Michael Jackson's Personal Debts To Be Paid Off By Year's End

Michael Jackson's Personal Debts To Be Paid Off By Year's End

10/24/2012

When Michael Jackson passed away in June 2009, his departure was met by the grieving of millions of fans around the world—and by a great deal of discussion and speculation over the fate of the half-billion dollars he owed to creditors ranging from big banks to “Thriller” director John Landis.

Many questions have been answered over the past three years as the King of Pop’s estate has continued to pull in nine figures on an annual basis, most recently $145 million over the past year. And according to representatives from the estate, the late singer’s personal debts will be paid off by the end of the year.

The last major non-business loan left is connected to Jackson’s Mijac Music, the entity that contains the copyrights to the songs he wrote over the course of his career. Shortly after the singer’s death, the estate started paying off a $75 million loan he had taken out against the catalog, negotiating the interest rate down from an exorbitant 15.5% to a very manageable 4%. The final payments on that loan are set to be made this fall.

It’s a major milestone for Michael Jackson’s growing postmortem business empire, especially considering where the estate began. After the singer’s death, it appeared that many of his assets were close to default, if not already there. But a handful of deals—including a $60 million advance for the concert film This Is It and a $250 million record deal with Sony, the largest in history—gave the estate the steady cash flow needed to pay off creditors.

In addition to paying down the massive loan on Mijac Music, the estate has paid $35 million owed to concert promoter AEG (in connection with Jackson’s planned This Is It tour) and the $4.1 million mortgage on the Jackson family estate in Encino, Calif. Smaller debts to individuals have been renegotiated and resolved, including an agreement with Landis, who had alleged that Jackson still owed him $2.3 million in 2009.

A substantial business loan ($280 million, by FORBES’ estimate) remains on Jackson’s 50% stake in the Sony/ATV publishing catalog. The singer shrewdly bought the entity’s precursor, ATV, for $47.5 million in 1985 after recognizing the value of the rights to songs it contained by The Beatles. Ten years later he merged the catalog with Sony’s publishing catalog after the company paid him $100 million as part of the deal, retaining half of the newly-formed combined entity for himself.

Today, the Sony/ATV catalog itself is worth somewhere in the neighborhood of $2 billion, thanks to its ownership of copyrights by The Beatles, Bob Dylan, Taylor Swift, Lady Gaga and others.
The interest rate on Jackson’s loan connected to the catalog has been sliced from 5.8% to 2.9% since his death. At that low rate, paying back the loan quickly, in full, may not even be financially expedient—the company’s funds could be better utilized by buying up new, money-generating copyrights.

That said, given Jackson’s postmortem earnings prowess, the estate could probably pay off that loan fairly soon if necessary. The singer’s Immortal World Tour, a joint venture with Cirque Du Soleil, has grossed $160 million this year, making Michael Jackson the top-grossing live act in North America three years after his death. Other deals–including one with Pepsi, Jackson’s first endorsement pact in two decades–should continue to add to the estate’s coffers.

Not even John Landis could have imagined such a resurrection.


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