People News

Michael Jackson's running out of money

By Stone Martindale Oct 28, 2007, 4:20 GMT

Michael Jackson - New York, NY © Wild1 / Photorazzi

Michael Jackson has defaulted on a $23 million loan and the holder has put him on notice. Jackson has 90 days to pay the full amount — $23 million plus $212,963.83 in interest — or he will lose his Neverland Ranch.

FOX News Roger Friedman reports the papers were filed in Santa Barbara County on Oct. 22, but apparently Jackson’s loan with Fortress Music Trust, doing business as DBCG LLC, a Delaware corporation, expired on Oct. 12.

Friedman writes that the $20 million loan was secured against the deed of trust for Neverland and is separate from the $300 million loan secured by Jackson’s stake in Sony/ATV Music Publishing.

The papers filed are titled “Notice of Default and Election to Sell.” No amount of wishing by Jackson fans or spin from his much-diminished team can change what they mean.

The default comes at a time when Jackson is being sued in London for $7 million by his former patron, Prince Abdullah of Bahrain. Jackson’s lawyers recently settled several other lawsuits but have not paid them off. That amount comes in the millions as well.

Friedman cites speculation that the cash-strapped Jackson could file for bankruptcy in the next 90 days to guard against further disasters.

Jackson recently admitted in sworn testimony to impairment due to prescription drug abuse — is living in Washington, D.C., where he’s renting an expensive home, according to Friedman.

His Neverland Ranch stands vacant. The ranch’s value was assessed in 2006 at $17,042,560. The land value was $6,898,858. Overall, the ranch has an improvement value of $11,034,702.

Friedman reports that the ranch is not Jackson’s only piece of highly leveraged property.

According to records, the Jackson family home in Encino — which Michael owns — carries a $4 million mortgage. That house, known as Hayvenhurst, has an assessed value of $2.66 million and an improvement value of $2.3 million.

Friedman writes that the Jackson’s parents are the official tenants of that house.

In 2006, the state of California threatened to shut down both homes to employees when it turned out Jackson had fallen behind in insurance payments and salaries.

Despite the fact Jackson owns 50 percent interest in Sony/ATV Music Publishing - an interest possibly worth $600 million, as some have calculated, yet Friedman contends that the $323 million in loans, if subtracted, plus all the other settlements, (Jackson’s huge tax and legal bills), the situation is pretty bad.

The singer does have an out clause from his last refinancing with Sony and Fortress for a liquidation sale come May 31, 2008.

Friedman muses Jackson may lose Neverland.

"But Jackson’s lawyers at Venable LLC in Washington may convince Fortress to back off or they may find a new white knight in the next three months. Either way, Jackson is in the worst financial situation he’s ever faced," reports Friedman.