Jackson in crisis over $70m bank loan

Undaunted by declining CD sales, the possibility of a prison sentence and the reported collapse of his personal fortune, Michael Jackson is still spending around $2m (more than £1m) a month, according to his financial advisers.

On a recent weekend, Jackson went on a car-buying spree, despite his main creditor, the Bank of America, imposing a $1.5m a month spending limit.

As well as shopping trips, Jackson is paying $70,000 a month to rent a Beverly Hills mansion with a transparent dining room floor, while his Neverland home near Santa Barbara stands empty.

But all that could come to an end on Tuesday when Jackson is due to repay a $70m loan to the Bank of America. At present, with the bank taking 50% of his royalties and other income, Jackson does not have the money to make the repay ment. Al Malnik, a Miami-based entrepreneur and recent addition to Jackson's crowded coterie of advisers, said yesterday he was trying to have the Bank of America loan extended to the end of next year.

Jackson's business advisers were "working toward a positive resolution of Michael's financial and business affairs that will result in a reorganisation of his valuable assets", he told the New York Times.

But last night Jackson's music manager, Charles Koppelman, denied the singer had financial problems, or that a $70m payment was due.

"Michael is an individual who has the ability to generate huge sums of money," he said.

The apparent crisis coincides with a court hearing for Jackson in Santa Barbara on charges of child molestation involving a 13-year-old boy. Today's session is due to set a date for the first hearing at which evidence will be heard. Jackson is not expected to attend.

At his last court appearance, in January, Jackson was criticised for trivialising the trial. He climbed on top of his car outside the court house to acknowledge supporters and infuriated the judge by arriving late and interrupting proceedings to request a toilet break.

Jackson's spokeswoman, Raymone Bain, promised that Jackson would take the issue more seriously. "He is tired of the circus-like atmosphere surrounding him," she said.

But the financial revelations suggest a more immediate threat than the potentially drawn out court case. Jackson has two valuable assets: his catalogue of hits, such as Billie Jean, with an estimated value of $75m-$90m, and a catalogue of 250 Beatles songs, which Jackson jointly owns with Sony Music Entertainment.

The Beatles catalogue is thought to be worth between $800m and $900m. But if Jackson were forced to sell his share, which he has used as a $250m guarantee for the purchase of other song catalogues, there would be nothing left for him once taxes were paid and Sony had taken its share.

Similarly, Jackson's own songs have been used as security for the $70m Bank of America loan. If he defaults on that, he would lose control of his songs to a New York-based finance fund.

Jackson's position has not been helped by the presence of the Nation of Islam at the heart of his entourage. Jackson's financial affairs are now being run by Leonard Muhammad, a leading Nation of Islam member, who has a string of failed business ventures to his name.