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Glazers in no rush to pay off Man Utd debt

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David Bond | 14:04 UK time, Tuesday, 25 May 2010

With the interest rate due to jump to 16.25% in August, you would think the Glazer family, Manchester United's unpopular American owners, would be anxious to start paying off their notorious payment in kind (PIK)loans as soon as possible.

But it is understood there are no immediate plans to start using United's bulging cash reserves to pay off the £225m chunk of debt - even though their £500m bond refinancing earlier this year has given them the freedom to do so.

Team building is more important than debt repayment, says a source close to the Glazers.

Now, if this were you or I and we had a mortgage on our house which was costing us more than 16% in interest a year, I reckon we wouldn't waste too much time in paying it off.

The Glazers have been subject to sustained protests at Old Trafford The Glazers have been subject to sustained protests at Old Trafford

The Glazers originally borrowed the money from three hedge funds - Och Ziff, Citadel and Perry Capital - at the time of their £800m takeover in 2005. It was one of three tranches of money, worth about £275m, to complete the buyout.

Unlike other forms of borrowing, these loans came with extremely expensive strings attached. Rather than pay off the loan and the interest each year, the interest simply rolls up and is added to the final bill.

Even allowing for the £175m which was paid off at the time of the Glazers' first refinancing in 2006, it is estimated that by the time the loans mature they will be worth £600m.

One of the reasons why the Glazers took out a £500m bond to refinance what they call their "senior debt" (a term which basically tells you it has priority over the PIKs) earlier this year was to free them from the restrictions which prevented them from taking cash out of the club to pay off the PIKs.

The bond has now liberated them and, with the club predicting cash reserves of £150m by June, the money is there to start paying them off.

And yet, they don't expect to start removing cash from United's hugely successful commercial operation in the near future - certainly not before the end of the current financial year which closes on 30 June.

Why? Implausible as it may seem the Glazers are apparently comfortable with the loan. They view it as a tax deductible, benign security.

Plus, the club's owners have obviously been shaken by the Green and Gold campaign prompted by a possible takeover bid from the Red Knights even though that campaign seems to be running out of steam, according to my colleague, BBC business editor Robert Peston.

Despite that, they know taking money out of the club to pay off their controversial debts at this moment in time would be a huge public relations disaster.

A series of recent off the record briefings with journalists - unheard of in the five years the Glazers have owned the club - demonstrate a desire to close what they see as the reality gap between the public perception of United as a business crushed by their weighty debts and what is really going on.

The Glazers believe their 2007 commercial shake-up is starting to pay off with that part of the business forecast to overtake matchday and media revenue in the next few years.

In 2008/09 matchday revenue - ticketing, hospitality, programmes etc - was the biggest earner for United with £109m, or 39% of their income; second was media with £99.7m, or 36%; with commercial third with £69.9m, or 25%.

United's decision to divide up their sponsorship rights globally has turned out to be a masterstroke. For example, they have sold mobile marketing rights to six territories - South Africa, Indonesia, Nigeria, Saudi Arabia, India and Malyasia.

Each company pay United for the right to use the club's badge and players to promote their products and services and give them a share of sales.

But then United can use the new mobile users to raise even more money by charging customers for a subscription to the club's mobile content services including clips, news alerts and ringtones.

Make no mistake - with United's global reach this is a licence to print money and must be extremely alarming for the rest of the Premier League teams.

United's ability to make money - witness the new four year £88m shirt sponsorship deal with Aon which starts next season - remains unrivalled. Last year (08/09) they brought in £288m in revenue.

But no matter what the club say, whether in public or private, they are held back by the Glazers' enormous acquisition debts.

And until they start paying them off, it's difficult to see how they can turn these vast mountains of cash to their advantage at the same time as winning the trust of United's most loyal supporters.

Comments

  • Comment number 1.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 2.

    This comment has been referred for further consideration. Explain.

  • Comment number 3.

    It certainly seems like strange behaviour from the Glazers - I would be keen to pay as much of the debt off as quickly as possible. I wonder what their logic is?

    http://the-fa-premier-league.blogspot.com

  • Comment number 4.

    Review of the Week is binned yet a non-story like this is ok. It's a sad week for the BBC website and the blogs in particular...


    Not only that, but apparently June now has 31 days....

  • Comment number 5.

    What the people need to understand is that while Utd have have a massive debt, by no means are they in danger of liquidation. For God's sake this is the world's biggest club with a massive fan-base! If they wanted to they could pay off their debt in max. two years; but it doesn't work like that. I believe that Utd have different term bonds which normally have a repayment period of five years. I'm an accountant so I know all about finance and trust me this club will never enter administration.
    If you want to blame anyone for Utd's debt then blame the FA for not having stringent ownership rules in force. Glazers may be bad owners but by no account are they bad businessmen!

  • Comment number 6.

    The Glazers have absolutely no interest in team building. They have invested virtually nothing in the team since arriving and it is only down to a damn good manager and some shrewd purchases (which now seem to be drying up) we have been able to be successful. The reason they are unconcerned about the debt is that they can use the club's revenue to service it. The fans' patience is running pretty low, demand for tickets is extremely low, revenue streams are currently squeezed to about maximum.

  • Comment number 7.

    Essentially, as soon as United can tap into the instant alerts, ringtones, and mobile phones market, the debt will be trivial.

    The Glazers will want to take a hit right now, because they are waiting for the big prize to come.

    The Glazers bought a gold mine... with the potential to be so much more. They saw it , and will reap the rewards.

    Looking at the club's potential over the next 5 years, it makes the £1.2 billion valuation silly. It looks like it is a minimum £2 billion business. Minimum.

    As long as Alex Ferguson is in charge, then there is no real threat to the business stability-wise and success-wise. Once the money rolls in, United could be looking to dominate for decades more.

  • Comment number 8.

    This comment has been referred for further consideration. Explain.

  • Comment number 9.

