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Outrageous. The self serving Premier League has no policy to deal with these sort of takeovers. The whole thing stinks. One of the handful of football clubs in the top 2 divisions that is solvent and makes a profit suddenly becomes saddled with debts. A simple and very reasonable change to the rules could prevent this. Premier League bosses declined to comment on this, how can that be allowed?
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“ALK Capital’s business plan is about securing top-flight football in Burnley for decades to come, but its financial model considers all economic circumstances, both on and off the football pitch."
That's an important quote at the end of the article. The nature of football means top-flight football in Burnley for "decades to come" is simply unrealistic. It won't happen. They, like everyone except possibly seven or eight clubs, will fall at some point and may or may not make it back quickly. Once it happens, ALK Capital will "consider all economic circumstances" and decide the project is no longer for them.
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The key to this will be the loan agreement with MSD.
9% is a high rate in the commercial world, but not ridiculous. Challenger banks are lending at 6%+, and bridging loans are 1% per month.
The issue will be the "acceleration rights" in the repayment of the loan, in the event of relegation. I'm guessing, but I wouldn't be surprised if relegation didn't lead to increased loan lump sum payments, financed by either player sales or parachute monies. The lender could have a debenture to be able to enforce/control this.
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Amazing that the owners compares the purchase to buying a mortgage on a house. When you buy a house, the price you paid more often than not goes up. If it doesn't you are in negative equity and either take the loss by selling for much cheaper and therefore saddle yourself with debt or keep paying over the odds until you own it outright and own something far less than what you have paid.
In these circumstance you can bet if they get in negative equity - relegation - they will just pull the plug and it will spiral out of control until its in administration and gets taken over or they go out of business. The fit and proper persons test should ensure a club doesn't get lumbered with heavy debt that would put its business at risk, these businesses are at the heart of the community and a club the size of Burnley sadly isn't getting any bigger than it is now - largely due to FFP.
The previous owners have basically made themselves very rich by taking as much money as possible at the expense of putting the club they 'support' or have worked hard on potentially put at real risk. Exactly the same move Jeremey Peace, Peace was a decent businessman at times but was also extremely luck to somehow keep the side in the Premier League with some awful appointments and transfers.
