Manchester United Financial Situation.

Dub13

I have had a request for a thread on the Utd Financial Situation,this topic certainly merits its own thread and it will also save the super thread from going around in one big circle.

So fire away lads and try and keep it in here.

Spud83

in a nut shell

The Muppet

Could I suggest that we have a post at the top of this one for links to relevent important club statements, articles, Financial statments, accounts etc that can be regularly updated . That should keep the discussion tidy and all the important information close at hand. Dub 13s post seems ideal.

I think the default period of time users that users are allowed to edit posts means a mod will have to keep this updated Ithink, obviously with the users supplying the links.

Dub13

The Muppet wrote: »

Could I suggest that we have a post at the top of this one for links to relevent important club statements, articles, Financial statments, accounts etc that can be regularly updated . That should keep the discussion tidy and all the important information close at hand. Dub 13s post seems ideal.

I think the default period of time users that users are allowed to edit posts means a mod will have to keep this updated Ithink, obviously with the users supplying the links.

PM me anything you want and I will stick it up.

The Muppet

Cheers Dub13

As this has been a bone on contention on the other thread I'll start the ball rolling with this. It's from the end of last year , we have spent £16 million since then, The rest should still be there for investment on the right players.

Fergie says he can spend 80 million pounds in transfer market
London: Manchester United manager Sir Alex Ferguson has said the 80 million pounds that the club received from the sale of Cristiano Ronaldo is available for investment, and he can spend it if he wants to.

"The Ronaldo money is there if I want to use it. The money was there in the summer if I had wanted to use it. There is no bother. That is a fact. But, I didn't think there was any value in the market then, and I don't see any value now. So, I'm not thinking of buying anyone in January. I'm happy with what I have brought to the club," The Daily Express quoted Ferguson, as saying.
"Last summer's deals did inflate the market. It was the silly season, with the prices paid for players. The prices we were quoted for players were not reasonable, in my opinion, and that's why I didn't do anything," he added.
Ferguson further said the amount quoted by Bayern Munich for Franck Ribery (60 million pounds), Valencia for David Villa (50 million pounds) and Wolfsburg for Edin Dzeko (30 million pounds) does not represent value for money, and he will not buy when the window opens next month.
"There is a danger that this situation could continue for a while. There is the World Cup coming up. A young player could emerge in the tournament, and there could be an escalation in his value," Ferguson said.
"But, it doesn't change my view that we must keep looking for value. I could spend the money, but I think value is important," he added.

http://article.wn.com/view/2009/12/12/Fergie_says_he_can_spend_80_million_pounds_in_transfer_marke/


Ferguson further said the amount quoted by Bayern Munich for Franck Ribery (60 million pounds), Valencia for David Villa (50 million pounds) and Wolfsburg for Edin Dzeko (30 million pounds) does not represent value for money and he will not buy when the window opens next month.

“There is a danger that this situation could continue for a while. There is the World Cup coming up. A young player could emerge in the tournament and there could be an escalation in his value,” Ferguson said.

“But, it doesn’t change my view that we must keep looking for value. I could spend the money, but I think value is important,” he added. (ANI)


http://blog.taragana.com/sports/2009/12/12/fergie-says-he-can-spend-80-million-pounds-in-transfer-market-if-he-wants-to-55508/

Manchester United chief executive David Gill has hinted at more signings by the club this summer.

MagicMarker

Thank christ I don't have to read all this bollocks in the UTD thread anymore.

*unsubscribes*

Mitch Connor

whatever Fergie and Gill say about the 80million Ronaldo money being there, the clubs financial accounts, shown in all their glory as part of the Bond issue, shows that United have NO cash available in the bank. Whatever money is spent (net) in the summer, will come from a loan or the bank overdraft facility mentioned in the bond prospectus.

So, I believe there is money available for Fergie to spend in the summer, but it is not (from what I have seen in the accounts and explanations of the accounts) the Ronaldo money nor is it money that is 'surplus' or similar.

What annoys me about this entire situation is that United are making more money now than they ever have before - the club itself is making a great amount of money but it is getting swollowed hole by the interest repayments to the banks/PIKs/Bonds, "consultancy fees" to the Glazers and interest fee loans to the Glazers. They are sucking every penny they can from the club.

Sure United only managed to make an overall profit of something like 30million in the last financial year despite selling Ronaldo for 80million and getting 40million of the AON deal payed to the accounts up front.