    I personally think some people listen a little too much to Sir Alex Ferguson at times.. but I would trust his wisdom in footballing matters.. Man Utd obviously very close to his heart and I haven't heard a thing from Sir Alex regarding anything negative towards oweners or the running of Man Utd.. So I will trust his experience on this matter before any supporter group campaign etc..

    On a side note related to this story.. during the Glazers time in charge of Man Utd has their trophy haul not included; Champions Leauge, Premier League Titles (note plural) and League Cup... I don't think many teams would argue with that haul and I dont think many supporters would question how the club is being run quite so angrily and often..

  • Comment number 10.

    I would say the Glazer's logic in prioritising team building over debt repayment (assuming that isn't just spin of course) is quite clear. In 2005 it looked like they could still stay in the top 4 without spending excessive amounts on players and wages. This would keep revenues high and they've also been very successful in increasing revenues from both supporters and commercial sources, although a fair amount of that revenue is dependent on success in the Champions League.

    However, with the increasing competition from clubs like Spurs, Manchester City and Aston Villa for the top 4, they've had to spend big. The two seasons prior to the one just finished, they spent £60m net although half of that was on Berbatov. They clawed that back via the sale of Ronaldo so, at this moment in time, their net spend under the Glazers is very small (about £2m a season possibly).

    They have generated about £90m free cash flow in the last two financial years and have to pay nearly half of that in interest alone for the next few years. The loss of CL revenue would severely restrict their ability to pay the bond interest, invest in the squad and draw enough cash out to start reducing the PIK debt. This would leave them very exposed financially so therefore maintaining their top 4 position is now a much higher priority than they ever thought it might be, with Spurs having broken in to that group and Manchester City possibly poised to next season.

  • Comment number 11.

    at the mercy of hedgefunds, id be worried

  • Comment number 12.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 13.

    The bonds were only created to allow them to take more money out of the club and cost them more than the bank loans they had previously (see http://andersred.blogspot.com/2010/05/no-david-gill-bond-issue-is-not-like.html ). I really hope their greed comes back to bite them.

  • Comment number 14.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 15.

    the interest simply rolls up and is added to the final bill

    Compound interest, then? Like most credit cards.

  • Comment number 16.

    Use the money pay the debts and may be falter one season. Continue with the present situation when ManU dont go full fledge either spending or paying high value debts and you would never win anything. So why not falter now for future. Otherwise the noisy neighbours keep clsong the gap on us!!!

  • Comment number 17.

    Glazers out !! this needs to happen.

  • Comment number 18.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 19.

    David, i'm confused.

    As a Man Utd fan (and clearly no economist!) Everything I have heard has been doom and gloom but this blog paints everything in a slightly more positive light.

    From the looks of it the efforts they have put into the commercial side of the business will really pay off. The telecoms deals they have set up has so much revenue generating potential its quite scary. Utd are really in a league of their own comercially. And when the internet rights of utd's matches will go up for grabs in a few years, the sky is the limit! I'm still worries about the debt being placed on the club, but its slightly reassuring to see that its not as bad as everyone says.

    Also, to be honest i'm not surprised that the Red Knights have some and gone. Once a load of bankers realised that they couldn't have got a quick return they went running!

    One last question David, what does this mean for utd this summer in the recruitment of players? Are utd at all resricted in who they can go for? Or does Fergie literally have the reserves of £150m at his disposal?

  • Comment number 20.

    I have to agree. What useless replacement for Robbo and Review of the Week. I care less about Utd's debt than I do the ratio of sprung mattresses to unsprung mattresses in Ulaan Batur, Mongolia. This is not news or even opinion it is rehashing a hundred different stories and shoving them in a complete waste of my license money. Shame, because I am beginning to think the BBC website's ubiquitousness is leading to laziness. A situation that will only get worse when newspapers start charging us to look at their web content.

  • Comment number 21.

    Our gripe is that the money's going on servicing the debt and not on the team. Every fan could have attended every match free of charge for the last five years and on top of that the club could have given every season-ticket holder £700 each – and would still have been no worse off.

  • Comment number 22.

    Hopelessgooner - "I'm an accountant so I know all about finance."
    I knew a man who said that once. I think his name was Arthur Andersen.

  • Comment number 23.

    I haven't read all the comments so someone may have already said this, but maaaaybe the glazers aren't paying the debt off straight away because the massive debt is what is stopping people trying to buy the club? it does sound a bit farfetched but could be a possibility. if they pay off the debt then buyers will only need the money to pay for the club and not pay off the debts as well, because the debt is almost doubling the price. just a thought...

  • Comment number 24.

    I find the blog and the comments in regarding the glazer strategy astonishing:

    firstly the green and gold campaign and general anti glazer feeling is because of the huge debts they have put on the club. I think the general consencus of most fans would rather see the investment in the health of the club and it's future by paying of a significant amount of the debt and at the earliest opportunity (er like now!), I'm therefore flabbergasted as to why a large chunk of the refinancing of the debt and bonds hasn't gone to pay off the Pik debt which is crippling the club

    This will surely infuriate us fans more not less. I hate the idea that the interest payments will go up and not down.

    If the money is to keep the on pitch side of the business going then the Glazers clearly forgot to tell Fergie - a couple of potential mediocre signings that won't mature for a good year or two anyway and selling your best player doesn't equate to a transfer policy in the last couple of years aimed at bringing both the premier league and champions league back to OT. There certainly hasn't been a time when fergie has been so relucatant to splash the cash in his whole tenure.

    Clearly it doesn't take a genius to work out that although Rooney can play well on his own upfront another world class striker of the same calibre last season would have seriously put us in a much stronger position to keep hold of the premier league title and win the champions league considering we only just narrowly lost to bayern who then made it to the final only to be beaten by a team we'd convincingly beat the previous year, more so given Rooney's ankle problems at such an important time. Why then have we not gone in for one of europe's finest strikers instead of signing someone who no-one's really heard of whom at best is going to take time to adjust and mature into whom we need him to be now!

