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.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. I told you in this space last week Fortress was trying to sell Jackson’s loans and that a desperate refinancing negotiation was taking place. From the looks of this filing, Fortress decided not to wait any longer. 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. Jackson’s financial house of cards is finally falling in.
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. There is some speculation that cash-strapped Jackson could file for bankruptcy in the next 90 days to guard against further disasters. The beleaguered pop star — who I told you on Thursday 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. Meanwhile, 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. But 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.
Jackson’s parents are the official tenants of that house, although several of his brothers and sisters and their children have lived there over the years. 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. On paper, Jackson still is quite wealthy. His 50 percent interest in Sony/ATV Music Publishing continues to sustain him. That interest may be worth $600 million, as some have calculated. But once the $323 million in loans is subtracted, not to mention all the other settlements, Jackson’s huge tax and legal bills, the situation doesn’t look quite so rosy. The singer does have an out clause from his last refinancing with Sony and Fortress for a liquidation sale come May 31, 2008.
Will he actually lose Neverland? That’s possible. There’s another lien on the property, thanks to former partner Marc Schaffel. 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
