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Red Knights continue to plot

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David Bond | 17:10 UK time, Friday, 2 April 2010

For Sir Alex Ferguson, it is the most critical week of the season so far.

Chelsea at Old Trafford on Saturday followed by the return leg of the Champions League quarter-final against Bayern Munich. And all to be negotiated without Wayne Rooney.

Away from events on the pitch, the even more important battle for the future ownership of the club is also reaching a critical point.

Despite last week's announcement from the Red Knights that there would be no takeover bid until the end of the season, the campaign to wrest control from the Glazer family gathers momentum.

badge595ap.jpgA Manchester United supporter wears a scarf in the colours of the anti-Glazer movement. Credit: AP

Earlier this week, leading Knights figures held a key strategy meeting to discuss the final structure of the bid being drawn up by Japanese investment bank Nomura and City lawyers Freshfields. According to well-placed sources, the favoured option is now for a £1.2bn bid working in two phases.

Having decided to retain the £500m bond recently used to refinance the Glazers' debts, the Knights are discussing a plan whereby two thirds of the remaining £700m would be raised from 30-40 super rich United supporters. The final third would come from fundraising among ordinary fans. If necessary, the Knights say they will borrow money to complete the bid.

In phase two - once the club was secured - a general share offer would be launched allowing supporters the chance to own a stake in their club.

Once this structure is agreed, Nomura will begin the process - perhaps as early as next week - of asking the 30 or 40 wealthy Knights to commit their cash.

So far, we only know the names of four of the Knights. They are Jim O'Neill, a lifelong United supporter and head of global economic research at Goldman Sachs, Paul Marshall from hedge fund Marshall Wace, Mark Rawlinson from Freshfields and Guy Dawson from Nomura.

All four have major City reputations and, perhaps more importantly, serious United credentials. In the case of O'Neill, he was on the United PLC board at the time of the Glazer takeover in 2005 and is close friends with Ferguson and chief executive David Gill.

But, even if this wealthy group of United fans can raise the money, would the Glazers sell?

Despite rumours of financial problems at home, the American family have insisted publicly they are in it for the long run. They have to say that.

But privately, too, they have been sending the same message to the Knights. Investment bank Rothschild, which advised the Glazers on their £800m takeover, has not been retained at this stage but it is understood it has made informal contact with the Knights in the last few weeks to tell them they are wasting their time.

Besides, as the club points out, United under the Glazers are hardly a disaster story. Since the takeover, Sir Alex's side have won the Champions League and three Premier League titles. They have increased commercial income by 65% and have, to date, only taken out £23m, although it is worth noting the bond issue allows them to take out many millions more in the future.

So the key questions are these:

Can the fans actually raise the money to persuade the Glazers to sell?

Until we see the colour of the Knights' money, this is impossible to predict but the sums involved would make it very difficult for ordinary fans to do it on their own.

A recent survey suggested 83% of United fans would be prepared to put an average of £600 towards the takeover. With 150,000 supporters now signed up to the Manchester United Supporters Trust that would amount to just £90m - 7.5% of what is required. That is not insignificant but fans would need to be prepared to put in thousands and thousands of pounds - not hundreds.

Even if the Knights were successful, what would actually change?

If it is accepted United are doing well on the pitch - in spite of Cristiano Ronaldo's sale to Real Madrid - and the club is making more money than ever, the touchstone issue is the £716m of debt the Glazers have saddled the club with.

Cristiano Ronaldo in action for Real MadridRonaldo signed a six-year contract with Real Madrid. Credit: AFP

But the Knights say they will keep the £500m bond. The interest payments currently draining out of the club at around £60m a year will not stop. And the longer-term problems - replacing Ferguson and rebuilding an ageing squad - will need even more money to solve.

Will the wealthy Knights just hand over the club to fans?

Rich men do not become rich through philanthropy. They will expect a return. The challenge for O'Neill and the Knights is persuading multi-millionaires to put their fortunes into the club and then allow their shares to be sold on to supporters for little if any profit. Is there not a danger that United could simply be swapping one group of wealthy owners for another?

For now, most United fans will worry only about results on the pitch - and with their team still in the hunt for a remarkable domestic and European double, they will leave the Knights to their plotting.

The crunch point will come when it becomes clear where the £80m United received for selling Ronaldo to Real has gone. Quarterly results - one of the requirements of the bond issue - due to be published on the Luxembourg Stock Exchange before the end of the month will show that the money is still sitting in the bank.

But if, as everyone suspects, it is eventually used to start paying down the Glazer's £202m of PIK (payment in kind) loans and not for strengthening Ferguson's team in the summer, then that's the point when things could really start to get interesting


  • Comment number 1.