    Considering David Villa has just been sold you can't tell me Fergie would not have been seriously interested yet not a sniff of a inkling that we went in from him until after the event (when Fergie's told us he doesn't want to buy anyone anway ) which makes me presume more Glazer spin.

    What's more incredible is Glazers are now telling every hack that cares to listen that there's money for transfers, Fergie is telling us he doesn't want to buy anway and all the while the interest on the debts far outweight that earned by a little extra cash in the bank. And they are trying to convince us this is good sound business policy.

    On the commercial revenues of the club any fan will tell you it's not hard to beat the business nous of the last three mega business brains that run the club Gill, Kenyon and Edwards - Edwards tried to sell various times for next to nothing including the ball juggling Michael Knighton, Kenyon tried to give us they yankee hook up and as for Gill does he actually run the club?

    Most of the commercial revenue has been from the Glazers making the fans pay for their debts by increased ticket prices at OT year on year. In fact if one were to argue why the club has been healthy in the first part of the Glazer tenure it's because of the fact they made the fans pay for the debt, something which clearly can't go on anymore which they well know. If you way up the real added commercial value they've given the club and take away the negative debt then like all things glazer related we are well in the red!

    What is laughable is you hacks all seem to buy it - just maybe they are sick of the negative publicity that get which is after all all honest stuff!

    Please can you explain what they gave you - some nice prawn sandwiches from Glazer ivory towers perhaps?!?

  • Comment number 25.

    can we have some half intelligent comments please - the ow haven't you won alot under the glazers doesn't fit very well when Fergie spent years buying players like Rooney and Ronaldo at a young age well before they even came on the scene.

  • Comment number 26.

    It tires me out reading guff about United's 'licence to print money' and supposed commercial dominance. The fact is that in the 21st century everybody loves a winner and nobody remembers the also-rans. Failure to win either the Premier League and/or the Champions League will destroy United's commercial potential in a couple of seasons, who in the Far East will want a ring tone reminding them of a bunch of 'losers'.

    The Glazers have been fortunate that Ferguson has performed miracles with his squad despite their lack of investment, but even Sir Alex fell short last season and United aren't top dogs anymore.

    History is important to the supporters, but doesn't earn cold hard cash from sponsors.

  • Comment number 27.

    I refuse to back the green and gold simply because there are too many people chanting 'glazer out' and wearing green and gold without having any real reason for doing so.

    'It's because of the debt, init?' Brilliant. Clearly people with lots of insight.

    People wanting me to pick them up a scarf because the never go to games so can't get themselves one, not seeing that them owning one is POINTLESS

  • Comment number 28.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 29.

    The sad part is that we were not chasing an impossible dream. We were not making a massive investment, like a stadium. Although we spent highly, we spent within our means.

    The debt incurred on us was through no fault of our own. We are the victims of our own success. We became the perfect football club commercially, and as a plc, ripe for an American to take.

    Thus, we are their goose that lays the most brilliant golden egg for them, guarenteed, year-on-year. You couldn't make it up.

    If I was a Glazer, I would not sell for a penny under £2billion.

  • Comment number 30.

    I am opposed to the Glazers owning United and I will be until the debt has been paid off and United are still at the top of the English game.

    It is understandable as to why they will want to invest, what is the point in creating a global brand out of an unsuccessful football club. What the Glazers must also realise is that the brand is built on an attacking and exciting brand of football. Therefore they will invest in United if only to serve their own needs.

    If all these supposed 'money making' schemes such as the sponsorship deals across multiple countries and mobile licenssing work and end up with us being the most profitable club in the world then fair enough. But United fans know that we need to be competitive constantly to attract the best players andwin trophies.

  • Comment number 31.

    One element which I think will become more apparent in the coming months is the difference in the Glazers attitude between match attendees who inconveniently demonstrate their opposition every home game and the majority of long distance supporters who will never visit Old Trafford but will buy mechandise and licensed United content in Africa and Asia. They tried to buy off season ticket holders with a price freeze this year but my ticket has increased by 40% since they took over so that isnt much of a gesture to me. We are the incovenient backdrop to home games that they would rather like to replace with 40k+ passive United Megastore shoppers. Thats why I wont give up my season ticket as MUST wants me to. The Green and Gold is my only voice to tell these greedy, avaricous parasites what I think of them and I dont think for a moment the Glazers will sell the club until they have milked it dry but it wont silence me..

  • Comment number 32.

    They aren't even rebuilding the team or paying the debts!!??!

  • Comment number 33.

    Should add that the interest rate of 16.25% is tax deductible expense in the US. So it makes perfect to write off that interest rather than pay the taxes on that.
    It is the same for myself. I could pay off my 6.25% mortgage instantly, but I would rather deduct the interest and use the capital elsewhere. Seems illogical but it is common in taxation/business in the US. The Glazers know exactly what they are doing.

  • Comment number 34.

    glaziers have backed manchester united in the past nani, andersson, berbatov, valencia all big money.
    when manchester united have lost ronaldo and tevez in one season but still only lose by a point to chelsea for the title and was very unlucky against bayern to get knocked out how can fans moan do manchester united have the rite to win cups every season no they will be times when we will be disappointed.
    its about the rite players when investing big money in them and if you look at the current man u squad its still a fantastic squad maybe just missing some attacking flare in midfield what ronaldo and a young paul scholes gave us but im sure the 1 player fergie buys this summer will be that position.
    we have great young players coming through the ranks that will do well for us in time look at rafael the odd imature mistake but he is becoming to be a fantastic player did well against both ronaldinhio and ribery in the champions league kept them both quiet in both 2nd legs.
    just have faith in the managers judgement he has made manchester united the team thay are today just dont keep blaming the glaziers and the debt because manchester united are just fine millions of people are in debt with house mortgages ect.

  • Comment number 35.

    Well as many supporters I have followed this tale for sometime and I can only come up with the same conclusions each time I think about it.

    1.I know the Man Utd fans have there heart in the right place and want the owners out,they want there club debt free and buying the best players.

    on the other hand..

