The expert opinion on Burnley’s finances and the questions raised by the club’s ‘worried’ accounts
Football finance expert Kieran Maguire believes there is reason to be concerned by Burnley’s most recent club accounts amid an uncertain financial situation at Turf Moor.
The accounts were released last week and showed the extent of the club’s debt following the leveraged buyout by ALK Capital, which completed in December 2020. As part of the deal, ALK borrowed 65 million to MSD Holdings and the accounts reveal a significant part of that. will have to be reimbursed if the Clarets are relegated.
The club’s cash reserves fell from £80m to £50m last June and the situation has likely changed since then. Burnley have also taken out a £12.5million loan from Australian firm Macquarie Bank on a transfer payment due from Newcastle United for the Chris Wood deal.
READ MORE: Burnley take out £12.5m loan for Wood Newcastle United transfer installment
The striker moved to St James’ Park in January after Newcastle activated a £25million release clause in his contract. The second installment is due in February 2023 and the Clarets chose to take out a loan to ensure they have the money now, rather than waiting 12 months.
This means that the transfer installment will instead be paid to Macquarie Bank and there will be interest attached, which should be around 8%. The process is not uncommon in football as clubs often believe that having cash on hand can provide flexibility in the transfer market, while it is common for transfer fees to be paid in many times, as is the case with the Wood deal.
But the decision to take the loan, coupled with the accounts, means Maguire is wary of the club’s financial situation, which would be made worse if the Clarets were relegated given that around 90% of their turnover came from the broadcast money and the payroll of around £86m accounts for 76% of their spend. Although the club would benefit from parachute payments should they end up in the Championship, it would also be necessary to sell players.
Maguire, speaking to Lancs Live, said: “The problem for Burnley is that the parachute payments would effectively be used to pay off the loan and that would put pressure on wages and Burnley would have to sell players. An £86million Premier League wage bill is not sustainable in the Championship and you’re likely to need a financial reset at the club and to do that you’re selling players so you’re watching Pope, McNeil, can -be Taylor and others.
“We also saw the club take that loan from Macquarie and under normal circumstances I don’t have a problem with that as it happens quite regularly. But for a club that had £50million in the bank as recently as last June to suddenly take out payday loans, you say ‘they burned through a lot of money very quickly’ and that’s where the discomfort begins.
“You only borrow money and therefore only pay interest, normally around eight or nine per cent, so you will only pay if you need the money. If you had £50m in the bank , in theory, you wouldn’t need it.
“Did they spend a lot of money on salaries? It’s not the Burnley style. They haven’t spent a huge amount on the transfer market either, suggesting the money has gone elsewhere. So was it used to fund payments to former owners? And we don’t know what’s going on there, but that doesn’t make you too comfortable. »
Burnley’s accounts were always going to show a high debt figure given the nature of the takeover and the amount of borrowing involved. Chairman Alan Pace has always declared his belief in the financial model and the Clarets recorded a relatively small operating loss of just over £5million, the third lowest in the top flight. Pace has not publicly commented on the accounts – which have not been posted on the club’s website homepage or posted on the club’s social media – since they were published and the club declined to comment when he was approached by Launches Live.
ALK have invested in infrastructure around Turf Moor and spent money on the transfer market, and they are willing to take more recruitment risks to try to build Burnley as a Premier League club, while Pace has always reiterated his desire to keep the club on sound. financial base. Relegation would further affect finances and Pace has previously said it will mean the departure of some of Burnley’s top talent.
This is the risk of a leveraged buyout – as Maguire concludes: “I teach leveraged buyouts and they are high rewards when they work and high risk when they don’t. And it’s not looking good, if I was a Burnley fan and they were in the Championship next season would I think they could keep the core of their squad and come back up like they did? did in 2016? I don’t think I would be confident. »
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