    Finally somebody puts the situation into an easy to read unbiased blog. Now financially stupid people like myself can actually understand what's happening.

  • Comment number 2.

    Another great BBC blog abou the financial goings-on behind the scenes. I have really enjoyed reading both your article and Matt Slater's on "The Arsenal Ownership Mystery" (to use his terminology). I was wondering - looking at the situations of both clubs, would you rather be a fan of Arsenal right now, or of Manchester Utd? Which club is prospering better and has the better future? I would love to read a comparison and your opinion.

  • Comment number 3.

    The whole Red Knights business is a stupid idea. As much as this pains me to say this as a City fan, United are better off with Glazer now, than they would be with the Red Knights. The Glazers will either make 1.2 billion in profit now, or 700 million in 10 years time. The only reason to stay is pride.

    If they do go, United will find itself in £500 million more debt, with poorer fans buying less merchandise. A group of wealthy men will be considerably less well off, with little or no chance of their money back. If they do take their money back, it is at the loss of United, which begs the question; Why invest in the first place?

    The whole situation is a pointless chirade. The Glazers have a plan to buy United for nothing, and invest money as they do so. United would be better off if they hadn't sold to Glazer, but the fact is, they did. So now they need to get over it, and get on with life.

    Or get an Arab billionaire...

  • Comment number 4.

    Makes sense. The debt is soooo large now no one is gonna fix it. Time for an Arab to come in.

  • Comment number 5.

    I don't think that any change of ownership now will alleviate the financial problems at Old Trafford. Unfortunately the rules that allowed them to buy the club with debt that the club has to pay is where the problem lies.

    I don't believe that there is going to be any one person, or a group, that will come in and make United debt free. The red knights will also want to gain from this deal somewhere down the line, the difference they would like to have us believe is that they have the clubs interests at the core of what they do. The Glazers need a successful club too, so either way not a lot will change.

  • Comment number 6.

    Yeah great idea get a wealthy Arab in, Portsmouth have had two of those and look where it's got them.

    The problem with any club relying on wealthy investors is that when they get bored / run out of money the funding goes and so does the club.

    The Glazer's aren't really that bad for United, they might be borrowing but the money to pay it back is coming from the commercial side not their own pockets and the popularity will still be there even after they get bored.

  • Comment number 7.

    i am a man u fan i think it is cool that the red knights what to talk over man u

  • Comment number 8.

    I don't really care. If only i could take over,i'd suck up all the money,relegate them and take them to administration to put the final nail in the coffin.

  • Comment number 9.

    Good blog David, but you say:

    "The interest payments currently draining out of the club at around £60m a year will not stop."

    The £60m you quote is too low, the total interest charge last year at the parent company (Red Football Joint Venture Ltd) level was £68.5m. This includes the PIK loans that would be repaid by the Glazers from some of the money the receive from any Red Knight offer.

    The ongoing interest on the bonds would be around £45m. But United would also not have to pay the £6m annual management fee to which the Glazers are entitled under the bond covenants, or the £3m for parent company "general corporate expenses". Nor would the 50% of consolidated net income dividends be payable, so the saving to United would be very, very significant.

    Such savings would allow the bonds to start to be repaid over the next few years whilst also providing a more generous transfer kitty and/or allow some ticket price reductions.....

  • Comment number 10.

    David your comment - "Is there not a danger that United could simply be swapping one group of wealthy owners for another?" says it all.
    That is exactly what will happen. Manchester United is not just a football team, it is a a world wide brand, valued recently(Forbes Foundation) as being in the region of £1.2b. As much as it irritates some fans that the Glazers are making money out of the club, the reality is someone will always do so, the days of Man Utd being owned and run as some sort of social/community enterprise are long gone. I have been a Man Utd fan for over 50+ years, I have probably spent more money over the years on Man Utd than I have on my house, i.e. on season tickets, (before that League Match ticket books), programmes, travel costs to games, home and away and a few cup finals, must have even spent more than a few bob on meat pies and cups of tea! However if you put all the money I have spent in 50 years together, it would not buy me more than a few shares in United these days, even if they are returned to the status of a public quoted company. The Glazer era at OT has so far been very successful and it is in the Glazer family's interests to ensure it remains that way.
    The problem for me is that if the Red Knights are successful and takeover the running of the club, therein lies the danger, everyone knows what happened at Leeds when the largest investor in the club was also a fan!

  • Comment number 11.

    2nd observation on your article, when you say:

    "Rich men do not become rich through philanthropy. They will expect a return."