    2.The owners did not buy this club as a play toy,unlike the Man City owners or indeed the Chelsea owner.
    They are business men and seen what is basically a company to make money.

    It is not in there interest to drive it into the ground as it would effect the sell on value if they were to sell.

    I would imagine that there is a lot more going on than people are made aware off and they are indeed using even "loopholes" in the system to make even more money,for both them and Utd.

  • Comment number 36.

    loans are based on betting on future profits it is more important that the man u team remain in the cl and at the top of pl to guarantee future income than to pay this off, as long as they keep earning all they have to do is pay the minimal and nothing will happen...

  • Comment number 37.

    The Glazers are incredibly successful business men with very high net worth and asset value. Their debt to asset ratio is the lowest of all the NFL owners. They are saving money through taxes in their financing of United and they are increasing the value of that particular asset at a time when the value of almost every other football club (and business) has been dropping. They are apparently in a cash rich situation which can never be bad news for the potential of investment in players which they well realise can have a positive impact on the commercial arm.

    All they did last year in flogging Ronaldo and not retaining Tevez was take a calculated risk. It almost paid off. 2 points off the prem after some shocking results (Burnley). Out of the Champs league after having a 3-0 lead at home to Bayern.

    You don't need to like them but they sure as heck know what they're doing!

  • Comment number 38.

    I've been a Man U supporter for 60 years or more. When I was growing up in Old Trafford, the club was owned by the Edwards family which pledged never to sell its controlling shareholding. How things have changed. We saw the sell-out to John Magnier, a noted horse breeder who, rumour has it, never saw a soccer game. But at least he allowed the club to function as a business and, to the best of my knowledge, never milked the business. Why did the loyal band of supporters allow the club to fall into the hands of the likes of the Glazer family? The debt level is absurd. And instead of retiring debt with massive annual profits, the Glaser family is taking out loans. If the Green and Gold campaign is to succeed, there is only one strategy: arrange a boycott of local games and stop buying merchandise. Drastic action, yes – and painful to true followers. But a dramatic fall in revenue would make the Glazer's more likely to consider selling out.

  • Comment number 39.

    The fact is many united fans don't understand our financial situation and thus immediately jump to conclusions. Whether people care to admit it or not the Glazers have increased united's world wide appeal by no end. Also many united fans are now wearing our original colours simply to show they are 'true' fans and they care about united's future. This may seem strange but do you actually think the Glazers care about the campaign and I think the people who had the most to gain from the campaign was the Red Knights who were trying to get the united fans to get the Glazers to sell. They don't even have enough money to buy us so how are they better than the Glazers. Also if Fergie wanted to he could end the Glazer ownership. He could come out and say I don't have any money the owners are tearing this club apart and the owners would be forced to fire him and then they would have to sell the club. Fergie loves the club and he doesn't complain about the Glazers so that's good enough for me.

  • Comment number 40.

    Look, I'd rather United not be in debt. Obvioulsy.

    I do however understand that football is now a business and the club will therefore be run as one, by business men. The Glazer's, it would appear, are astute business men and are therefore going to ensure the club remains profitable. On field success is integral to this.

    My main issue with the Glazer family? Well it's the same as the one I have with the FA and most other controlling bodies in football. The ever increasing cost of already expensive tickets which forced me to sell my book last season, and possibly this (unless £700 falls out the sky before June 13th; Please God).

    If by some incredible strecth of the imagintaion the Amercian's sell up in the near future, who will take over? Morally sound people who will fore go huge profits to reduce ticket prices for the ordinary local supporter? Don't think so.

    Shrewd economists out! Sympathetic and generous-to-a-fault owners in!





  • Comment number 41.

    I can't believe you are just reeling off the Glazer's press release (not least in the headline), without giving us an informed opinion about it.

    Th Glazers have yet to put the team first, or shell out for any big name players (Valencia was hardly a world star when he arrived as the biggest name last summer, and this summer will be no different.

    I would also ask hacks to question how much United paid for their new signings - it infuriates me when I read the Glazers have spent £12m on Smalling and £7m on Hernandez, when its clearly not the case.

    A reasonable assumption may be that Smalling cost us £6m, with the rest added on in clauses on games played, england appearances, etc. Thats £6m, not £12m. And if buying an unknown striker from a poor club in Mexico, who hadn't previously been linked with a European club, let alone Manchester United, costs us £7m then we are clearlty doing something wrong. Again it may add up to £7m if he becomes the FIFA World Player of the Year or something, but in all seriousness the transfer fee is looking at more like £2 - 3m. Total outlay = £9m, yet the press are bandying around figures like £20m spent already.

    And Mame Diouf - £4m from a small Norwegian club. Really?

  • Comment number 42.

    For those staunch anti-Gazer United fans.

    You want our club delivered back into control of the fans? Restore the soul of MUFC?

    Would you hold the same sentiment if the Glazer's were superseded by an oil-rich Sheikh?

  • Comment number 43.

    Lets get one thing straight about the Sale of Ronaldo and for that matter Tevez. I don't believe either of these were motivated by money. They would have gone anyway. It's not the first time Fergie has shifted the quality out the door. Stam and Van Nistelroy for example were at the top of their game when they were sold on. It's personality. They are selfish thinking about themselves players. I believe Man Utd is a very tightly run ship and any individualism is at first struggled with and eventually thrown out the door. When you don't do what you are told, a la Beckham, for instance then Fergie doesn't want you. IT is so clear Ronaldo was an individual with great talent, but dodgy team play, and that Tevez was in it for the personal glory. Compare them to the likes of Giggs and Scholes who have just got on with it over the years without all the bling. Nothing at all to do with the debt.

  • Comment number 44.

    Too many posers pretending to be lifelong united supporters on here, the same plastics who wear the G+G.

    Facts are united have been hugely successful on the pitch, have increased income and value of the club by a significant amount and the greatest manager in the PL history is happy with the owners.

