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Burnley have punched above their weight in the Premier League for six consecutive seasons, but financial gravity has finally caught up with the Clarets and at the worst possible time.

The east Lancashire club was relegated on Sunday after losing 2-1 to Newcastle United at Turf Moor, while rivals Leeds United won 2-1 away at Brentford and survived.

Any side dropping out of the Premier League faces an immediate hit on income to the tune of around £60M, as they lose the £100M-plus in TV money and pick up a £40M parachute payment in the first year, to soften their fall.

Burnley’s relegation from the Premier League was confirmed on Sunday after their defeat

Even so, in the past, relegation held far less fear for Burnley, who steadfastly refused to rack up debt in the top flight, and even turned a profit.

But that is not the case now. The Turf Moor outfit were the subject of a leveraged buyout by US investors ALK Capital in December 2020, which has loaded them with the kind of debt they were previously desperate to avoid, and it has also eaten away their savings.

As first reported in Sportsmail, and confirmed in the most recent accounts, a significant proportion of a £65M loan from MSD Capital falls due on relegation, with the rest payable the following year.

ALK said after the takeover that their plans accounted for relegation, but even so the figures alarm analysts.

The Clarets’ intermin management team, headed by Mike Jackson, slmost kept them up

‘Any club that is relegated has a £60M hit in revenue and that has to be managed but the issue with Burnley is the leveraged take over,’ said Dan Plumley, a football finance expert at Sheffield Hallam University.

‘There is the £65M repayment that will now be drawn upon. That is the bigger issue on top of falling out of the Premier League.’

The issue is not just the debt, according to Plumley, it is the fact it has be paid off so quickly to an external lender. Most clubs owe money to their owner, who is unlikely to call in the debt.

‘From what we can see in the accounts…. That has to be dealt with and it is in the short term. If there is no budging [on the terms of repayment] it is clear what will happen,’ added Plumley, who anticipates the £40M parachute payment in year one [after relegation] will have to fund that £65M loan repayment.

It was a harrowing day for Burnley fans at Turf Moor after six consecutive season in top flight

But the financial challenge is not the only one Burnley face, under the stewardship of chairman, Alan Pace, who completed the £170M takeover from former owner, Mike Garlick, in December 2020.

Nine players, including star defender James Tarkowski, are out of contract at the end of the season and there is no management team in place on the playing side after Sean Dyche was unexpectedly sacked in April departing with four senior coaches. Furthermore, up to 20 members of staff have gone from the business since ALK came in, sources previously told Sportsmail, including the chief executive.

After two years of struggle (the Clarets finished 17th last season) and increasingly gritty performances, resulting in part from a lack of investment in Garlick’s final years in charge, some fans see relegation as an opportunity for a fresh start.

Chairman Alan Pace has a huge amount of work to do to stabilise the Clarets in Championship

However, Pace and his partners, have a huge amount of work to do to avoid the Clarets falling through the fiercely competitive Championship into League One.

Interim manager, Mike Jackson and the players almost pulled off a great escape after Dyche was sacked. 

Burnley fans would be the first to agree they have enjoyed an incredible run under Dyche. he guided the club to two promotions from the Championship and a seventh-place finish in the Premier League, securing Europa League football.

But now, the reality is a huge amount of know-how has been lost in the dugout with more to leave the pitch – and the Clarets are looking for a new manager who has the capacity to rebuild, while coping with a difficult financial situation.

‘How they pay the wages next season if they use the parachute payment [to cover the debt], we do not know,’ said analyst Kieran Maguire from the University of Liverpool and host of the Price of Football podcast.

When Sunderland were releagted from top flight in 2017, they went down again to League One

‘We saw with Sunderland… their parachutes payments appeared to have something to do with the acquisition of the club and they went straight into League One. Could that be the case with Burnley? It will depend on the quality of their recruitment.’

Sunderland were relegated from the top flight in 2017 and on Saturday the Black Cats finally clawed their way back to the Championship after four years in League One. 

‘It could be worse than Sunderland for Burnley,’ Dr Rob Wilson, head of Sports Business Management, at Sheffield Hallam told Sportsmail.

‘The way the ALK deal is structured, the level of debt in there, it could really scupper them. Someone from the ownership has to come out and say this is how we are going to manage it.’

Wilson and Maguire expects a fire sale of players to generate much needed revenue.

While Tarkowski will leave for free, winger and top scorer, Maxwel Cornet, reportedly has a release clause in his contract for £17.5M, centre back Nathan Collins and full-back Connor Roberts have shown themselves to be effective top-flight defenders, while midfielder Dwight McNeill and striker Wout Weghorst are also likely to attract attention.

Sean Dyche was unexpectdely sacked by Burnley this season after nine years at the club

Goalkeeper Nick Pope, who has been in stunning form this season, will have to leave, too, to realise his England ambitions.

Maguire believes the sale of players will be the key if the club is to stabilise in the Championship, but at the expense of promotion hopes.

‘They have got to find £65M quickly,’ he said. ‘They have the assets to do that but it is going to impact on getting back up next season. That’s the downside.’

In Burnley’s favour is they have historically controlled their costs, which will help them now. 

Burnley’s experience shows the risks associated with a leveraged takeover, reflected Maguire. If a club remains in the top flight and increases in value then there is potentially a significant and rapid reward for the new owner; if it does not the club is lumbered with debts it cannot service.

Ashley Barnes reacts during the Clarets’ agonising defeat at Turf Moor to Newcastle United

For the Clarets, more than 80 per cent of the club’s income in the Premier Leaguecame from TV revenue, but that now melts away and there is not much left to pay the interest on loans so they have to be repaid fast, hence the relegation clause MSD demanded.

Pace is yet to speak following Sunday’s result, but has previously insisted that his financial plan was designed to cover the possibility of relegation

Questioned about his plans after the £170M takeover, Pace reassured supporters at the time.

‘We actually do honestly mean it when we say we are concerned about the long-term viability of this club, just as if we were a family member,’ he said. ‘So, we’re not going to do stupid stuff.

Burnley goalkeeper Nick Pope has been in fabulous form this season but is expected to leave

And the former chief executive of Major League Soccer’s Real Salt Lake, added: ‘The loans that we have involved in this transaction are absolutely reasonable and absolutely in line with what can be supported by this club and will not take away from the ability to operate on a daily basis.’ 

In aftermath of Burnley’s relegation interim Mike Jackson told reporters he thought the club was in good hands.

There are good people here who want to do well and they want the club to bounce back but it is small steps and planning and making sure we have everything in place to do that.’

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