West Brom’s Financial Nightmare Mirrors Man Utd’s Crisis! Expert Warns of Dire Consequences – Must Read
Kieran Maguire has warned that the situation West Brom find themselves in, paying high amounts of interest on PIK (payment in kind) loans, can get “very scary, very quickly”.
The University of Liverpool football finance expert said on The Price of Football on 5 February that the Baggies are currently paying as much as 74% interest a year in compound interest on loans from Warmfront Holdings, and highlighted how the cost of such PIK loans can quickly mount up while comparing it to the fall out from the takeover of Manchester United by the Glazer family.
Warmfront Holdings lent current controlling shareholder Guochuan Lai £2million in 2022, secured against part of his West Brom shares [Birmingham Mail, 12 January], and is owned by Alex Hearn, who is currently involved in one of the three main takeover bids.
Maguire explained (10m 20s): “Payment in kind. This is a type of loan where you borrow money where you pay interest, and you add interest to the interest because it’s something you can’t afford to repay.
“Manchester United took out these loans and they didn’t pay anything back. They didn’t pay any interest or any capital back, and when you’ve got 14.25% x 14.25% [interest due] that money very, very quickly adds up.
“West Brom have got a similar issue with Warmfront Holdings where they’re paying 5% a month. That works out at 74% a year on a compound basis, and these things can get very scary, very quickly.”
It is little wonder that the Albion are in such concerning shape financially if they are essentially throwing good money after bad thanks to interest costs on their interest costs.
As if any West Brom fan needed reminding it highlights once more how important it is that the ongoing takeover situation finds a swift and suitable resolution.
Loans to Lai have been taken out of the club in recent years and not paid back, with the prospective new owner thought set to now take on the responsibility to do so, while millions have been borrowed by West Brom from MSD Holdings against Baggies assets.
There was some hope towards the end of 2023 that a takeover might be possible in time to have some effect on the January transfer window, which clearly hasn’t been the case.
The squad again avoided being ripped apart as Carlos Corberan tries to hold things together on a shoestring and take West Brom back to the Premier League.
But that likely means the wage bill still remains too high as things stand, and when the club are tied into costs that ultimately buy them nothing every month it isn’t hard to see why.
Shilen Patel is believed to be in the box seat to complete a takeover, but it is has been some weeks now since he emerged at the front of the queue and the longer the delay persists the more uncomfortable it will make everyone who has been waiting so long for a change at the top.
In other West Brom news, Gabby Agbonlahor hit back at a journalist, telling him to “shut up” for criticising a Baggies ace.