Chase has become an unlikely participant in the unfolding saga surrounding a troubled Miami-based private-equity firm and its failed bid for a top-tier English soccer team.
Earlier this year, the megabank paid $88.5 million for a bond bearing the name 777-600. It acquired the asset from the Advantage Capital insurance group, which has been a major lender to 777 Partners and its 600 Partners affiliate.
777 spent much of the past year trying to close a deal for the English Premier League’s Everton soccer club. The pursuit, which was dropped in June, spurred broader scrutiny about 777’s business. Advantage Capital has been trying to pare its exposure to 777, under pressure from regulators and the industry’s rating firm.
That’s where JPMorgan seems to enter the picture.
JPMorgan bought the loan for face value on Jan. 1 from Haymarket, one of the five life insurance and annuity companies under Advantage Capital’s umbrella, according to Haymarket’s first-quarter filing with Utah’s Insurance Department. Advantage Capital, better known as A-CAP, had assets totaling $11.5 billion through its insurance carriers as of the end of last year.
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The “777-600 Bridge Loan” is among the roughly $160 million in 777-related assets that A-CAP insurers have sold during the first three months of this year, according to the insurers’ financial filings.
The 777-600 loan has an 18%-interest rate, payable at maturity in October of this year, according to Haymarket.
Barron’s request for comment from JPMorgan was directed to a spokeswoman for the bank’s asset-management division. She declined to comment. 777 and A-CAP didn’t respond to messages.
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JPMorgan could be interested in the collateral that 777 might have to surrender if it defaulted on the loan, says New York University finance professor David Yu.
“Bridge loans are usually backed by stuff,” Yu says. “So maybe they want the stuff underneath.”
777’s known holdings include European soccer teams, a film-finance business, and a sports-streaming app.
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Barron’s wasn’t able to find information about the 777-600 loan beyond the details in the A-CAP financial filings. Disclosure rules don’t require JPMorgan to list every asset in its own public filings.
A-CAP was the focus of a Barron’s investigation last month, which found that the group’s insurers were heavily invested in businesses under their parent company’s control, raising potential conflicts of interest.
Concern over such conflicts have been raised by consumer advocates and retiree groups, since they potentially skew incentives for insurers tasked with investing policyholder premiums to finance future life-insurance and annuity-contract payouts.
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Barron’s reporting also shed new light on A-CAP’s exposure to 777, whose financial struggles became increasingly clear last year during its ill-fated bid to buy the Everton soccer club.
The investigation found that loans from A-CAP supported nearly every aspect of 777’s business.
The 777-600 Bridge Loan, held jointly by Haymarket and other A-CAP insurers, was among the largest of those loans.
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A-CAP’s exposure to 777 has been central to ongoing litigation with AM Best, the insurance industry’s dominant ratings firm.
In April, A-CAP insurers sued AM Best in U.S. District Court in New Jersey to stop the ratings firm from publishing a planned downgrade of the firm’s financial strength score.
In its complaint, A-CAP said AM Best’s evaluation of its insurers’ relationship with 777 was based on “flawed methods, improper assumptions, and demonstrably false data.” In response, AM Best said it “operated with the utmost integrity and fairness in this rating process.”
Deliberations in the case are currently on hold while the two sides hold settlement talks, attorneys said in a court filing last month.
Also in April, regulators in Utah and South Carolina ordered A-CAP to reduce its investments with 777, the Financial Times reported.
Since then, 777 has seen the collapse of its Australian budget airline Bonza and the widely-reported seizure of its soccer teams in Brazil and Belgium.
Restructuring specialists from the financial firm B Riley took over 777’s operations in May at A-CAP’s request to protect the insurance group’s investments, according to declarations filed as part of a fraud lawsuit.
That lawsuit, filed by London-based Leadenhall Capital Partners in U.S. District Court in New York, accuses 777 and the 600 Partners affiliate of pledging assets they “didn’t own, didn’t exist or were already promised to someone else” to secure a loan.
777 didn’t respond to a request for comment about the case.
Newly unsealed documents from unrelated litigation in New York’s Supreme Court show that 777’s financial issues aren’t new. As of the end of September 2022, the consolidated 777 and 600 partnerships had $196 million more in liabilities than assets, according to an unaudited financial statement filed as part of the case.
The partnerships reported a net loss of $563 million during the first nine months of 2022.
777 didn’t respond to a request for comment about the financial statement.
Write to Jacob Adelman at jacob.adelman@barrons.com