Mitch Connor

MagicMarker wrote: »

*unsubscribes*

Why did you subscribe in the first place?

ShoulderChip

Mitch Connor wrote: »

Why did you subscribe in the first place?

probably like me uses the automatic subscribe feature

Pro. F

It's pretty much the same for me as what Mitch has said above.

I don't know if Ferguson is lying or telling a half truth or has been misled when he talks about having money available for transfers. However, I do know that the financial statement shows that there is no cash available, only an over-draft facility (ie even more debt). So if/when we do buy players we will be adding to the already massive debts on the club.


For anybody who is interested, here is a post with links to analysis of the situation in articles from the Financial Times' news blog.

Pro. F wrote: »

Information on the bond issue, the financial structures and the credit facility
here

And
more analysis of the structures which transfer money from the club to the Glazers' holding company(where the PIKs are)

And some additional information on the PIKs and the urgency of repaying them.

timetogetfit

Ferguson saying that there is no value in the transfer market really is annoying,the prices are set by the clubs willing to pay the prices so if Real Madrid ,Man City and Chelsea are willing to pay the current market prices then thats where the prices will stay and the others can either try and accept that or get left behind.

Besides it makes little sense in paying a little less for inferior players when for a little bit extra for top top players and thats where the real value lies

Paying 35 to 40 million for David Villa who is a world class player probably would be a bad move now that he is 29 but it would have proved more valuable to pay the extra 10m for him after the euros instead of going for berbatov

Mr Alan

Mitch and Pro. F own this thread by the way.

Boskowski

As I'm taking abut of an interst in utd I'd like to say it's total rubbish that so much is made of the fact that utd are not interested to buy villa for fourty million. They would be off their heads to spend that money on him. I don't like the man one bit but he's a great manager and he knows exactly what he's talking about. Only for the fvcked up ownership situation I'd say trust the man and let there be no worries. But I think there us a situation at utd that even the great man I don't like may not be able to overcome. I hope it's not going to kill off this club in the long run. They've been too great a rival over the years.

Vanbis

The Red knights know that Glazers wont sell the club unless they get a offer they just can't refuse. I'm no financial expert but why don't the Red knights offer to invest in the club helping to reduce the current debt and also provide SAF with a war chest to invest in 4/5 top players this summer. Long term the Red knights will eventually buy the club from the Glazers in the next five to ten years and with the investment it will leave the club in a sound financial state when they did complete a takeover and get the fans back on side.

I know its easier said then done but surley a good idea?

Spud83

Because that would help the Glaziers too much. If they invested in the club let's say 40% and helped clear some of the debt then the remaining 60% would be much more expensive. Therefore making the the glaziers more money, and costing the red knights much more.

The red knights are business people at the end if the day, there is no point thinking of them as anything else.

Also there would be no guarantee of the Glaziers selling a remaining percentage to them.

However all that is important, but possible more important is that the Red Knights want fan support for any takeover. It's why they approached MUST. Getting into bed with the Glaziers so to speak would lose them most if not all fan support.

Vanbis

Spud83 wrote: »

Getting into bed with the Glaziers so to speak would lose them most if not all fan support.

I understand that but at the end of day the club is most important and if it helps with a future take over and help reduce the current debt while offering significant financial backing for SAF then surley its a win win situation for all.

Red knights may well make a bid in the summer when the Glazers refuse and reject it what will the red knights do after that? If these so called Manutd fans really want to help the club and secure the future and ease the debts surley its an option they and glazers should consider.

gosplan

Spud83 wrote: »

The red knights are business people at the end if the day, there is no point thinking of them as anything else.

This.

If a businessperson comes in they're going to treat it like a business.

Also, I'd be very suspicious if they decided to call themselves 'the red knights'.

Spud83

Vanbis wrote: »

I understand that but at the end of day the club is most important and if it helps with a future take over and help reduce the current debt while offering significant financial backing for SAF then surley its a win win situation for all.

Red knights may well make a bid in the summer when the Glazers refuse and reject it what will the red knights do after that? If these so called Manutd fans really want to help the club and secure the future and ease the debts surley its an option they and glazers should consider.

Not really as the Glaziers would still have majority control so they would still be the ones calling the shots on finances.

Also as I said I don't think it would help with a future takeover. If it was on the stock exchange then it might, but helping the Glaziers, which investing in the club would do, will just drive the price up, and may make a takeover unattainable. The size of the debt is the one thing that might make the Glaziers sell. If they can't see themselves getting out of it, they might let someone else bail them out.

