Glazers To Suck Out a Further Half a Billion From Man Utd, Or 70p in Every Old Trafford Pound
We’re sorry that it has been all Manchester United debt all the time this week, but it’s been a key topic we’ve addressed here for years, and it’s both sad and shocking to see every last concern about the club’s future under the ownership of the Glazers realised as their refinancing effort has been put under the microscope.
What has been difficult for those of us with no training in the deliberately obscure arts of high finance wizardry is to understand in plain language what the Glazers’ latest bond issue means for Man Utd, both in explaining the state of the club’s finances (which have never before under the Glazers had to be so openly explained in the fine print of the bond issue’s prospectus) and in what the future holds now.
The best source has been the Financial Times, and one post on the Alphaville blog brilliantly dissects the situation and puts the numbers into language we can all understand, and which might make United fans throw up in their throats.
To put it plainly: the equivalent of 70% of all matchday income is going to pay the interest on the debt from the Glazers’ takeover, to go out as dividends to the Glazers (!) and to be spent on “management fees and expenses” to the Glazers, which will total over half a billion pounds at the minimum (at current profit levels) by 2017.
So even if the club continues to run an operating profit for the next seven years — which will be dependent on continuing successful performance at the highest level — the club will likely be saddled with the same amount of debt by 2017 and the Glazers will have sucked out half a billion pounds from the club. Even if the club somehow makes a lot more money than expected, half of that will go to the Glazers as well. Oh, and if the club spirals downward and operating profit no longer covers these costs, the bond issue allows the Glazers to sell off assets including Old Trafford to pay down their own debt.
Read the whole thing for the full explanation, but the crux of the matter is as follows:
The small print of Red Football Ltd’s bond prospectus shows that the Glazers have structured the issue to allow them to take at least £20m of dividends out of the club every year. An additional, so far unnoticed, clause allows a further £25m to be paid out in dividends at any time. Add these payments to the £70m already known about, the Carrington deal and “management fees” and at least £220m of the club’s cash will flow directly to the Glazers between 2010 to 2017.
With interest on the bonds and the extra cost of leasing our training ground back, the total that will be sucked out of the club between now and 2017 will exceed half a billion pounds, to add to the huge cost already imposed by the Glazers.
Let’s go over that again. The small print of the bond issue means that the Glazers get to suck out 50% of Consolidated Net Income from the club every year; if profits hold steady, that’d be £23m a year until 2017.
In fact, this bond issue is deliberately structured in such a way, that (assuming they can hold profits where they are) this is the minimum sum they can take each year. If there is any rise in profits from better TV deals or higher prices for supporters, half the extra money can be paid out in dividends.
Adding management fees, expenses and the interest on the bonds, every year 79% of the operating profits of the club will be taken out.
Or perhaps we should turn it around the other way and look at it from the fans’ point of view because this outflow is no less than 70% of all United’s matchday revenues. 70 pence from every pound spent by supporters on match tickets, food and drink, programmes, even car parking, and 70 pence from every pound spent on corporate boxes and executive facilities will go straight out of the door in dividends, fees and interest.
79% of the operating profits taken out. Or what amounts to 70% of matchday revenue, the money fans are directly spending at Old Trafford.
And the kicker?
By 2017, despite having pumped more than half a billion pounds out of Manchester United, the club will still be saddled with the £500m of debts it has today.
Many supporters, commentators and people in the wider football world have been astonished by the revelations concerning the Glazers ownership of Manchester United that have come to light in the last week.
This paper demonstrates that the pillaging of the club over the last four years by the owners is set to continue and indeed accelerate in the years to come. Nobody can be in any doubt; not the fans, the Football Association, the Premier League, UEFA, the government or indeed the manager or players that what is being allowed to happen is nothing less than a violent assault on one of Britain’s best known sporting institutions. There can no longer be any excuses by the football authorities to not immediately and urgently intervene (through rule changes if necessary) to prevent people, who have no interest in football beyond their own greed, from acting in this way.
