A demotion to the Championship would likely secure £65million in debt against the called-up club, meaning they would likely have to sell players to raise the capital
The club’s accounts revealed the payback clause, which is the headline from financial data that also confirms the impact on the Clarets of the leveraged buyout that transferred ownership to Alan Pace’s ALK Capital group. The club’s cash reserves had fallen from £80m to £50m while Burnley has picked up £102m in debt.
Relegation to the Championship will force Burnley to repay a significant part of a £65million loan taken out as part of ALK Capital’s leveraged buyout – bringing the need to complete their grand escape into focus moves.
But it’s loan payback that draws the eye of the accounts and underscores the need to stay out of the bottom three. Recent form under caretaker Mike Jackson raised her to 16th with four Premier League games to play.
Football finance expert Kieran Maguire said the clause was “nasty” and would likely affect Burnley’s ability to repeat Fulham’s immediate return to the Premier League if they go down and force them to sell players.
ALK Capital borrowed from MSD Holdings to fund the buyout and is currently only paying interest — at 8 percent — on it. The full amount is to be repaid in 2025.
However, the club’s accounts show the repayment schedule would be brought forward if they fall into the Championship, with most of the loan having to be repaid at the end of the season.
Burnley declined to comment when contacted by I.
Football finance expert Maguire said: “It’s an ugly clause and would have a major impact in the event of relegation.
“We’ve just seen Fulham and Bournemouth bounce back, but both have wealthy owners willing to put up with a loss in the Championship to move back up. They are a trophy asset for these owners but Alan Pace doesn’t give the impression that he sees the club in the same way.”
Burnley chairman Pace was under scrutiny at the time over the way the takeover was funded and Maguire said the terms of the loan repayment reflected the downside of a takeover so structured.
“Leveraged buyouts involve a high level of risk. When they work, that’s a big benefit, but when they don’t, the downsides are significant too,” he said.
“Basically, MSD Holdings is saying, ‘We’re not taking that risk if you relegate.’ They say they want the parachute payments and the club would likely be forced to sell a player like Dwight McNeil to cover that payment.
“It’s fine for MSD Holdings to loan Burnley £65m in the Premier League but £65m in the Championship is a significant amount of money and they are protecting themselves against that risk.”
Ironically, the Clarets remain one of the best run clubs in the Premier League, as evidenced by the small £3million loss on their accounts. Other Premier League clubs have suffered much bigger losses in a year severely disrupted by the pandemic.
“Burnley are historically one of the best run clubs in the Premier League – they have good wage control and a low wage bill,” Maguire said.
Meanwhile, club sources insist everything is business as usual for manager Jackson ahead of Burnley’s home game against Aston Villa.
As reported by IThe Clarets are running all sorts of long-term options with Bodo/Glimt boss Kjetil Knutsen, Anderlecht’s Vincent Kompany and Wayne Rooney.
But Jackson will handle the rest of the campaign.