    I have to ask "why?"

    We are used to super rich individuals (Abramovich, Mansour) chucking money at football with no hope of return. Indeed before the Premier League, such was the lot of most owners - putting money in and getting little back.
    Why should a group of rich if not super rich "Red Knights" not adopt the same view. If you are passionate United supporter with £50m, why not put £10m to save the club? Beats another yacht or holiday home doesn't it?You don't want to lose money, but you may be happy to park your capital in your football club....

    The savings I outlined above would be wiped out by any dividend requirements, making the whole exercise pointless. Nor would fans be willing to grant the Red Knights an instant profit. I have no doubt Jim O'Neil et al are well aware of this.

  • Comment number 12.

    I am of a humble financial background, but can someone answer me these blaringly obvious questions:

    ....Red Knights take over...

    1. It would appear they are still going to carry a large sum of debt, though admittedly reduced, main note the bond issue, about 10% interest so still £60m interest per/annum if i remember that being quoted correct somewhere.

    2. These Red Knights are very successful businessmen, however i am sure that with £20-30m of personal wealth sitting around, they can, with their knowledge, get a decent return on that wealth, so lets not be fooled into thinking they are getting involved with Utd out of the goodness of their hearts or to be No.1 fans.

    So are we not swapping one owner who is looking at Utd as an investment, for another owner, albeit fans, wanting a return too, so money, transfer money you would imagine being pulled out at some point.

    which leads me onto more interesting debatable topics.

    3. With the new Red Knights at the helm, they need to find investment for the team, and as the blog lead toward an ageing team. where are they going to find finance for that? Liquidity in the market is not as it was, owners can't add to it as they will be clean out of personal investment.

    4. Is Utd even a good purchase? Utds success is down to one man alone, Sir Alex, he has how many years left? 3? 4? Then you are going to see the biggest transition period the club has seen for 20 years. And Utd have real competion, City with bottomless pits, a Chelsea owner that has cash in the bank, foreign owners 2 a penny, all with deep pockets, the medium term future for Utd doesn't look amazing, would you want to be investing in a company, at the top end of the market, when you know these huge bumps along the road are going to come???

    Not with my money!

  • Comment number 13.

    I'm divided on this topic, but I like this blog. My biggest problem is the continuing rise of the cost of my season ticket. And those who have not simply jumped on the fashion statement of the Green & Gold scarf - whilst buying club merchandise from the megastore - will probably agree. The Glazers are taking millions out for their own profit and yet hiking up the price for the fan. The threat here is that, eventually the fans will turn and stop going unless this changes....then where will the Glazers be? Will the Red Knights bring prices down? Who knows. As for the transfer kitty....we have had more than enough big name signings since 2005 and we have won enough cups. Who are we as fans to decide that Ferguson should spend the £80 million. Hasn't he said enough times there is no value out there. Should we not trust the gaffer? So this is where my sitting on the fence attitude lies. Sadly, this problem has arisen from the emergence of the rich neighbours. Not many people batted an eyelid before City started throwing the cash around and United fans realised we can't compete. Luckily for us, they had a manager who wasted far too much on useless signings. Will this always be the case though. We will not get a wealthy Arab and we will never have an unlimited transfer fund but we should also not be mugged off by the Glazer family who waltz in and threaten to sell our beloved ground and state of the art training facility to keep lining their own pockets. Sadly, I fear there will be no end to this....

  • Comment number 14.

    I despise this trend of rich tycoons taking over English clubs and in Manchester United's regard, render a powerhouse of world football, who at one stage held the bragging rights as the world's most famous and richest club, to a calamity of debt.

    And what does that ginger-beard Glazier know of football! Well soccer, if you consider the American form of football... Armour wearing, teeth-guard fashioned drones geared to win the Superbowl. A flimsy excuse for a real man's game; rugby that is.

    Venting aside, the real interest of the Glazier takeover was merely financial and in doing so plundered what was once a debt-free club. So, if the Red Knights motives are the same, why are they more suitable owners? Simple. They are wealthy SUPPORTERS of this prestigious football club and as far as I understand, British.

    Sure, in the case of capitalism, foreign investors may contribute to business's portfolios but on a minor scale. If the stakes were to be divided, in an ideal world, 70% should belong to these Red Knights, 10% to the global fans and 10% allocated to foreign investors who see Manchester United as a mere marketing tool.

    England does not require investment. There is enough wealth and talent to go around. Manchester United football club was well established before those Americans came around. Perhaps the Glazier's interest would fair better at clubs who required assistance; Portsmouth perhaps.