Fucking hell, folks. Fucking hell.
Hat-tip to the folks at WSC for finding the article.
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Under Uefa initiative to get clubs to only spend what they earn by 2012 Manchester United 2017 is to late to stop Man being thrown out of the Champions League. Therefore increasing the debt.
As someone with a modest finance background and who is not categorically opposed to deficit spending, the dividends are somewhat repugnant.
The matchday income is not the holy grail, but in a depressed economy no dividends should be paid to any shareholders – and if they were serious about selling United, it looks/appears like they are robbing the piggy bank before selling the pink shell.
On a more serious note, the Glazers can just about get away with this because the supporters of the club only have two real options:
A.) Continue to support the club they’ve supported all their lives through the purchase of tickets and merchandise, thus making the Glazers richer, or
B.) Move their support to FC United and/or boycott Manchester United all together and thus allowing the club they’ve supported all their lives to crumble under a mountain of debt just like Leeds.
If there’s an option C, I don’t see it, barring some sort of intervention from UEFA or the FA, and there’s no telling how Platini’s actions might affect the club at this stage.
The Glazers personally borrowing money is troubling. However, even with this, ManUnited’s debt/value is actually in mid-range.
According to Forbes’ poll back in April, Arsenal have more debt than they are worth. Plus, it’s common in the States, all NFL teams have a fair amount. Though, Glazer’s Buccaneers have a debt/value of 13%, much less than the 60% range than United probably now have.
Didn’t Arsenal take debt to build a new stadium? From what I understand, united’s debt is from glazer borrowing from the club to buy the team. It’s not really the same.
Although I think it’s finally hurting the team, Ferguson hasn’t made any big signings since Ronaldo left (without that cash, they would be in the red). Although, with all the money he’s wasted on Nani and Anderson and benching of Berbatov…..maybe it’s a blessing?
A. Ruiz, you’re correct. Arsenal’s debt of almost 300 million pounds was to finance building the Emirates, which is now making the club far more money than Highbury — a worthwhile risk, financially. Man Utd’s debt has all pretty much come from servicing the Glazers’ takeover; it hasn’t provided a penny of extra income to the club as far as I can tell, and as we can see, is actually going to continue sucking out hundreds of millions from the club for years to come without even reducing that debt.
It was all absolutely unnecessary for United.
On Arsenal’s debt, see this Times piece, which lists the following biggest debtors and explains Arsenal’s situation;
Arsenal are 17 shares from being in the same boat as United, if not worse. Liverpool have less debt than us, but I would say they are worse off. Anyway…
A. Ruiz: Berbatov is on the bench because of niggling injuries. If you call scoring 20 goals and garnering 10 assists in all competitions — 9 assists in EPL, which placed him 2nd behind Van Persie — a waste of money, clearly you don’t know what you’re talking about. In 18 appearances (5 of those as a sub) this season, he has 7 in goals and 2 assists — while playing most of this year with a knee injury. Not world beating form, no, but what can you ask? If you actually, truly watched United, you’d understand how his hold-up and link-up play, barring one or two performances, is so often essential to our success.
As far as Anderson being a waste of money, well, we spent 17million for an 18 year-old. He’s 21/22 now, and that makes him the same age Fletcher was when everyone spent the better part of 3-4 years groaning about how he would never make the first team, that he wasn’t cut out for United, etc. Now he’s one of the 1st names on the team sheet. The center midfields of the EPL are a difficult and very public forum within which to hone your skills. I don’t do anything that I’m struggling to improve at in front of even a few hundred people, much less a few million. How about you?
Nani, well, a gamble on youth is just that, a gamble. As opposed to many other managers, Ferguson is right way more often than his wrong.
