-Cap took to the courts, but its complaint was directed not at Wander’s firm but at its credit rating agency. Two A-Cap insurers said their “very existence” was at risk from a planned downgrade by AM Best that the firm argued did not reflect the progress it had made in reducing its 777 exposure. AM Best countered that its credibility risked being “irreparably damaged” if were to be prevented from publishing its opinion.
“[It’s] just a mess,” said an insurance executive, speaking privately, saying the episode reflected that the Bermuda regulator “doesn’t do credit work well”.
In a statement, the BMA highlighted the “significant role” that ceding insurers have “in the selection and allocation of assets in the collateral accounts” in arrangements such as 777 Re’s. It said it had made “significant enhancements to its regulatory framework”, including which assets it permits to back policyholder obligations.
In response to a series of questions for this article, 777 said: “We are a private company and can confirm insurance customer funds have never been used inappropriately.”
With A-Cap working to recover as much as possible from its 777-exposed assets, meanwhile, the clubs at the heart of its sporting land-grab are in an uncertain position. A-Cap has appointed bankers to review 777’s football assets, according to people familiar with the matter.
In theory, Wander’s Everton deal is still on the table. Moshiri has extended the sale and purchase agreement to May 31, according to a person with knowledge of the matter. Everton’s new stadium, which is in the final stages of construction, is the sort of real asset that could unlock financing, but Moshiri is now looking for alternative investors.
But meeting the Premier League’s conditions is no longer Wander’s biggest headache. Leadenhall’s lawsuit accusing 777 of fraud by double-pledging $350mn of collateral is one of a number from unpaid creditors claiming that some of its bets on football were made with money it did not have. Everton, Leadenhall’s suit claimed, was just “the latest shiny object of Wander’s fraudulent scheme”, while A-Cap was the “Wizard of Oz behind the 777 Partners’ curtain”.
777 has said it “vehemently refutes” the claims in Leadenhall’s complaint. A-Cap said it would “take all necessary measures to safeguard the interests of its policyholders and vigorously defend itself against Leadenhall’s baseless allegations”.
As A-Cap seeks the sale of more of the assets they accumulated, Wander and Pasko have not given up on their lottery ticket. But their grip on 777 is now in question.
Within days of the Leadenhall lawsuit being filed, it emerged that 777 Partners had appointed restructuring firm B Riley Advisory Services. In a letter to the court, lawyers for 777 wrote that Wander and Pasko had resigned as managers of the group on May 6.
Asked about their resignations, a 777 spokeswoman told the FT Wander and Pasko, as 100 per cent owners of 777, remained “unreservedly committed” to its successful future. Both men, she said, “continue to lead on strategic direction across every facet of the business, overseeing all progressive changes directed at strengthening the company’s long term value.”
Additional reporting by Mercedes Ruehl