    Still I maintain my stance. Away with those pompous Americans. United were winning trophies and breaking records before they realised football was actually played with feet!

  • Comment number 15.

    Andersred: The answer is quite simple. Because the amount of money likely to be involved is a lot more than £10 million each. I imagine it would be at least twice that, and probably more, especially since the Glazers clearly don't want to sell.

    Great blog, by the way. My understanding of financial subjects is rather limited, but I had no problems reading this blog.

  • Comment number 16.

    Its the big debate if you support Manchester United......... The Glazers or not the Glazers......

    What ever your point of view, you have to give the family credit for borrowing 700m, carrying little risk because those fans will pay for it, either by actual monetary value or by a poor performance in both the Transfer Market or the league!

    If it failed, ok, they would have set to lose a few million ( I can never foresee the club "collapsing", no matter how much I would like it, the infrastructure they have in place is to "solid" IMO.

    But to Actually buy the club with Borrowed money, get the fans to pay for it then sell it at even a greater profit in a few years to those exact fans........ The business model is excellent.

    So what I am proposing!!!!!!

    There are around 10-20m BBC license payers in this country. How about we all stick £50/100 in and Buy Barcelona!!!!!

    We can take all the Glory of owning one of the greatest clubs in the world, get the spanish to pay for it, and when they have had enough of us, we will double what we put it!!!!!

    A lot better then your 6% year on year investment in the Stock Market!!!!!

  • Comment number 17.


    Your 'massive savings' are all based on an assumption that the professional fees being taken out are unusual and unnecessary. Thats not the case.

    The Interest on the PIK would go, but at the same time this isn't being paid by United themselves anyway so its really not the interest figure which should be being used otherwise you are comparing Apples and Oranges. The club would be paying be paying £45mill in Interest under both ownerships. So there is no savings there.

    The other professional fees are still going to be there, management services will still be required and the structure of a RK buyout would actually open up more areas where such fees would have to be paid

    "If you are passionate United supporter with £50m, why not put £10m to save the club?"

    These Red Knights in their own words don't have a spare £50mill just sitting in the bank. Most of the RK's total worth is in the millions or tens of millions and thats total worth not Cash in Hand. The RK with the highest worth is apparently in the £240mill range. Its not like they are Abramovich or Mansour (or even the Glazers) where they are in the realms of being super rich and might be able to find 10mill going spare. Most of The Red Knights to reach the £20mill stake they are being asked to put up are going to have to either cash in investments they have already that are earning them money or take out loans secured against their assets and that means they REQUIRE a return.

  • Comment number 18.

    I'm not a United fan nor a financial guru, but if the Red Knights have the over whelming support of the supporters, could they call for a mass boycott of the home games starting next season until the Glaziers agreed to sell for the same price that they paid for it? The Glaziers would act very quickly when they see their team play in an empty stadium. It would be a drastic move but sometimes we need to make big big statements. I realise this is hypothetical but just wondered what, if any, the legal implications are.

  • Comment number 19.


    The problem is with Season Tickets is that yes they have risen alot over the last 5 years but pre Glazer United's ticket prices were well below the going rate of the market. Even now the average ticket price at OT is less than at the London Clubs of Arsenal, Chelsea and Spurs. Now yes there is the southern premium and the London premium also that accounts for some of that (although there is no way that accounts for all the difference) but how do you explain Liverpool whose Average ticket was and still is higher despite them not hiking their ticket prices. In England with our combined TV rights Match Day is the main source of income and if a club like United want to compete with Europe's best they can't do so selling tickets at hundreds of pounds below the market value, especially when due to the low prices when they took over the club the waiting list was outragously long.

    The Red Knights aren't going to reduce ticket prices unless a)They Cut the Transfer budget or b)Suddenly United are allowed to sell their own TV rights OR c)New WORLDWIDE football Finance rules are introduced that are fair and can't be abused thus reducing the amount of money linked to the game because they have to remain profitable which currently means maximising Match day revenues

    "mugged off by the Glazer family who waltz in and threaten to sell our beloved ground and state of the art training facility to keep lining their own pockets"
    But they didn't threaten that. It was mentioned as a legal requirement as part of the Risks section of the Bond material. Find someone who has the original PLC material and you will almost certainly find the sale of OT and the Cliff mentioned in that.

  • Comment number 20.