What I call a true waste of money is spending nearly 30 million on a nearly 30 year-old Shevchenko, Ballack, etc. Or, let’s say, breaking the British transfer record by securing Robinho for 32.5 million (or any number of other players who were simply too self absorbed or loud mouthed or even violent — tevez and bellamy and adebayor anyone? — to survive for any lengths of time at other clubs) — just because you can. Or, let’s say, buying any of the following players simply because you can: Lescott, Toure, Bridge, Sylvinho, etc and so on. None of these players, no matter what they say, give two shits about the club or the fans they play for — just like Tevez never gave a shit about United fans. Blah, blah, blah…it’s all too distracting from the real event — the actual playing of the sport — to be sustainably interesting.
I’m not sure what’s worse in the long-run: losing your club to money-hungry idiots who owe their asses to legitimatized loan sharks or losing your club to dictatorial billionaires who seek to divorce your club from it’s working class history simply so he/they can begin their own personal, real-life game of Championship Manager.
That in mind, we have yet to see what will happen to any of the English billionaire clubs when their honey pots dry up and head back to Russia or the Middle East or wherever — will they sustain their brands or…who knows? Those fans, all of them, are laboring under the same psychological exercise in non-agency as we United fans are — hope it all doesn’t dry up and blow away….
What all of this partly exposes is just how sincerely during the Ferguson era is just how the collective ABU subculture has been waiting impatiently for an actual concrete sign of United finally and ultimately failing, and in this Glazer bullshit it exists.
It’s sad, really, as I would argue, yes as a United fan, that the Edwards family’s drive to keep United at the forefront of everything commercially propellant within the footballing world throughout the late 80s and early 90s is integral to the EPLs worldwide growth. Martin Edwards, as did those like him, worked and pushed, both at and from, the very epicenter of the initial efforts to establish the Premier League — a moment of real watershed and controversy in the history of English football, no doubt. In many ways the evolution of the Premier league helped drag English football out from its place of post-Heysel ostracization, and let’s be honest, from around 1996/97-2003 Man United helped bring the EPL brand to America more than any other English club. The club’s continuous appearances on the European stage throughout the 90s brought them into a scant, while ever increasing (still), number of American homes. They were the 1st English club to invest real time and money in our market. What would become the English cliche of “all yanks support United” is no longer true because of United’s success as a brand — i.e., for me, the general rise of American interest in American soccer since the 1999 Women’s World Cup is completely attached to our massive (and rather unlikely) interest in the big European leagues. In fact, perhaps, if one were to graph it, when we factor in the myriad avenues of match viewing access now available, I would argue that as a country these two interests, both foreign and domestic, are on a long-term rise, and that our ever-rising interest in foreign football is happening on a slightly steeper trajectory than our interest in actual American soccer, both MLS and NATs teams included. Compare ESPNs rating numbers for EPL games versus those of MLS (finals) and NATs matchs — the difference is staggering. I don’t believe only British and Irish ex-pats and other immigrants represent even 90 % of this difference.
United, for its own part, is inextricably linked to both of these rises — and I don’t mean this in an arrogant way, either. It’s just, if Chelsea has only been on your radar for 3-4 years and you’re ecstatic about the possibility of United completely going under, I would simply say that you remind me — YES, in a much less severe and important manner — of the type of American who stood around after 9/11 wondering how any of it ended up at your doorstep, but then not really caring about it when someone tries to explain from the Balfour Decision on to “today” how and why these things have transpired. People don’t care “how” such events occur. We just want our perceived enemies to be smashed and crushed. Ultimately, such a line of thinking allows us to enter into a sense of accomplished thought — “I, and everything that makes me be me, am superior to all that I always knew I was superior to. And now, and more importantly, all the world will see it.”
There is always the possibility of United eventually fading into administration, points deductions, and so on, but I would venture to guess that a “bailout” will eventually arise from nowhere, or perhaps Russia or the Middle East. After all, when United were in severe financial trouble around the turn of the last century, it only took a dog to save us then. Perhaps the ghost of Ernest Mangnall will arise to inspire another…we’ll see.
