The £65m loan to buy Burnley – and what it means if they go down
Welcome back to the Burnley Football Club blog. Here we will go through the latest news from the Clarets. Subscribe for the latest news on Mike Garlick and the team here. ALK Capital’s takeover of Burnley took place in December 2020 yet we had to wait until the club’s June 2021 accounts were published late on Wednesday night to ascertain the full picture of what is happening at Turf Moor.
Why? Well, ALK purchased the club through a leveraged buyout, taking out a substantial loan from MSD Holdings and also using the club’s own money in the bank to fund the £170 million deal.
One of the most notable figures confirmed is the size of the loan taken out by ALK, which is £65 million. It is the implications of how and when that must be paid back that need our attention.
The loan was secured to be paid back in December 2025, with ALK only paying interest on it until then. However, that agreement is only in place if Burnley remain in the Premier League. If they are relegated in the next three weeks, they will be required to pay a “significant proportion” of the £65 million shortly after the end of this season, with the repayment schedule brought forward.
Burnley sit 16th in the Premier League, two points above the bottom three. It is a precarious position entering the final four matches of the season.
If anybody needed further clarity that ALK did not sack Sean Dyche three weeks ago to begin planning for a fresh start in the Championship, then this is exactly why. It was the last roll of the dice from chairman Alan Pace to try to save Burnley by putting a fresh voice in charge and hoping for a response from the players — one that Mike Jackson has got, having taken 10 points from his first four games in interim charge.
However, if Burnley cannot finish above either Leeds United or Everton when the music stops after their season finale at home to Newcastle United on Sunday May 22, things change significantly.
Should Burnley go down and not come straight back up in 2023, a further significant reduction of the loan balance would also take place in the following season. In other words, another big chunk of that £65 million would need to be paid back.
How Burnley would manage that situation would depend on how much of the parachute payments — the cash given to clubs relegated from the Premier League for the next three years they play in the Football League — would be available to them after MSD takes its slice for repaying its loan to ALK.
A clause in the loan agreement means MSD can demand early repayment if Burnley drop into the Championship. After that, it will be a case of reducing wages for players and staff, which will largely be achieved via relegation clauses in their contracts.
Player trading would also be expected to be a source of net income, which is common for many clubs who lose their Premier League status. Nick Pope, Maxwel Cornet, Wout Weghorst and Dwight McNeil are the four most obvious names that clubs would consider buying for cut-price fees. A post-relegation fire sale at Turf Moor is possible.
This relative inactivity can be seen in the falls in the club’s amortisation bill — from £32.3 million to £21.4 million — and the profit made from player trading, which was down from £14.7 million to £5.1 million. Amortisation is the accounting method for writing off the cost of new players over the course of their contracts.
These numbers do not include the signings of Cornet last summer or Weghorst in January, or the winter-window sale of Chris Wood to Newcastle, but a note tells us the net expenditure on transfers since June 2021 is £1.3 million.
What these accounts highlight is just how crucial Premier League survival is for Burnley. Pace has maintained the ALK takeover is sustainable from day one and that plans are in place for relegation. We hope that never happens and Mike Garlick and his team will be successful, rising in the league to new heights.