    I am sorry, but this makes me sick. The media are more concerned about the financial state of Premier League clubs, whereas lower division clubs are on the brink of going out of business due to small debts, certainly in relation to the hundreds of millions owed by the the premier league teams. Why? due to the Premier League itself being created and siphoning off the cream of TV money, and even earlier, the grabbing of all the gate recipts for home league games. What they forget for the latter is that it takes TWO teams to make a football match.
    In the past there was a more even playing field, where the TV money was share more evenly (yes the top flight got more, no problem with that) but this money got syphoned down more due to transfers with the lower clobs, so the money stayed within UK FA PLC. Now we have an uneven field where great chunks of money now go out of the country to Europe and further afield for players and less and less money go to "lesser" clubs.
    As a consequence we now have a situation where the PL over spend to get to Europe with foreign players, no money to the lower divisions, the national team suffer due to lack of numbers capable, and an increasing number of clubs either in Admin or going to the wall. How do clubs like Southampton, Leicester, Leeds, Southend, Chester (who have gone), Darlington, Stockport, cardiff, Palace, Rotherham, Luton et al feel when their debts were very small in comparison, and indeed with some (Stockport) were put into Admin without their own accord for a mere £300K. But of course this does not matter as it is not PL!
    If these so called "Red knights" were football fans, they would see the wider picture, rather than just United.

  • Comment number 21.

    So the Red Knights are going to keep the 500M Bond. Therefore what is going to change, better stay as is, at least the Devil you know, who has not done Utd any harm, than a load of entrepeneurs (who just wanna make money) plus a Japanese Bank, I don't think so!!!!!

  • Comment number 22.


    There is little point me saying "no return required" and you saying "return required"! We'll have to wait and see won't we.

    You are entitled to believe that the club will not pay the interest on the PIKs if you want. This was not permitted under the bank debt covenants, but I and many other analysts believe the main purpose of the bond issue was to allow dividends to be paid up to RF JV Ltd to deal with the PIKs.

    The key right is the ability to pay out 50% of consolidated net income (essentially EBITDA - bond interest if trailing 12mth EBITDA is twice trailing fixed charges). See my blog for more detail than you could ever want.

    The Glazers have to use this method to pay the PIKs because their US shopping center business is not generating any cash (again, see my blog).

    By avoiding the need to pay fees, divis etc, United could deleverage (i.e. repay the bonds when the early redemption penalties come off) quite fast.

  • Comment number 23.

    A clear an fair explanation for what is going on right now. I think the problem is not only a ManUtd problem but a disease spreading out all over world football: the evergrowing importance of money. It's totally ridiculous that players receive over 150.000 a week (no matter how brilliant they might be),bllionaires consider a football club as their spare time toy and the man in the street has to break his back to be able to watch his club playing. Not only it attracts weird and dubious sheiks, olicharchs and other quick moneymakers to get involved in this and spend their even more dubiously earned money on it but it also leads to corruption into the highest levels of football-organisations like FIFA and UEFA. A sad observation because in my opinion football belongs to the people. And maybe unnecessary to add: no matter what happens, Manchester United Football Club will always be the biggest and greatest club in the world..!

  • Comment number 24.

    Firstly it seems to me several of the red knights were involved in, advised on or worked for companies that helped the glazers buy united to start with. They also seem likely to land united with debt comparable to what it has now. I for one would rather have the glazers in charge than some cheap imitations.

    Secondly the glazers recently released new information showing profits have increased in the last year. Media revenues were up 33%, commercial revenue up 16% on last year and in the last month there have been 2 new sponsorship deals plus a partnership deal with Turkish Airlines.

    The glazers have always backed SAF, they are doing well to increase revenue and are constantly looking to make the united "franchise" more profitable.

    I think far too many people look at the current debt repayments and tell themselves "Wow, if only that money was spent on transfers and not wasted" but if it wasn't the glazers taking that money, someone else would.

  • Comment number 25.

    Yew Wun Thuree Seavun Seavun Ait Thuree Foor Nein

    Media income is nothing to do with the owners whoever they are. It is all to do with the PL and CL deals and how well the team does.
    The commercial stuff is helpful but any management team could pursue that strategy and I would hope they would (actually some of the step up was built into the plc's Nike contract and was therefore automatic).

    I'm not sure how the people involved "helped" the Glazers buy United. Jim O'Neil was on the plc board that opposed the Glazers and they were advised by Guy Dawson (now at Nomura) and by Freshfields.

    The ethos of the owners is that of LBO owners - squeeze the pips to pay the debts. All the money from the post 2005 50%+ ticket price rises has gone to pay interest. There is no rule to say that has to be the case.

  • Comment number 26.

    #9 andersred

    The £60m you quote is too low, the total interest charge last year at the parent company (Red Football Joint Venture Ltd) level was £68.5m. This includes the PIK loans that would be repaid by the Glazers from some of the money the receive from any Red Knight offer.