    People major issue with the debt seems to be a lack of football manager type signings of players like benzema, silva etc blaming the debt for not attempting to sign totally unrealistic and stupid targets.

    SAF has been backed to the hilt with large amounts of money for transfers, it cant be argued with. Anyone who thinks he hasn't has no idea about united or his buying philosophy.

  • Comment number 45.

    I think it might be time for the fans and everyone who has an interest in the club to actually sit down and talk about how we can make the club healthier.

    For example, could it be possible for the Glazers to convert a portion of the debt into shares to be bought by fans, and then sold back to the Glazers after a specific length of time?

    The Glazers would effectively be indebted to the fans, but the fans would not charge them the interest that is currently crippling the club. The Glazers could then use the money they save to actually pay down the remaining debt, and would not have to buy back the fan-owned shares until the club could easily deal with it.

    If the Glazers wanted this - what would essentially be a zero interest fan loan - perhaps we could impose certain stipulations about the kind of people who the Glazers could eventually sell the club to - i.e. people who would buy the club with mainly money, not debt.

    Just an idea. Perhaps there are some economists and accountants out there who could tell me if something like this would be theoretically possible?

  • Comment number 46.

    A future buyer won't be put off by the debt becasue the club isn't in debt, it's holding company is. MUFC is a well run business that makes a healthy profit, the fact it's servicing the debt of it's owners is by the by. It's an asset, not a debt-ridden club that has over-stretched and not able to pay its own way. Liverpool is a club in a similar situation - neither are in danger of going under.

    When the Glazers sell the club they are forecasting that it will be for a value that covers their initial outlay and the interest they're paying on the loans, with some. If they pull more money out of the club then they risk it losing it's healthy standing by poor performance on the pitch, affecting media and merchandising revenue and decreasing it's overall value to a prospective buyer. I think the financing arrangements make it pretty clear that they have no intention of selling up before 2016.

    Unfortunately, when the financial status of the club is being reported on it is usually by football journalists, which exacerbates the fan anger. We wouldn't expect FT jornalists to write good match reports so why it is working the other way around, I do not know.

  • Comment number 47.

    I have no problem with the story but I do wish Utd fans would stop mewing on about their club being taken over by Glazer Inc. The shares were up for sale. You weren't complaining when all that juicy plc money was rolling in before and now it seems the majority of you have next to no idea how business works. Face it, they're here to stay so lets start hearing some cheers for Malcolm and his boys.

  • Comment number 48.

    @famouscrocadog

    Not really viable. The bonds can't really be paid back early, not without paying a major premium.

    The only thing that could be paid down are the PIK's but as this article implies the Glazers don't seem concerned about these as they could have paid these down by 70mill but don't seem like they are going to which suggests they have had a plan all along and that its on track.

    Also anyone who thinks that ordinary fans who aren't going to get a return on their money can raise a significant amount is a little deluded. Barca and Real generate around £20mill a season from their 'fan ownership' model, thats barely worth the effort for the Glazers to try you idea

  • Comment number 49.

    @matchwinner

    Smalling is by all accounts 12mill which is non-conditional and a further 2mill in clauses. The 12mill probably isn't being paid upfront mind you, situations like Ronaldo where all the money is paid at once is rare, its usually spread over a period of time

    On transfers, almost every transfer these days includes clauses and its the final figure which is important NOT the lowest amount as it has to be assumed all clauses will be met. Oh and apparently Dioufs fee is 4mill + 1mill on conditions and Hernadez is 5mill + 2 mill conditional

  • Comment number 50.

    "45. At 10:11am on 26 May 2010, famouscrocadog wrote:"

    The time and administration involved behind that type of collective deal is massive. Simply not viable as a business plan, particularly as you seem to be suggesting that

    'Fan ownership' is a bit of a myth at Barcelona too, the 'members' are not taking money out of the club. They are donations, which comes attached to status and mixed in with feelings atatched to Catalan national pride. I can't see United fans donating money to the Glazers.

  • Comment number 51.

    @Wakey

    yes but it makes a nonsense of it all if you include conditionals. It may or may not be paid, but doesn't come out of the cash flow, and is only a worst-case scenario.

    In CM 01/02 you could stick £50m in when the player played over 20 internationals, and pick up players like Paolo Maldini (in his pomp at the time) on a free transfer.

    Cynical clubs can do the same (though probably less extreme) and just sell on before the clauses kick in. Has happened loads and loads of times in the past.

    If we're paying £7m for Hernandez then Guadalahara must have seen us coming :(

  • Comment number 52.

    Wish I had thought of it. Take out a 600 million loan. Buy United and pay off the loan using the money generated by the club. Oh this financialy system is such a farce!

  • Comment number 53.

    i can see why all united fans are worried. but,the silverware they have brought too the club since they arrived cannot be argued with.they are businessmen which most of us dont understand but what you have to think of is man utd debt is only about £200m the rest of the debt belongs to the glaziers i saw this in an interview with david gill now if he has pulled the wool over our eyes then we could well be in trouble i dont think the debt was ever a 5,6 or year year plan i think it will be more like a 15 year planwith united staying at or near the top in those 15 years and when the debt is finally paid united will be the worlds biggest money earners and all that money will go on players and we will be come the untouchable manchester united p.s for god sake buy milner

  • Comment number 54.

    I have to say that the vitriol to the Glazers seems to be subsiding.
    I actually believe that the LUHG campaign will wither away, as the reality sets in that the Glazers have not done that bad a job.
    All this about United not signing big priced players.......I seem to remember that its the manager that selects the players HE wants to buy and the board furnish him with the money.
    I feel that if Fergie wanted Benzema or some of the likes, he would get him.
    Ronaldo WANTED to leave, so Fergie got the best deal he could and got Valencia who played very well last season.
    Rooney does not want to leave, if he does, then I think Manchester United have a BIG problem......I think that will be the gauge of things, if Rooney stays!!!

    I also remember the days of the Edwards family and THEY made loads of money out of United and we were not that sucessful, but we were just pleased to go and see our team....

