Why £129m debt is no barrier to Mike Ashley selling Newcastle United
The latest financial results were published by Newcastle United on Wednesday, with the club under the ownership of Mike Ashley showing a profit of over £32m for the 2014/15 season and over £48m accumulated in cash at the end of June.
The profits were £13m higher than the previous season and had been achieved by getting rid of a lot of highly paid players and replacing them with mediocre lower paid alternatives, leading to slashing the wage bill by £13m.
Also in the headline figures, the club stated that Newcastle United still ‘owe’ Mike Ashley £129m.
This figure is a combination of part of what it cost Mike Ashley to buy the club, topped up with extra cash he had to put in after his shambolic running of the club led to relegation in 2009.
A large part of this £129m ‘debt’ relates to paying off a mortgage that previously existed from the Hall/Shepherd regime, money borrowed to finance the St James Park stadium development and expansion, the debt secured on future season ticket sales back in the day.
As the story goes, we are expected to believe that when Mike Ashley bought the club, he was supposedly unaware that over £50m was still owed on this club mortgage.
I can quite believe that he wasn’t made aware that the previous regime didn’t make clear that all the Northern Rock sponsorship money had been taken up front, or just how much was still owed on a number of players who had been bought by Newcastle some time ago – but believing he was ignorant of the £50m+ mortgage is ever so slightly incredulous.
Whatever Mike Ashley did or didn’t know, what he paid to take over the club and then sort it out, was HIS choice.
Obviously he wasn’t doing it for the fans (in the style of Blackburn’s Jack Walker), he was simply buying another company/asset that he thought would benefit him financially in the long-term.
Both through all the free promotion of the rest of his business empire, as well as an asset that could dramatically increase in value, especially via the ever increasing TV deals.
It is claimed that this £129m ‘debt’ supposedly owed by Newcastle United to Mike Ashley, is somehow a barrier to him selling the club.
The only barrier to Mike Ashley selling the club is how much he would want for Newcastle United, the £129m debt is irrelevant as it is Ashley’s to dispose of at any time. If he sold the club then the debt is his responsibility, NOT that of whoever is buying Newcastle United.
Think of it the same as you buying a house.
Say you see a house up for sale for £150,000, you go and see it you like it, you jump through all the hoops via solicitors etc and you agree to pay the £150,000.
After all of that, you don’t then get the current owner turning around to you and saying ‘Hold on, there is still £100,000 on my mortgage that you have to pay as well’.
Debts that Newcastle United currently have such as the money owed to Mike Ashley, are the responsibility of the current owner, Mike Ashley, not a future one.
In the house example above, the reality is that of your £150,000, £100,000 is going to pay off the mortgage that was still owed on the house and £50,000 profit is going to the seller.
So when Mike Ashley bought NUFC, the £50m+ would have been taken into account when he was deciding a price to pay, or if you believe he was ignorant of it then he only has himself to blame. Which in the house buying scenario would take you into the kind of territory whereby you don’t get a proper survey done and end up needing a new roof or whatever – that expenditure is your problem/responsibility, not extra cash you can then demand from a future buyer on top of the agreed asking price.
So ignore everything else, claimed sitting debts or whatever.
There are no barriers to Mike Ashley selling Newcastle, apart from him simply making the decision to make it available at a price it will sell at.
Just like your house, everything has a price point that it will sell at, Newcastle United is no different.
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