Burnley are said to be “approximately £90m worse off” under new owners ALK Capital.
A report from The Guardian says that the US consortium used a loan to complete their takeover of the club at the end of 2020.
It’s believed they borrowed around £60m from MSD UK Holdings. This will have to be repaid – along with the interest – through the Clarets’ own revenues.
That’s why there is now concern. The deal is being likened to the controversial Glazers takeover of Manchester United in 2005.
They loaded £525m of debt on Man United, with £1bn having since been paid out in “interest, fees and refinancing charges”.
The numbers aren’t as high at Burnley, but it’s still thought it will eat into their cash reserves.
Southampton also recently borrowed £78.8m from MSD to help with the cost of the pandemic. Their annual interest rate is 9.14%.
New Clarets chairman, Alan Pace – who heads up ALK – has refused to confirm whether their loan has a similar 9% interest rate. If it does, that will equate to around £5.4m a year.
Which is significant considering the Lancashire club had no debts and about £42m in the bank before the sale. That’s according to their most recent accounts, published in 2019.
It’s believed those cash reserves will now be used to make the loan repayments.
Burnley owners wanted to buy Sheffield United
All of this could have been Sheffield United’s story. As the article by David Conn explains, ALK have been looking to buy a football club for some time and came close to purchasing the Blades.
As we previously outlined, former owner Kevin McCabe agreed a deal to sell the club to Pace and fellow American businessman, Dave Checketts. They were going to make the purchase through ALK.
This sale hinged on McCabe winning his High Court battle with Prince Abdullah.
Yet the Saudi Prince won the case in September 2019. McCabe was ordered to sell his 50% stake in the Blades to him for £5m.
Prince Abdullah is now the sole owner and as a result, the agreement with ALK never materialised.
It’s important to note that ALK has responded to The Guardian report. They said in a statement their financial approach is “reasonable and sustainable”.
Pace is also showing “some impatience” at the takeover being questioned, likening its financing to taking out a mortgage on a house.
The issue with that analogy is Burnley had no borrowings and therefore the “mortgage” was paid. People don’t often re-mortgage unless they are going to use the money elsewhere.
With the January transfer window passing without the Clarets making a single signing, there is no evidence of that thus far.
It is only a little over a month since ALK took over at Turf Moor, so it will take time to see exactly how this pans out. But early signs are that the Blades had a lucky escape.