    Leave the Glazers be.......United are in safe hands.
    No businessman would deliberately lose money......they are there to MAKE money, which is what United and they do.

    Keep supporting United.......ignore what the businessmen do and enjoy the feast served up by some of the best players in the world.......

  • Comment number 55.

    Far too many pretend die hard United fans who haven't got a clue about how the club is being run. MUST don't know what is happening so it is laughable when they say the club is being run in to the ground.

    All these people forget that in the 1990's Man Utd were paying out well over £30M ever single year to share holders, and with the money that the Glazers have managed to get in from the extra commercial revenues that figure would have topped £50M ever year as dividends to share holders. So really, with the loan payments United are still paying out a comparible amount that is not invested in the club at all.

    It also seems an alien concept to these fake fans that Business people actually want to make something work, it is as if they assume the Glazers want United to fail. The truth of this world is though that business people jump ship at the first sign of trouble but the Glazers are still there so there is something going on here that MUST and the Red Knights have absolutely no clue about, but the plastic fans are still very quick to back them up.

    Also, can anyone tell me where the plastic fans money is going for the Green and Gold merchandise? Is that going into some kind of pot by anychance?

    And why does every Anti-Glazer establishment assume the PIK payments are against Manchester United? They are not, those loans are against the Glazers themselves and not the club! And yet they are still happy for them to mature because of the many 10's of millions saved on the Tax payments, which after all the years could equal 100 Million that they didnot have to pay!

    United's debt is actually £500, not the £700M plus the BBC sometimes writes in it's reports.... but there is one report from March this year that actually explains the truth... by showing it is infact the £500M figure which all of it has a far kinder interest rule.

    When the bebt has been paid off, not even the Shiehk will financially compete with Man United because the Sheihk will not be happy with given a £200M budget every single season which is where United will be at once the commercial revenues start up... and the Glazers haven't even got around to milking the business opportunities from the USA. There is only 1 team of note there and that is Manchester United, the club is a household name there. Even the majority of people in Alabama - the most anti-soccer state in the USA - know who Manchester United are and they even see them as a monster in the world of sport, not a bad monster, but a money making monster that they know none of the sports franchises can match up to. They believe that United's financial pull can one day BUY an NFL team!

  • Comment number 56.

    @45 famouscrocadog

    Yes it is possible, but not a good idea. With the currencies as they are the inflation of the pound will very and fans could lose a lot money or the club lose alot of money on the rebuying those shares.

    So there would have to be interest paid to the fans to ensure their investment doesn't ruin their lives.

  • Comment number 57.

    @51 matchwinner

    I stopped reading your post as soon as you started talking about Championship Manager 2001/2002.

    You obviously have absolutely no idea how money in football works, and so to say how things happen in a computer game is laughable.

  • Comment number 58.

    @The Realist

    Oh no! Please can you read the rest of my post?! I'm devastated! lol.

  • Comment number 59.

    PS. I didn''t read all of your Glazer-loving post, so I guess that makes us even? And its 'Debt' btw. lol

  • Comment number 60.

    @43, Collie21 has a good point. CR# patently wasn't sold to generate funds, his attitude and the cost, in terms of team, of servicing CR#s ego simply outweighed the advantages. Tevez is a simple case of not needing a forward to run around supplying the missing work-rate of CR#...

    On the financial side:
    @55, The Realist, excellent point. What about the money chain on the G&G scarves? It would be wonderfully ironic if it turned out that the Glazers were pulling some profits off of that merch as well. Ironic, but hardly surprising...

    Oh, yeah, little hint for all you G&G scarf wearers... Doesn't it seem pointless to spend good money on a scarf to protest how the owners are spending the bad money you keep giving them for tickets, and programmes, and comestibles and...

    Yeah, if I'm a Glazer, I love those G&G scarves, because every one of those scarves represents a fool to be parted from his money and otherwise ignored.

  • Comment number 61.

    I must be bored (!) but here's a anti-Glazer fan stating why he isn't renewing his season ticket. Vaguely interesting :)

    www.manutdboycott.com

  • Comment number 62.

    Why do people always focus on the Glazers rather than the people who sold their shares to them in the first place..for a very tidy profit?Without the sale of shares to them the Glazers would never have happened.Why do these people get off Scot(actually Irish)free?

  • Comment number 63.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 64.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 65.

    The business plan is simple
    Compare it to buying a house and then renting it to pay the mortgage.
    After 20+ yrs the mortgage is paid off and you own a house - sell the house and keep the money - you're rich!
    As far as the glazers are concerned the club will ALWAYS generate enough revenue to pay the loans.
    So, the club is paying for itself and when the debts are paid off in 5-10 yrs they will own Manchester United outright.
    If they then choose to sell the club they will recieve upwards of 1.5 billion in cash.

    Whats important between now and then is to make (on average) 25 odd million a yr available for transfers.

    Simple

    So whats the big deal???

  • Comment number 66.

    THE GLAZER FAMILY ARE VERY SHREWD BUSINESS PERSONS AND I HAVE NO DOUBT WSE THAT IN 5 YEARS TIME MUFC WILL BE MAKING £75MILLION BIDS+ FOR THE BEST PLAYERS IN THE WORLD AT THAT TIME IF WE SO WISH TO BUT DONT FORGET MUFC TAKES PRIDE IN BRINGING OUR OWN TALENT TO THE WORLD STAGE...LIKE MY FATHER ONCE WROTE IN 1957..THERE A BUNCH OF BOUNCING BUZBY BABES..AND OUR YOUNG TALENT EQUALS TALENT ANYWHERE..SO DONT BE GREEDY MUFC FANS LIKE MYSELF BECAUSE WE DONT NEED DIRTY OIL MONEY WE ARE NUMBER ONE FOREVER

  • Comment number 67.

    This is a good blog, but a lot of contributors' comments seem to overlook a couple of things.