    The ongoing interest on the bonds would be around £45m. But United would also not have to pay the £6m annual management fee to which the Glazers are entitled under the bond covenants, or the £3m for parent company "general corporate expenses". Nor would the 50% of consolidated net income dividends be payable, so the saving to United would be very, very significant.


    Consolidated net income is likely to be negative for the remainder of the period over which the goodwill resulting from the buyout is being amortised (11 years). Additionally, at present, the fixed charge coverage ratio covenant would prohibit such payment. (Not much of a change given that no dividends have been paid since the buyout.)

    "General corporate expenses" are carefully defined in the bond prospectus - there's very little wiggle room. These are costs that are likely to accrue no matter who owns the club.

    The amount of the 6 million management fee allowable that will be taken remains to be seen. (And, of course, we have no way of knowing the value United will receive for the fees.)

    Two asides: 1) The bonds are putable at 101% of face value in the event of a change of control - the Knights don't have the ability to leave them in place if the bond holders want to redeem them. This might leave the Knights needing to raise 500 million in debt as well as the 700 million in equity they are projecting.

    2) In the event of a buyout by the Knights, the goodwill from the previous transaction will (as far as I can ascertain) be eliminated. This would move United into a tax paying position, which would be likely to be expensive. (Unless the new transaction generates a similar amount of goodwill to be amortised, which it might.)

    Bottom line - without knowing more about the Knight's plans it is impossible to say whether or not there would be a benefit to United.

  • Comment number 27.

    Oops. That'll teach me to check UK tax statutes before I post. Amortisation of Goodwill isn't applicable in calculating taxes. However, the notional interest on the PIK seems to be. The general observation on the non-positive net profit and the fixed charge coverage ratio covenant precluding dividends seem to hold (although for how long would appear to depend on the fate of the PIK or its successor). Sorry for the confusion - my bad.

  • Comment number 28.

    #20 offertonhatter - Finally! someone mentions the financial woes at most other clubs in lower divisions. Thank you!

    All this railing about Americans (PS: I quite like Mr Lerner over at Villa) ... it's a pity football doesnt (indeed, cannot) adopt the socialist methods that American sports leagues use ... losing teams rewarded with the pick of the next year's draft, salary caps, etc.

    All European and British football is left with is unfettered capitalism and suboptimal consequences... rich get richer, poor get poorer, bubbles grow, bubbles burst...

  • Comment number 29.

    "They have increased commercial income by 65% and have, to date, only taken out £23m"

    Indeed. They have increased ticket prices by 50% in 4 seasons, and have 'only taken out' £23 million personally, but have also taken £250 million in interest payments on THEIR loans, yet the debt continues to rise.

  • Comment number 30.

    Another great insight into financial, behind the scenes, dealings. I hope that Platini's idea is brought to fruition by uefa - namely, a club can only invest what they earn from revenue. That would make for a more even playing field abd perhaps also end the massive debts clubs run up.

  • Comment number 31.

    I am sorry but what exactly is the big issue if Utd have large debts of 716mn?? the club is more than capable of paying it back, hence creditors are more than willing to lend money. The club has not suffered on the pitch and even the manager seems to prefer the current system to its predecessor. As far as ticket prices are concerned they will be raised as long as there is enough demand to meet the price. They may not raise them this yr but will raise next yr, face it Utd with a turnover of over 280mill and a payroll of only about 130mill are a goldmine. Believe it or not Glazers are actually treating Utd very well, there haven't been any cuts whatsoever. Look at Tampa Bay Rays, last 2 yrs the payroll has been cut to 40mill (well below salary cap of 120 odd mill) and franchise has shunned all expensive signings. This is same team that is worth over a billion and is bringing in tens of millions of profits due to NFL's shared revenues model. If Glazers are ever in a major money soup they will sell the NFL team not the football team in Manchester. If they had to sell they could have sold to the Abu Dhabi group.

    A consortium owned team would be a joke with the various investors wanting their share of pound of flesh either in terms of money or influence.

  • Comment number 32.

    "And what does that ginger-beard Glazier know of football!"

    He probably knows how to spell his name.

  • Comment number 33.

    So Who's really supporting the Green and Gold campaign? Coming away from this afternoons defeat,Sooo called Glazer out scarf wearers carrying superstore bags full of goodies,buying drinks and pies in the concourse area. Do they really know what it's all about? If you want the Glazers out then don't feed the monster.Wear your old shirts,take a packed lunch and flask. This campaign isn't a fashion statement.The scarf should have real meaning or we might as well give up and let them fleece us.