Now calling them fans is very premature. We don't know exactly who they are, who is involved, and what their plan is. What they will do if the Glaziers reject their bid I don't know, I don't know if they are even going to be able to put a workable bid together.

They will however be business men, and they will know that doing a half way deal with the Glaziers will be bad business.

Regardless of anything else that may happen, part ownership between the red knights and the glaziers won't.

BTW the red knights I believe is a media term that they seem to have accepted. Considering there is no official company set up by them, its easier than saying the group of business men interested in buying united.

Paleface

The thing that puzzles me about the situation is why on earth would the Glazers buy United, the biggest sport franchise in the world, and then run it into the ground??

It just doesn't make sense.

Maybe its that football is living in dreamland at the moment. The money clubs spend on players is totally unrealistic. The governing bodies are supposedly trying to correct this and when they do transfer fees should go down.

The Glazers know this and could be holding out when United would be in prime position to take advantage of such a scenario with their large annual turnover.

The Muppet

Vanbis wrote: »

I understand that but at the end of day the club is most important and if it helps with a future take over and help reduce the current debt while offering significant financial backing for SAF then surley its a win win situation for all.

Red knights may well make a bid in the summer when the Glazers refuse and reject it what will the red knights do after that? If these so called Manutd fans really want to help the club and secure the future and ease the debts surley its an option they and glazers should consider.

That's fans speak, from the owners point of view profit is most important, maximising their investment, The sceptic in me suspects that some sections of the red knights, (the business men) would have the same agenda, Other sectors MUST formerly Shareholders United being ordinary fans would have the interest of the club at heart.

Spud83

Paleface wrote: »

The thing that puzzles me about the situation is why on earth would the Glazers buy United, the biggest sport franchise in the world, and then run it into the ground??

It just doesn't make sense.

Maybe its that football is living in dreamland at the moment. The money clubs spend on players is totally unrealistic. The governing bodies are supposedly trying to correct this and when they do transfer fees should go down.

The Glazers know this and could be holding out when United would be in prime position to take advantage of such a scenario with their large annual turnover.

Don't be fooled buying United didn't cost the Glaziers much if anything at all, and they have been taking money out of it from day one. The bought United to make a profit, if they sold in the summer they will make a profit, if they wait 5, 10 years the could make a bigger profit. Once the club is breaking even, or making a small profit as the situation is now and has been since they arrived they don't care. Problem is we needed the Ronaldo money and half our shirt deal to make a profit last year, where that money is coming from this year I dunno.

The Muppet

Paleface wrote: »

The thing that puzzles me about the situation is why on earth would the Glazers buy United, the biggest sport franchise in the world, and then run it into the ground??

It just doesn't make sense.

Maybe its that football is living in dreamland at the moment. The money clubs spend on players is totally unrealistic. The governing bodies are supposedly trying to correct this and when they do transfer fees should go down.

The Glazers know this and could be holding out when United would be in prime position to take advantage of such a scenario with their large annual turnover.

The didn't buy it to run it into the ground and TBH I don't believe they are running it into the groud. They bought it because they saw an opportunity to make a lot of money by being Succesful and building the brand Globally. Like most other people they didn't see the recession on the horizon and that recession must have had some negative impact on their business plan and their ability to increase revenue.

United is still a viable business and anything I have read on the finance indicates that the clubs debt can be serviced by revenue the club generates. Some see the Piks as a major issue but they are not secured against the Club they are Glazer debt and they just might force/encourage them to sell if they got the right offer.

Paleface

Spud83 wrote: »

Don't be fooled buying United didn't cost the Glaziers much if anything at all, and they have been taking money out of it from day one. The bought United to make a profit, if they sold in the summer they will make a profit, if they wait 5, 10 years the could make a bigger profit. Once the club is breaking even, or making a small profit as the situation is now and has been since they arrived they don't care. Problem is we needed the Ronaldo money and half our shirt deal to make a profit last year, where that money is coming from this year I dunno.

You are contradicting yourself in that reply. If the Glazers bought United to make money but it isn't making a profit then what sort of money making future does it have?

Paleface

The Muppet wrote: »

The didn't buy it to run it into the ground and TBH I don't believe they are running it into the groud. They bought it because they saw an opportunity to make a lot of money by being Succesful and building the brand Globally. Like most other people they didn't see the recession on the horizon and that recession must have had some negative impact on their business plan and their ability to increase revenue.

