Relegation to the Championship will compel Burnley to pay back a significant proportion of a £65million loan taken out as part of ALK Capital’s leveraged buy-out – throwing into sharp focus the need to complete their great escape.
The club’s accounts revealed the repayment clause, which is the headline figure from financials that also confirm the impact on the Clarets of the leveraged buy-out that transferred ownership to Alan Pace’s ALK Capital group. The club’s cash reserves had reduced from £80m to £50m, while Burnley have collected £102m of debt.
But it is the loan repayment which is the eye-catching takeaway from the accounts, emphasising the need to stay out of the bottom three. Recent form under caretaker boss Mike Jackson has lifted them to 16th with three Premier League fixtures to play.
Football finance expert Kieran Maguire said the clause was “nasty” and would be likely to hit Burnley’s ability to replicate Fulham’s immediate return to the Premier League if they went down, as well as forcing them to sell players.
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But the club’s accounts reveal that the repayment schedule would be brought forward if they drop into the Championship, with a most of the loan required to be paid off at the end of the season.
Burnley declined to comment when contacted by i.
Football finance expert Maguire said: “It’s a nasty clause and would have a big impact in the event of relegation.
“We’ve just seen Fulham and Bournemouth bounce back up but both have wealthy owners prepared to absorb a loss in the Championship to get promotion again. They’re trophy assets to those owners but Alan Pace doesn’t give off that impression that he sees the club in the same way.”
Burnley chairman Pace faced scrutiny at the time because of the way the buy out was financed and Maguire said the terms of the loan repayment reflect the downside of a takeover structured in that way.
“Leveraged buy-outs are high risk. If they work out, it’s high benefit but if it doesn’t the downside is also significant,” he said.
“Effectively what MSD Holdings are doing is saying ‘we are not taking on that risk if you do get relegated’. They’re saying they want the parachute payments and also the club would likely be compelled to sell a player like Dwight McNeil to cover that payment.
“For MSD Holdings, lending Burnley £65m in the Premier League is fine but £65m in the Championship is a significant amount of money and they’re protecting themselves against that risk.”
Ironically the Clarets remain one of the best run clubs in the Premier League, as revealed by the small £3m loss posted in their accounts. Other Premier League clubs have been posting much more significant losses in a year seriously 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 it’s business as usual for manager Jackson ahead of Burnley’s home game against Aston Villa.
As reported by i, the Clarets are undertaking managerial due diligence with Bodo/Glimt boss Kjetil Knutsen, Vincent Kompany of Anderlecht and Wayne Rooney all possible long-term options.
But Jackson is set to take charge for the rest of the campaign.
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