  • Comment number 34.

    If the Glazer's original valuation of £790 million for Manchester United was way in excess of reality, and only stacked up based on hugely inflated ticket prices... then why would any level headed business investor want to reward the Glazers original investment of £272 million of their own money, with a £478 million profit? That's what the Knights would appear to be offering the Glazers if the article is correct. Am I missing something or is a £1.2 billion valuation simply compounding the problem we have now? As a fan, I certainly would not buy any shares in a club so clearly overvalued. It just does not make sense.

  • Comment number 35.

    This Takeover bid is madness. The media are jumping all over it because it sells advertising space and newspapers. They are playing on peoples fear of debt as they know that most people don't understand money and think all debt is bad (like credit card debt). Currently Man Utd is better run than ever before, which is why the club is becoming more and more profitable every year. Decisions are made quickly as there are only a few people who need to make a decision. Since the Glazers takeover the club has had it's most successful period in it's history.

    The Glazers are being talked of as if they want to ruin the club and just take all they can from it. They want to make a profit, of course (as with all companies). They achieve this by doing what is best for the club, winning trophies and bringing in players who entertain. They want a steady profit for decades not a quick robbery. If the Red Knights achieve the takeover they will have to do it in a way that seriously over values the club and would have to make a loss. Then there will be about 40 wealthy individuals all wanting the club to be run in their way and pulling in different directions which will cause many problems.

    The current debt on the club is like having a £70,000 mortgage on a rental property worth £100,000. The property would have mortgage payments of £400pcm with a rental income of £550pcm (£150pcm profit). This would be seen as a great investment as it is producing a comfortable cash flow. But the media is focusing on the £70,000 debt because they know that most people don't think and just jump on the crazy witch hunt.

    If the takeover is successful it will destroy the club and put it into even more debt and it will be like buying a property worth £100,000 for £140,000. Madness. When people realise that they will make a loss on their shares they will sell and the value of the club will plummet. Then they may really have to start selling players like Leeds did and look what happened to them.

  • Comment number 36.

    W David C

    I’m not sure you quite understand the Red Football group of companies’ balance sheet structure. The last reported debt figure (June 2009) was £716m. This comprised the PIKs which were £202m and the bank debt (now repaid and replaced by the 2017 senior notes aka the bond issue). The PIKs are escalating at a “credit card like rate” of 14.25% per annum (which will rise to 16.25% pa from August 2010). So as of the end of March 2010, the PIKs are now around £223m. The bond debt is £534m, so the total debt at the end of March was £757m. We know cash at the end of December was £98m, so net debt is around £660m.

    Is £660m affordable for a company of United’s profitability? Last season, United made EBITDA (earnings before interest, tax, depreciation and amortisation) of £93m. Having debt to EBITDA of around 7x is pretty high. What level would you say is appropriate?

    Furthermore, EBITDA is a relatively poor measure of football club profitability as one of the inherent costs of football, transfer spending to maintain the quality of the squad, is excluded. As the JP Morgan report shows, “free cashflow” (cashflow after transfers, capex on Old Trafford, cash interest and working capital) is actually quite weak.

    Furthermore, the £93m of EBITDA was earned in a year of extraordinary success for the club (as you point out). Yet we know football is an inherently volatile industry – just ask a Liverpool supporter 20 years after they last won the league. This means the risk this level of debt creates is very high. It is only five years since we failed to qualify from the Champions League group stage and it would be foolish to believe success will go on indefinitely, especially in a post Fergie world.

    The PIK debt is some of the most expensive wholesale financing possible. With the reverse amortisation (like a credit card) and the power of compounding, it will spiral out of control is not repaid soon. At 16.25%, the total repayable sum would reach over £700m by August 2017 when the PIKs have to be repaid.

    The Glazers have shown themselves unable to repay the PIKs in the last four years. The bond document includes numerous rights to “restricted payments” which are clearly designed to liberate the club’s cash and cashflow for the purpose of repaying them.

    So your premise of “affordable debt” is sadly simplistic, resting as it does on cyclically high profits and the wrong interest charge (or effective cash outflow from interest and dividends to contain the PIKs).

    You also appear to mistake the price at which a company is bought with its profits (unless the “loss” you refer to relates to goodwill amortisation, a non-cash item). Company valuation does not affect operating profits. You believe that by definition any bid for United would be at the wrong price but give no reason.

    I can understand scepticism about the Red Knights possible offer, and of course people should reserve judgement until more details are presented, but I’m afraid none of your argument against it makes any financial sense.