United is still a viable business and anything I have read on the finance indicates that the clubs debt can be serviced by revenue the club generates. Some see the Piks as a major issue but they are not secured against the Club they are Glazer debt and they just might force/encourage them to sell if they got the right offer.

I'm not disputing the fact that United is a viable business. I'm also not disputing the fact that the Glazers are shrewd business men with a plan for United to make even more money.

I'm just curious as to why United fans seem to think that getting rid of the Glazers is going to suddenly make United debt free and have shed loads of cash to splash on new players because lets face it new players are the only reason anyone cares about the money. A lack of new signings in the summer would have everyone up in arms!

Liam O

If the Red Knights are seriously out to help the club then why don't they offer the Glazers investment for a % of the club?

Ok the debt is worrying but United are a huge business and get more sponsorship it seems every couple of months or so. When the Nike contract runs out in 2015 the club may sign another deal for over £250m and take a chunk of the debt with it. I feel the club will be ok.

Son Of A Vidic

Why doesn't Fergie go old school again? Get his best young talent on the pitch next season regularly and consistently. Be prepared for a trophyless season or two and build for the future. Even if the money was available, the talent already at the club should not be ignored. We don't want to buy another Berbatov now do we? With Rooney injured and when he was most needed he failed - shock horror. I often think a lot of these big name signings come to United, fulfill a dream or ambition and play out their careers with the pension plan as their only priority.

OPENROAD

The Muppet wrote: »

anything I have read on the finance indicates that the clubs debt can be serviced by revenue the club generates.

Do you have a link, maybe someone can clarify for me, what is the interest that utd have to pay per year and what is the average profit made by utd.

Was it not the case that if Utd had not sold Ronaldo they would have made a loss.

If utd can finance the interest payments how much is left over for possible transfers?

Pro. F

The Muppet wrote: »

Some see the Piks as a major issue but they are not secured against the Club they are Glazer debt

You keep saying this in the United super thread but it is a total avoidance of the obvious issues with the PIKs.

The PIKs are secured against the Glazers' equity in the club - if the PIKs aren't repaid then the hedge funds that they are owed to will gain control of the club. So yes, in terms of actual effect, the PIKs are secured against the club.

The recent refinancing during the bond issue was specifically structured in such a way so that the Glazers can use the clubs' revenues to pay off the PIKs.

In short: The PIKs are held by Red Football Joint Venture Limited. Red Football Joint Venture Limited owns Manchester United. Therefor the PIKs are directly connected to Manchester United.

All of the above would be obvious to you if you were to take an honest objective interest in the financial issues of club.

Mitch Connor

Pro. F wrote: »

You keep saying this in the United super thread but it is a total avoidance of the obvious issues with the PIKs.

The PIKs are secured against the Glazers' equity in the club - if the PIKs aren't repaid then the hedge funds that they are owed to will gain control of the club. So yes, in terms of actual effect, the PIKs are secured against the club.

The recent refinancing during the bond issue was specifically structured in such a way so that the Glazers can use the clubs' revenues to pay off the PIKs.

In short: The PIKs are held by Red Football Joint Venture Limited. Red Football Joint Venture Limited owns Manchester United. Therefor the PIKs are directly connected to Manchester United.

All of the above would be obvious to you if you were to take an honest objective interest in the financial issues of club.

also, regardless of the ownership issue with the PIKs, it has been clear since day one that the plan is to use United money to pay off the PIKs. United money is, in effect, Glazer money, with which they can do as they like really.

The Muppet

Pro. F wrote: »

You keep saying this in the United super thread but it is a total avoidance of the obvious issues with the PIKs.

The PIKs are secured against the Glazers' equity in the club - if the PIKs aren't repaid then the hedge funds that they are owed to will gain control of the club. So yes, in terms of actual effect, the PIKs are secured against the club.

The recent refinancing during the bond issue was specifically structured in such a way so that the Glazers can use the clubs' revenues to pay off the PIKs.

In short: The PIKs are held by Red Football Joint Venture Limited. Red Football Joint Venture Limited owns Manchester United. Therefor the PIKs are directly connected to Manchester United.

All of the above would be obvious to you if you were to take an honest objective interest in the financial issues of club.

It's fact, like it or not.

The rest of your post is theoritical, we don't do that remember?

