There is a growing possibility that Newcastle Utd will not be sold this summer, according to the Guardian. This will leave owner Mike Ashley in charge of the Championship club at least until January and possibly next summer.

Several consortiums remain interested in purchasing Newcastle for a figure close to the £100m asking price, but the club's financial liabilities are severely slowing the purchasing process. "The process is moving extremely slowly, there is still genuine hope of a sale but it's not looking imminent," said the source. "Newcastle comes with a lot of baggage."

Potential buyers are likely to complete a transaction only on the condition of being able to sell players and reduce the club's wage bill. It is rare for football clubs to be sold outside of a transfer window, and with Newcastle's £65m wage bill totaling more than expected 2009/10 revenue, it makes little sense for buyers to purchase the club without the opportunity to offload assets and wages.

A £100m purchase of Newcastle is an extremely risky investment to any observer. Revenue, which totaled approximately £100m last season - next season when the club is in the Championship will be considerably lower than in previous years, while it will be near impossible to keep costs below £70m. The only conclusion one can reach is that Newcastle over the next season will add to its already giant £100m debt and that debt risks spiraling out of control if the club cannot reenter the premier league very quickly.

Newcastle's biggest chunk of income stemmed from broadcasting, totaling around £40m last season. In comparison to last season, Championship Newcastle are due to lose around £25m from broadcasting revenue alone. Newcastle are expected to make around £15m, including parachute payments, in broadcasting revenue next season. Any potential buyer for this reason alone will be gambling on an immediate return to the premier league for the northern club.

If a purchase is completed soon, the new owners will immediately try to offload some of the expensive talent in the squad. Newcastle's wage bill totals £65m per year, or over 100% of expected revenue. New owners will want to do their best to cut this by at least 40%. As the Guardian comments, sales of the sellable big earners at Newcastle - Obafemi Martins, Joey Barton, Fabricio Coloccini, Sebastien Bassong - are only likely to be completed if the club continues to pay a portion of their former players' wages. When Leeds United sold Robbie Fowler to Manchester City Elland Road kept on meeting a sizeable percentage of his salary and a source close to Newcastle admitted: "The fear is we could end up in a worse financial mess than Leeds did."

Many big earners at Newcastle will simply be stuck on the club's books until their contracts expire. None of Alan Smith, Geremi, Jonas Gutierrez, Xisco, Ignacio Gonzalez or Jose Enrique are sellable, probably even if Newcastle offer to continue to pay a sizeable chunk of their salaries.

The challenge facing Newcastle is not simply that its debt will increase in the short term. If the club cannot return to the top tier within 2 years, premier league parachute payments - £11m per year - will cease. In consequence, revenue will decline even further, which will mean even more players will need to be sold or losses expanded. The club may be desperate to get players off of its books and have to continue to pay portions of player wages or simply buy out player contracts, leading to a further increase of the club's debt.

More unfortunate, even if the club can manage within several years to make profits - an extremely unlikely scenario given club wages, the need to finance debt and Championship competition to enter the premier league -these will be negligible relative to potential premier league club profits. Championship revenue totals nowhere near premier league revenue. This means that the club will not be earning enough income to payback any significant portion of its debt.

Simply put, Newcastle Utd need a 2-year return to the premier league or to be bought out by owners willing to take the "Mike Ashley" risk of massive short-term losses for a longterm payoff. In the meantime, the depressed form of Ashley faces the prospect of continuing to own this club and taking an even bigger future loss on his investment in the club.

Sources

Guardian, Newcastle Utd Sale
Telegraph, Newcastle: Who Will Stay and Who Will Leave?
Newcastle Utd Finances