There is a report in the News Of The World (NOTW) today that Newcastle owner, Mike Ashley, made an emergency £25M loan to the club in December to keep Newcastle afloat.
Mike Ashley – interest free loan to Newcastle
But we wonder whether this is a new story, because in late October there was a report that Mike loaned Newcastle £20M for new players and the general running of the club.
Maybe that was the same payment being reported today.
Newcastle brought in 6 players during the January transfer window, and it seems the 4 players the club actually bought may have cost around £4M.
NOTW is reporting the owner arranged an interest-free loan so that the club could meet the players wage bill, buy new players, and help with the general expenses of running the club.
Of course if all goes according to plan and Newcastle get promoted in May, the Tyneside club will be back to £100M revenues, and the club will get over £40M alone next season from the world-wide TV revenues the Premier League generates.
And it seems the PL games are becoming even more popular around the world.
The Newcastle wage bill is now somewhere around £40M, maybe less, and that compares to the £74M it was in the Premier League last season.
Newcastle will also be getting their second and final parachute payment of £11M in August from the Premier League, and that will help the Newcastle finances greatly, and it also comes at a good time.
The NOTW is reporting that Newcastle are still owed around £9M from the sale of Obafemi Martins, Damien Duff and Sebastien Bassong last summer.
But don’t necessarily believe the NOTW when they then assume that money will go immediately to pay off Mike’s loan in August.
Since the loan is interest free, why not pay it off over a couple of years, because we will need around £20M at most for new players in the summer.
That’s if Mike stays put at Newcastle of course, and we have no idea what his future plans are.
That proverbial club source – is again quoted by the NOTW – maybe it’s Derek Llambias?:
“Mike did not want people to know about the loan he put into the club in December,””If he had not done that, who knows what could have happened? “
“The only other possible option would have been to have arranged an outside finance deal and the interest rate for that would have been around 20%, which means you’ve lost another £5million straight away.”
“Mike has committed more money to the club. It is a secured loan, interest free and it had to be done.”
“There is a shortfall of around £50M because of relegation. The club had to bring some payments forward. That is not unusual.”
“Doing this was the only way the club could operate. All the previous sponsorship money had been spent on the Michael Owen deal before Mike Ashley even bought the club.”
“That deal alone has cost Newcastle £44M. The TV money went with relegation, the retail income has gone, the commercial income has been cut. The money has to come from somewhere and that is why there had to be an injection of £25M at the end of last year.”
The revenues have dropped from £100M to £50M, but that doesn’t mean the shortfall is £50M, because Newcastle have reduced their running costs.
And we were well aware the sponsorship money was all used to buy Michael Owen, and that’s not good financial management to say the least.
Michael’s move turned out to be a disaster for Newcastle, but it was hailed as a great move at the time – we were certainly excited when Owen signed.
The wage bill has been culled by around £34M, and we’re sure other thrift strategies are in place at Newcastle, so we doubt the shortfall is as much as £50M, although it will be huge – no doubt..
It does mean the club can be in fairly good shape financially, because if we are promoted, there’s no way the club will ever approach that wage bill of £74M ever again, and they shouldn’t either.
So assuming we are promoted there may be a silver lining, at least on the financial front, as Newcastle finally get their costs under control.
And we don’t even think it will necessarily take £20M to get in new players in the summer, if we can strike some great deals like we did to get players like Seb Bassong.
We also have to expect some of our younger players like Tamas Kadar and Nile Ranger to be even better next season.
Comments very welcome.