Mitch Connor

The Muppet wrote: »

It's fact, like it or not.

The rest of your post is theoritical, we don't do that remember?

It is FACT that if the PIKs aren't paid the hedge funds gain a measure of ownership of the club. If the PIKs are not secured against the club in anyway why would that be the case?

The Muppet

Paleface wrote: »

I'm not disputing the fact that United is a viable business. I'm also not disputing the fact that the Glazers are shrewd business men with a plan for United to make even more money.

I'm just curious as to why United fans seem to think that getting rid of the Glazers is going to suddenly make United debt free and have shed loads of cash to splash on new players because lets face it new players are the only reason anyone cares about the money. A lack of new signings in the summer would have everyone up in arms!

I totally agree with you, not all united fans hold the opinions you express. Some of us have not jumped on the Anti Glazer bandwagon and decided to keep an open mind and adopted a wait and see approach until we have all the options available clealy defined before deciding what we think is best for the club.

Mr_Roger_Bongos

Im familiar with the structure of the debt, but for the improvement and education of debate (tongue in cheek considering forum), would anybody have links to some balanced articles explaining the debt structure etc?

Perhaps pm the OP and he could linky in the 1st post?

Spud83

Paleface wrote: »

You are contradicting yourself in that reply. If the Glazers bought United to make money but it isn't making a profit then what sort of money making future does it have?

I don't think I'm contradicting myself, maybe I just didn't explain my thoughts properly. The Glaziers bought United to make money. Off course they want the club profitable, and the club is hugely profitable, the problem is the debt they placed on the club is eating up all that profit. Now the Glaziers don't care about a profit once they can service the debt. This is getting harder and harder for them.

Now you talk about money making future. I believe the Glaziers bought the club to make a profit down the road, not off United profits but off the value of the club. The club is more valuable now then it was when the Glaziers took over due to increased revenue. Out turnover has increased massively which makes the club more valuable, but the extra profit is being eaten but the debt meaning the club has no cash despite the increased turnover.

The Glaziers will make a profit by selling the club. If they sold in the summer they would make a profit, if they sold in 5, 10 years time they will make a profit. That is where they will make their money, not directly through yearly profits. Not to mention the millions they have already taken out of the club through expenses, and fees.

Paleface wrote: »

I'm not disputing the fact that United is a viable business. I'm also not disputing the fact that the Glazers are shrewd business men with a plan for United to make even more money.

I'm just curious as to why United fans seem to think that getting rid of the Glazers is going to suddenly make United debt free and have shed loads of cash to splash on new players because lets face it new players are the only reason anyone cares about the money. A lack of new signings in the summer would have everyone up in arms!

I don't think any United fans think just getting rid of the Glaziers is going to reduce our debt and make cash available to splash on players. Thats is why the red knights don't have the full support of a lot of United fans because they haven't put a full bid on the table. As this stage we don't know what they will offer. If it is another bid based around large sums of debt than its not going to be much if any better.

However the Glaziers are doing nothing but damage to United in the short and long term, and that leads me to at least give the Red Knights a chance to put forward an offer, so I can try judge if that would be better or not. If they somehow can get enough cash together to get rid of the Glaziers and reduce the debt then United is big enough, and has a big enough turnover to support itself including transfers.

Oh and new players isn't the only reason fans are worried, some clauses in the bond issue has me very worried like selling Carrington and leasing it back to United.

Liam O wrote: »

If the Red Knights are seriously out to help the club then why don't they offer the Glazers investment for a % of the club?

I though I answered this, because that would help the Glaziers too much. We should be looking to get them out, as they are irresponsible owners, not looking for a way to bail them out and let them stick around and still milk the club dry. It will push up the price of any remaining percentage leaving a takeover possible unattainable, and also leave the Glaziers in charge. It would also cost them a huge chunk if not all the support of the fans.

Liam O wrote: »

Ok the debt is worrying but United are a huge business and get more sponsorship it seems every couple of months or so. When the Nike contract runs out in 2015 the club may sign another deal for over £250m and take a chunk of the debt with it. I feel the club will be ok.

We needed the Ronaldo sale and half our 4 year shirt sponsorship deal upfront to make the debt payments last year and post a small profit. We won't have Ronaldo money this year, and we won't have half our sponsorship deal either. I struggle to see where they are going to get the money to pay the debt interest this year, however the bond issue may have cleared some of this problem, meaning we won't have to pay as much interest this year, but the PIKs are still sitting which have to be paid by 2017, and the bonds are also due the same year. If the Glaziers stay I suspect we will just restructure the bonds in 2017 and just pay the interest until then, and use every other pound we make to start paying off the PIKs, which still means the club itself will be running at either a loss, or breaking even.

