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.