    The first is that these are NOT normal times in business terms. The days when debt could be refinanced easily are over. The yield on Utd's recently-issued debt paper as placed wasn't all that far off junk-bond levels. And if you think, as I do, that we're heading for the second stage of the financial crisis, then high debt structures look risky, especially if they are built on assumptions of ever-growing income in the future.

    Second, the soccer authorites are clearly getting fed up with clubs having too much debt, and who can blame them? UEFA are particularly concerned about this. They are said to be looking at excluding high-debt clubs from the Champions League two years from now. It's not clear that they'll actually do this, but what would Utd's financial plans - or Liverpool's, for that matter - look like without the CL?

    However good your business model looks, financial risk is clearly high, and rising, which makes high debt look A Very Bad Idea. The tragedy for Utd is that the club was bought with debt (secured against the club's own assets), not with equity cash, as per Man City. A cash buyer - almost irrespective of geographical origin - would be good news for Utd, if it were to happen.

  • Comment number 68.

    Mr Bond's post is full of contradictions: he says the fans won't accept the Glazers until they start to pay off their huge debts, but at the same time he says the Glazers are not going to start to pay off their debts for fear of a public relations backlash/disaster.

    Regarding the Glazers and this so called "team building talk". Let's see what happens in the transfer market concerning United, it would be good if Mr Bond follows up this post when the dust has settled and Fergie has spent barely anything due to the financial constraints imposed on him.

  • Comment number 69.

    # 42.

    No, I would want the Sikh. Difference is, Glaziers have us in this massive debt. Sikh would get us out, hopefully. If not, I'd want Fans. I'd rather not be in debt.

  • Comment number 70.


    This is a club that has been built on 'plastic fans' who have no association with the club other than parading round provincal towns in their replica shirts having never been to OT.

    Seeing the small percentage of the ones who go to OT trooping into the ground with their Norwich City scarves, cameras and Megastore bags with little knowledge of what they are protesting about identifies them as the gloryhunting sheep that they are.

    If you thing I'm wrong see the comment by the Utd fan above about fellow 'fans' asking him to get scarves for them !!

    The Glazers are simply doing exactly what 98%+ of Man Utd fans do, jumping on the band wagon of the most successful team looking to milk it for their personal gain before eventually getting bored and moving on.

    I would feel a pang of sorrow for the very small number of genuine Man Utd fans out there but I don't remember too many of them being concerned about the fans of smaller clubs in the past so I won't be losing too much sleep about it.

    Apathetic about Glazer, Hate United.

  • Comment number 71.

    David - Clearly the 'anti-Glazer' feeling is still alive and raging, judging by a number of the posts on this blogg. So next season therefore we can look forward to an increasingly aggravated campaign of 'G&G' posters, scarves, possibly another helicopter display over OT ,etc (by the way who pays for these things?).
    The problem is that this campaign is starting to drive a wedge between United supporters, 'real or plastic', it does'nt matter, because people with genuinely held views will be dragged into arguments that have the potential to cause a 'schism' within the Man Utd faithful, which will last long after the Glazers have departed the scene.
    It saddens me deeply, as at our final game this season a large section of the crowd were more interested in demonstrating their objections to the Glazers, rather than cheering the players. For me it was in marked contrast to the atmosphere I experienced 50+ years ago at OT, when as an 11 year old boy who had played truant from School (I had to bunk off school early, even though it was a evening KO just to be sure of getting to the Ground) so he could be inside OT for that first game after Munich when a decimated United team took the field against Sheffield Wednesday. I cannot remember what the capacity of the Ground was in those days, but a hour and half before kick off the crowd was so large, it was spilling out of OT and down almost to the Cricket Ground. Those in the Ground that night didn't care who owned the club, what money the owners were making, indeed we didn't know half the players on the pitch wearing our famous red, white and black, strip - what we cared about then was winning the game and ensuring the club got back on its feet and moved forward.
    Since that night a spirit has always moved within OT, against all odds, with a team of virtual reserves and some ageing players 'parachuted-in', United made it to the FA Cup Final - lets have some of that old United spirit back next season - the Glazers can do their best,or their worst, in the long run it really does not matter, what matters is the unique spirit in the club, whether we are (as we were in 2008)Champions of England, Europe and the World, or in debt, or all the above, we are United -that matters!

  • Comment number 72.

    United have won everything and are in shape to continue doing so. Their supporters are spoiled. Rather sickening from the outside looking in.

  • Comment number 73.

    # 69 I think you have summed up in your short post why there is this feeling toward the Glazers.. most of you don't understand the debt and just look at figures that tabloids feed you..

    I think if you look at # 72's point you will see how the rest of the football fans view the situation..

  • Comment number 74.

    @67 Friendly Card

    I am glad somebody brought up the debt rule that UEFA started talking about.

    I think it will apply to teams who expenditure exceeds their revenue, while being in debt. So that would mean as things stand the Manchester United and Liverpool would be given the green light to continue playing in the Champions League.

    It would however cast doubt on the eligibilty of Manchester City, Chelsea and more importantly to the situation coming about, Real Madrid.

    As UEFA's "jewel in it's crown" stands a big chance of failing this requirement I doubt the rule would ever be enforced. I just cannot see UEFA doing anything that would jeapordise that club considering they tend to tug over it night and day, allowing it to carry out practices that would otherwise be deemed as Government Interference... I don't have the rule number to hand.

    Oooops... kinda wandered off topic there!

  • Comment number 75.

    74. The Realist:

    Thanks, and I think you're right about the rule change - initially at least, it would look at the relationship between revenue and spending, because buying (and paying) players that you can't really afford is actually a form of cheating. Later, though, overall debt levels might also become part of the equation. And yes, it would be difficult to see UEFA actually excluding Real (whatever my personal views on this as a Barca supporter...). I'm not sure I could see them excluding Chelsea either, for that matter.

    This said, the approach to heavily loss-making clubs (such as Chelsea, and potentially Man City), and towards over-indebted sides (Man Utd, Liverpool), is really a test of UEFA's seriousness (or otherwise) where financial sustainability is concerned.

