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Ashley's £25m emergency loan

Mon 22nd Feb 2010 | Money & Finance

MIKE ASHLEY had to make an emergency £25million loan in December to keep Newcastle going according to a report in the yesterday’s News of the World.

The article states that Newcastle owner Ashley arranged the interest-free deal to meet player wages and the general running costs of the Championship leaders.

It further highlights the precarious nature of the club's financial situation despite a campaign that has seen them largely lead the Championship.

Newcastle's wage bill remains around £40million despite a huge cull of personnel in the summer.

Last season’s relegation from the  Premier League seen the club’s turnover drop to around £50million and the hush-hush refinancing deal enabled the club to not only secure its short-term future but also strengthen their squad with four permanent signings and two loan deals arriving in January.

However, it’s understood that the loan has effectively been offset against Newcastle's second and final parachute payment from the Premier League and the outstanding deferred fees to be paid on the outgoing transfers that took place in the summer.

That means the £11million parachute payment that will arrive in August has already been spent, as has a sum believed to be around £9million that was owed from the sales of Obafemi Martins, Damien Duff and Sebastien Bassong.

"Mike did not want people to know about the loan he put into the club in December," said a club source.

"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 per cent, 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 £50million 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 £44million. 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 £25 million at the end of last year.

Despite crowds staying around the 40,000 mark, turnstile income has dropped to £14million and hospitality has similarly been more than halved to around £3million.

An immediate return to the Premier League would bank the club around £40million in television revenue alone.

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