  • Comment number 37.

    The bottom line with manchester united is that they have to reduce its debts soon before its gets bigger. The Glazers must sell the club to the Red Knights soon before its to late to redue its debts. As long as manchester united keep wining year after year the debts won't become bigger

    Manchester United should have drawn 1-1 against chelsea on Saturday, the poor referee made a big mistake and that can cost manchester united winnning the premier league. Its still 3 horse race as long as chelsea drop at least 3 points before end of season!

  • Comment number 38.

    Maybe I missed this but all of these scenarios discussed rely on the Glazers being willing to sell...which they are not?

    You can wave as much as you like under their noses but they're in this for business and are not going to pack up and move out of town.

    I'd bet next season the Glazers will still be in charge, Man Utd will still be successful and carrying the debt they have today.

    The other key difference between the debts of Utd et al vs the debts of the smaller teams is that the smaller teams missed their payments which is why they get in to trouble. Debts fine if you pay off your monthly dues, it's when you forget to pay the taxman or other loans that things go wrong and Utd haven't been missing payments as far as I am aware...?

  • Comment number 39.

    W David C and Anders Red

    One Million Reds' thinks that W David C's analogy with buying a house as an investment is helpful for 'ordinary reds' like me to get our heads around most of the issues involved. Of course 'andersred' is a highly knowledgeable expert in the city, but sometimes too much technical info tends to confuse, bamboozle or switch people off, when they really need to be switched on.

    Let's remind folks of W David C's relevant para

    "The current debt on the club is like having a £70,000 mortgage on a rental property worth £100,000. The property would have mortgage payments of £400pcm with a rental income of £550pcm (£150pcm profit). This would be seen as a great investment as it is producing a comfortable cash flow. But the media is focusing on the £70,000 debt because they know that most people don't think and just jump on the crazy witch hunt."

    Summary of W David C's valuations

    1. Property Value at £100,000
    2. Mortgage of £70,000
    3. Repayments of £400
    4. Rental Income of £550

    However, there are a few key points that need to be added in order to give the full picture of how the house was bought and is being paid for:

    1. The mortgage taken out on the property equates to an 'endowment' type mortgage, where the monthly payments only pay off the interest, with nothing being paid off on the original capital borrowed. Today, endowment mortgages are almost unheard of.

    2. A significant portion of the original capital was borrowed at incredible interest rate of 14.25 per cent, and it appears that the interest on this has been allowed to accumulate to worrying levels.

    3. The rent of £550 although being paid has been pushed up to the very limits of what the tenant is comfortable paying.

    So, although the current business model is operating 'successfully' on a month to month basis, the worrying part is how the owners of the house are going to find the cash from within the business to begin making any serious impact on the original capital borrowed.

    With regard to W David C's main point - let's look ahead to the Red Knights' possible bid of £1.2 billion, and ask the question. How can a house which currently struggles to pay rent of £550 on a property valuation of £100,000 all of a sudden be worth £140,000?

    One Million Reds on facebook is a new meeting place for a group of fans who are calling for fans to reach out the hand of friendship to the Glazers'.

    Promoting co-operation with the Glazers to agree a phased introduction of majority or even 100 per cent fan ownership will be a much cheaper option than trying to force through a hostile takeover bid which grossly overvalues the club.

    One Million Reds is still only a fledgling idea on facebook, but all ideas were just that at one time.

    It is our contention that we can sell the idea of majority fan ownership to the Glazers as an enhancement to the Manchester United brand, both on a moral and business level.

    Such an approach offers a win win scenario for fans and business.

    Agreeing to the Glazers remaining on with a gradually diminishing holding, would be a much cheaper option in the short and medium term with no new debt being introduced.

    Of course it's all down to getting the right valuation agreed in advance and the willingness of both Glazers and fans to properly engage. But are we going to let our current feelings get in the way of common sense?

    You can view the One Million Reds page on facebook at

  • Comment number 40.

    @ #7, tanaka webb: I don't doubt your commitment to United, but please, check up on why United fans never, EVER, use the phrase "Man U" to refer to the club.

    David, good blog, as a few people have pointed out, this is a great introduction for non-financial people into the troubles at United. My only real issue with the Glazers is that I feel they are spreading themselves too thinly. Their investments are split between different sports across different continents and the club is suffering as a result. Surely if they sold off some assets in the States and paid off some debt, the club would be more financially successful, thus allowing them to take more out while still ploughing money in to ensure continued success? If the teams are simply shelling out to cover interest payments, they are losing money which could be used to boost the team and their pockets.

  • Comment number 41.

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


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