Paleface

@Spuds83

I'd be largely surprised if the Glazers sell United to anyone unless they are forced to by their financial commitments. They undoubtedly have a long term vision for United and the current climate is one which they see as a challenge to over come but nothing more.

They have owned the Tampa Bay Buccaneers since 1995 and have not sold them despite supposedly taking money out of them to try and lower the debt at United.

http://www.guardian.co.uk/sport/2009/oct/24/tampa-bay-buccaneer-glazers-manchester-united

If anything it would make more sense to sell the NFL team and concentrate on United as a bigger cash cow so to speak. So why take money out of one to help the other? Because they want to keep both.

I predict they will sell neither. There out look has to be one of short term pain for long term gain. If that's the case United fans may well be entering into a period of short term pain just like the Buccaneer fans.

Spud83

Paleface wrote: »

@Spuds83

I'd be largely surprised if the Glazers sell United to anyone unless they are forced to by their financial commitments. They undoubtedly have a long term vision for United and the current climate is one which they see as a challenge to over come but nothing more.

I completely agree. That is why any potential owners offering to invest in the club would be a bad move, as it would easy the burden of debt on the club but make it far easier for the Glaziers to stick around.

The only reason the Glaziers will sell now is if they believe now is the time they will make the most profit, if they believe they can keep dealing with debt and make United worth more and more then they will stick around.

Unfortunately the B scenario is probably more likely, and is terrible for the fans, because the debt seems to be getting worse and worse, which means team investment is likely to get worse and worse.

Just to be clear here, I don't believe a takeover will happen this summer, but that doesn't mean I'm going to write it off.

Paleface wrote: »

They have owned the Tampa Bay Buccaneers since 1995 and have not sold them despite supposedly taking money out of them to try and lower the debt at United.

http://www.guardian.co.uk/sport/2009/oct/24/tampa-bay-buccaneer-glazers-manchester-united

I've read that link, it has no evidence that the Glaziers have redirected money from the Bucs to invest in United. The Glaziers have not put a penny of their own money, or the Bucs money into clearing any debt at United. The debt has only gone one way at United and that is up.

Paleface wrote: »

If anything it would make more sense to sell the NFL team and concentrate on United as a bigger cash cow so to speak. So why take money out of one to help the other? Because they want to keep both.

They didn't take money out of one to help the other, they just reduced the amount of spending the Bucs done, this reducing spending did not result in an increased spend at United. I have no idea what the Bucs are worth, or what the Glaziers spent on them, so I have no idea if selling them is a profitable option for them over there. I've enough trouble trying to get my head around the United figures.

Paleface wrote: »

I predict they will sell neither. There out look has to be one of short term pain for long term gain. If that's the case United fans may well be entering into a period of short term pain just like the Buccaneer fans.

The problem is some United fans might be willing to accept short term pain if we could see the result of that being United on solid footing for the future. All I am seeing is short term pain, and long term pain.

I really believe the only thing that has kept United successful during the Glazier tenure has been Fergie. As hard as it is to say he ain't going to be around for ever or even that much longer. What will happen when he goes could really send the club into a disasterous spiral, even that article states that they hired a rookie coach at the Bucs. If United do that it could be disaster, especially if it coincides with an even further reduction in spending.

Can I ask you were you are seeing a long term gain? a 500 million bond has to be paid back in 2017 are we just going to restructure that again, meaning we will forever be crippled with interest payments? What about the PIK's? To me it looks like the Glaziers used the bond issue to clear the bank debt (which the had to do before they were allowed pay off the PIK's), and now for the next 7 years they are going to use every cent United earn to pay them off.

Paleface

Spud83 wrote: »

Can I ask you were you are seeing a long term gain? a 500 million bond has to be paid back in 2017 are we just going to restructure that again, meaning we will forever be crippled with interest payments? What about the PIK's? To me it looks like the Glaziers used the bond issue to clear the bank debt (which the had to do before they were allowed pay off the PIK's), and now for the next 7 years they are going to use every cent United earn to pay them off.

The long term gain would be having United in a situation where the income is enough to manage the debt whilst still having capital to replenish the squad when needed. Currently this is not the case which is why I mentioned short term pain.