    My guess is that they will opt for a rather fuzzy "financial viability" test, which will exclude future Portsmouth-type situations whilst - it just so happens - allowing Man Utd, Real, Chelsea and others to get through. Maybe I'm just being too cynical?.....

    ..........but the point about future viability is surely important. The economy has changed decisively, and the old mentality - "revenues can only ever go up, and you can't possibly have too much leverage" - has gone from most industries. Football's administrators seem, as so often, to have been a bit slow-on-the-uptake here. Perhaps the glamour and money of the game blinds administrators to hard financial realities? It's going to be interesting to see how this pans out.

    One last thought. I've seen Real quite a bit this season, and they're looking potentially very good. They've not yet made the transition from a collection of galacticos into a seamless team, but they do show a lot of promise. If Jose does go there, his timing will have been superb.

  • Comment number 76.

    67. At 7:44pm on 26 May 2010, Friendlycard wrote:

    Having lack of debt being a qualifying criteria for The Champions League simply won't happen. You can't have a Champions League by exluding the top clubs in Europe. Nobody would watch it. Also, the company I work for pays upwards of £4m a year on CL advertising. If United, Real and loads of other top clubs weren't in it then we wouldn't bother. Also, how would this criteria be judged? Real Madrid have over-stretched numerous times over the past 30 years and had to be bailed out by the Castillian authorities. UEFA would be constantly in court as clubs pull apart the criteria used and be challenging the participation of other teams. It's a nightmare scenario that would cripple the greatest club competition in the world. Platini wouldn't risk it's existance by trying to play 'the big man'.

    This stuff should stay OFF THE FIELD.

  • Comment number 77.

    Whether their financial plan works out or not, the Glazers have little or nothing to lose - http://footballinsights.wordpress.com/2010/01/16/manchester-united-and-liverpool-an-alternative-financial-plan/

    That is the beauty of modern finance, the rich can only get richer, never poorer.

    http://allandevery.wordpress.com/2009/06/01/the-financial-crisis-who-is-to-blame/

  • Comment number 78.

    77. R Nair:

    "Whether their financial plan works out or not, the Glazers have little or nothing to lose"

    Yes, spot on. And thanks for the links - the first, in particular, is a fascinating insight.

  • Comment number 79.

    @70. Pathetic stereotypical ABU nonsense. What is it with Stoke and their fan's obsession with United? You sing Munich songs and rejoice in your hatred of us yet our paths have barely crossed in 30 years until recently. Perhaps if Stoke produced football worth watching you wouldn't see so many red shirts around town? Stick to winding up Port Vale fans.

    @72. Is it it really spoiled not to want a profitable business being saddled with £700m of debt - wanting more than spending 6m net on players in 5 years off a turnover of over 200m a year? I'd be more sickened by a no mark division 4 club with no fans being unjustly enriched into the top flight at the expense of other real clubs who've had to live within their means.

  • Comment number 80.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 81.

    Good blog, nice research and explanation. I live in hope that the reason for them not using the cash reserves is to allow us to purchase suitable players to bolster the squad in areas it really needs (centre back, creativity from midfield, a first-team-ready striker instead of Berba, Joe Hart) rather than just to avoid PR disaster.

    They do seem to know what they're doing, and the results of their changes were bound to take some time to bear fruit. But as long as we have a manager squeezing the best possible out of sometimes average players, and the chance for investment, then i'll hold my judgement back.

    After all, they're in it to make money, and that's the biggest driving force to guarantee the future success of the club.

  • Comment number 82.

    Thanks Friendlycard (at 78), they are both my blogs.

    It's easy to forget that Manchester United existed before Sir Alex Ferguson, and will in all likelihood continue to exist after him:

    http://footballinsights.wordpress.com/2007/12/06/munich-50-years-on/
    http://footballinsights.wordpress.com/2010/05/21/the-future-of-newton-heath/

    Lest we forget:

    "In January 1902, with debts of £2,670 – equivalent to about £210,000 as of 2010[10] – the club was declared bankrupt.[11] After seeking new investment, four local businessmen, found by captain Harry Stafford, invested £500 each in return for a direct interest in running the club,[12] and it was decided that the club should change its name; on 26 April 1902, Manchester United officially came into existence.[12]"

    http://en.wikipedia.org/wiki/Manchester_united#Early_years_.281878.E2.80.931945.29
    http://footballinsights.wordpress.com/2009/07/17/manchester-city-the-new-bank-of-england-club/

  • Comment number 83.


    see, the problem with the red knights (and their supporters) is they have gone about it the wrong way.

    by pushing this "us against them" it has alienated a lot of people.

    by trying to shame the glazers with the debt figures do you think its going to help in negotiations.

    the green and gold thing is counter productive and looks like a load of Norwich City fans have gone to the wrong match...

    really...

    if you support united, wear red and be proud...

  • Comment number 84.

    "Most of the commercial revenue has been from the Glazers making the fans pay for their debts by increased ticket prices at OT year on year."

    thats matchday revenue not commercial

  • Comment number 85.

    [Unsuitable/Broken URL removed by Moderator] "Most of the commercial revenue has been from the Glazers making the fans pay for their debts by increased ticket prices at OT year on year.

  • Comment number 86.

    [Unsuitable/Broken URL removed by Moderator]Where's my comment?All new members are pre-moderated initially, which means that there will be a short delay between when you post your comment and when it appears while one of our moderators checks it.

  • Comment number 87.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 88.

    The society is facing problems with such laws. This has to go legal
    and it’s needed to be sorted at the earlier.
    ---------

    debt management

  • Comment number 89.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 90.

    When will United fans get any kind of transparency at their own club. what the Glazers have done is disgusting - they should never have been allowed to take over.

  • Comment number 91.

    Have the Glazers turned the corner? Three CL Finals in four years can't be wrong, and they are slowly paying the debt off...

    Good to see Beckham back in United colours yesterday.

 

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