That said, in today’s (marketing) game, and it’s hard to say with any assuredness or proof, as well, how does the “too big to fail” ethos of gluttony apply to football clubs of the sheer size of Manchester United? No offense to Leeds fans, and I mean that, but as a brand they weren’t anywhere close to United when they went under (plus, the comparison between the 2 clubs’ financial troubles don’t hold up — United’s hasn’t resulted from buying more players than the club can afford, after all. The rich owner thing isn’t quite working at QPR — and in some part that must be because unaffiliated outsiders or onlookers can’t locate a legitimate reason to invest their time (and money) in following the club. When Madrid was in deep debt trouble a few years ago, they simply sold their training ground to the city of Madrid to clear much of their debt. Such solutions aren’t necessarily available to many English clubs, if any. Debt or millions and billions or civic generated bailouts — all of this eventually denigrates the playing of the sport itself (think of Gary Cook’s recent brilliant rant of a monologue).
Regardless, it’s clear that Martin Edwards and Sir Alex have directly contributed to the construction of United’s own Frakenstein monsters, The Glazers, a piecemeal work in progress that began all the way back in, say, 1991-1992. But, that’s a big business. Carrington will now (probably) be sold. The name OId Trafford could be next. If and when the Glazers do exit, will they have taken any of the soul left in United with them? That’s the question that should be and has been being asked by MUST/Shareholders United and FC United supporters for going on nearly half-a-decade.
Regardless, on valencia and obretan alone we spent over 20 million pounds this summer — so I wouldn’t exactly call us a club with no money. That said, if we have to become the kind of club that simply MUST pay 40, 50, 60, 70, 80 million pounds on individual players, whom are either entering their peak or are passing through it, just to be competitive, United’s contemporary ethos of spend big on younger players with vast potential and bring others through will be finally be lost — and thusly, gone will be the aforementioned soul, the soul of Busby. In Macheda, Wellbeck, King, Eikrem, Diouf, Anderson, the Da Silva twins, Evans, Cleverly, et al, I think we have some excellent talent, some of which will come through, and those of them who do will have done so mostly for nothing. Say what you will about those players, but most of have been deeper into the Carling Cup, including having been on the field when we last won it, than all of Arsenal’s more oft touted youngsters.
This is exactly what is wrong with American ownership. The money doesn’t go to support the team or to put a better product out for the fans, it goes to line the owners’ pockets.
We see it here in the States all the time, especially in baseball. Money from television contracts generally goes to the owners, not to providing better players for the enjoyment of the fans who generate all the income. The bigger teams have more to spend so they perpetuate dominance, but the smaller teams, like in English football, have no chance. Teams are playthings for the owners.
However, in United’s case, the team is more than a plaything, it’s a cash cow. Repugnant, repulsive, you pick the adjective. I’m embarrassed for my nation when it comes to the Glazers. Or Hicks and Gillette, for that matter.
Let’s not be that surprised now.
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@rednowred4ever: Arsenal took out the loan to construct Ashburton Grove and the residential development at Highbury, which provides jobs and community regeneration for hundreds in the North London Area. The increase in ground capacity and subsequent rise in profits is well worth the initial outlay. Additionally, Arsenal has paid off 40% of its total debt in late February, not through write-offs that ignore structural problems like at Chelsea and Manchester City, but through money earned from the sale of its Arsenal Stadium flats. In less than five years since its move, Arsenal has only GBP 13 million left to pay out of its construction loan of GBP 130+.
As for Kroenke and Usmanov, Arsenal hopes to keep them at bay. We’ve seen what private ownership has down to the Reds of Manchester and Liverpool. We don’t want to go down the path of Pompey and we certainly don’t want the wham-baam-thank-you-maam succession of managers at Chelsea, etc. Mixed ownership in which there is a balance of power between large shareholders with a long term vested interest in the club (like the Hill-Woods though DAMN they shouldn’t have off loaded their majority stake a long time ago), fans with a few shares, and some investment/insurance companies is the way to go. That, and you know, Arsene Wenger.