With increased revenue from sales due to marketing etc and also a different ethos in terms of success vs financial cost of success, United should get closer to achieving this.

But to be honest with you I haven't much more input on the subject when it comes to looking into the finer details of the debt. I'm assuming that they will be able to restructure it again but its anyone's guess as to how or when.

You've answered a lot of my questions when it comes to the opinion of the realistic United fan.

Mitch Connor

Mitch Connor wrote: »

It is FACT that if the PIKs aren't paid the hedge funds gain a measure of ownership of the club. If the PIKs are not secured against the club in anyway why would that be the case?

On this issue, turns out I was wrong, according to the following:

http://www.guardian.co.uk/football/2010/jan/13/manchester-united-debt-glazer-family

What if they default on the PIK loans?

The hedge funds would not gain any say over the operational side of the business, but they could prevent it incurring fresh debt or paying out dividends, as well as gaining the power to block any potential sale.

To me, it still, however, shows a measure of control over United - as they could stop the club from being sold. if the PIKs were not secured in any way against the club I do not know why they would have the power to do that. (could be reason of asset management/recovery or similar)

Pro. F

The Muppet wrote: »

It's fact, like it or not.

The rest of your post is theoritical, we don't do that remember?

Where is the theory in my post? Are you denying that the PIKs are secured against Red Football Joint Venture ltd's equity in the club?
Are you denying that the financial restructuring specifically allowed club revenue to be used to pay the PIKs?

Mitch Connor wrote: »

On this issue, turns out I was wrong, according to the following:

http://www.guardian.co.uk/football/2010/jan/13/manchester-united-debt-glazer-family

To me, it still, however, shows a measure of control over United - as they could stop the club from being sold. if the PIKs were not secured in any way against the club I do not know why they would have the power to do that. (could be reason of asset management/recovery or similar)

Not just preventing sale of the club Mitch, the hedge funds would also decide whether we borrow money (which we know is needed for player transfers) and would decide on dividend payments. That's a whole lot of control.

Pro. F

Mr_Roger_Bongos wrote: »

Im familiar with the structure of the debt, but for the improvement and education of debate (tongue in cheek considering forum), would anybody have links to some balanced articles explaining the debt structure etc?

Perhaps pm the OP and he could linky in the 1st post?

My first post in this thread has links to articles all posted on the Financial Times news blog. They explain the finances in a lot of detail and the FT is as objective a source as there is.

I don't think links in the OP is a good idea as deciding which articles are or are not worthy would probably become a parallel debate.

PHB

Paleface wrote: »

The thing that puzzles me about the situation is why on earth would the Glazers buy United, the biggest sport franchise in the world, and then run it into the ground??

It just doesn't make sense.

Maybe its that football is living in dreamland at the moment. The money clubs spend on players is totally unrealistic. The governing bodies are supposedly trying to correct this and when they do transfer fees should go down.

The Glazers know this and could be holding out when United would be in prime position to take advantage of such a scenario with their large annual turnover.

Put it within the context of the financial crisis. Lots of property developers thought that they could loan money, invest, and make a profit out of it. Developers would mis-analyse how much money could be made from a company, convince banks that they were right, and get the loans to do it, with no real business case to buy it off. They bought into their own hype.

Ultimately, the Glazers thought that they could increase the turnover through increased ticket prices, decreased spends, increases matchday, increased commerical, etc. which they have done. They thought that they would be able to refinance the PIKs once they did this, but the crisis hit and money was nowhere. I'd wager the initial plan was to maximise revenues, refinance, and then sell for a decent profit having developed the business a lot. However, the crisis hit. They couldnt refinance. But they want to make a profit for time spent.

Right now, they are paying themselves huge wages out of the club for every member of the family which is a profit to themselves. Keep in mind the Glazers put in very little of their own money into this investment. They are probably hoping some billionaire comes along and buys it out of them are a big price increase.

When you think of the Glazers, and you wonder what the **** that they were trying to do, don't think of them as some successful business men who must have a plan. Think of them as Sean FitzPatrick and the rest of the ****wits who have caused the greatest finacial crisis of the past 60 years.

Mr Alan

Excellent post PHB.

The Muppet

PHB wrote: »

Put it within the context of the financial crisis. Lots of property developers thought that they could loan money, invest, and make a profit out of it. Developers would mis-analyse how much money could be made from a company, convince banks that they were right, and get the loans to do it, with no real business case to buy it off. They bought into their own hype.

Ultimately, the Glazers thought that they could increase the turnover through increased ticket prices, decreased spends, increases matchday, increased commerical, etc. which they have done. They thought that they would be able to refinance the PIKs once they did this, but the crisis hit and money was nowhere. I'd wager the initial plan was to maximise revenues, refinance, and then sell for a decent profit having developed the business a lot. However, the crisis hit. They couldnt refinance. But they want to make a profit for time spent.

Right now, they are paying themselves huge wages out of the club for every member of the family which is a profit to themselves. Keep in mind the Glazers put in very little of their own money into this investment. They are probably hoping some billionaire comes along and buys it out of them are a big price increase.

When you think of the Glazers, and you wonder what the **** that they were trying to do, don't think of them as some successful business men who must have a plan. Think of them as Sean FitzPatrick and the rest of the ****wits who have caused the greatest finacial crisis of the past 60 years.

I though The Glazers invested nearly £300 million of their Own money on the United Buy out, that's a considerable investment by any standards.


Nice Sean Fitzpatrick soundbite but his actions doesn't bear any similaities in fact with the Glazers to the best of my knowledge. I have seen no evidence of similar creative accounting by the Glazers , perhaps you could back up that part of your post with some evidence.

Paleface

PHB wrote: »

When you think of the Glazers, and you wonder what the **** that they were trying to do, don't think of them as some successful business men who must have a plan. Think of them as Sean FitzPatrick and the rest of the ****wits who have caused the greatest finacial crisis of the past 60 years.

I think your equating two completely different lines of business. United is hardly an office block or housing estate! It is a hugely profitable company.

Money is tight in today's world because of property speculation not because loads of people bought companies/sport franchises and now can't sell them on to repay their loans.

keane2097

The Muppet wrote: »

Nice Sean Fitzpatrick soundbite but his actions doesn't bear any similaities in fact with the Glazers to the best of my knowledge. I have seen no evidence of similar creative accounting by the Glazers , perhaps you could back up that part of your post with some evidence.

I'm sure he'll correct me if I'm wrong but I think the point PHB is trying to make is that the Glazers made their move for United under wildly different financial circumstances to those they currently find themselves in, in terms of the world economy.

There is no doubt whatsoever that they had a plan starting out and very little doubt that that plan would have worked had things stayed the same.

The trouble is that they are unlikely to have seen the economy crashing to the extent it has, since nobody else, and so their plans are likely now unworkable.

It is, I think, not beyond the realms of plausibilty that they are basically bailing water now and hoping things changed in the short-term.

Mr Alan

i presumed the point PHB was trying to make was that the Glazers exploited the insanely irresponsible levels of credit which were available during boom times. this lack of foresight that the good times wouldn't last forever was rampant in the irish banking community and it is a huge part of the reason ours and the worlds economy is in the state it's in now. its a good comparison imo.

Mitch Connor

keane2097 wrote: »

There is no doubt whatsoever that they had a plan starting out and very little doubt that that plan would have worked had things stayed the same.

the united board had plenty of doubt that the Glazers business plan could work, hence they cut off negotiations with the Glazers and recommended that the shareholders reject the offer being made. There has always been doubt that the business plan the Glazers put together was workable.

UnitedIrishman

And some then made a hasty retreat from those quotes about them when the Galzers took over in order to save their jobs - i.e. David Gill.

Mitch Connor

In fairness, I think Gill is good at his job, and we should be happy that both Gill and Fergie stayed despite their opposition to the take-over.

The Muppet

OPENROAD wrote: »

Do you have a link, maybe someone can clarify for me, what is the interest that utd have to pay per year and what is the average profit made by utd.

Apologies I just saw this now, I don't have a link at the monent, As far as I can recall David Gill has said that the clubs debt is servicable.

keane2097 wrote: »

I'm sure he'll correct me if I'm wrong but I think the point PHB is trying to make is that the Glazers made their move for United under wildly different financial circumstances to those they currently find themselves in, in terms of the world economy.

There is no doubt whatsoever that they had a plan starting out and very little doubt that that plan would have worked had things stayed the same.

The trouble is that they are unlikely to have seen the economy crashing to the extent it has, since nobody else, and so their plans are likely now unworkable.

It is, I think, not beyond the realms of plausibilty that they are basically bailing water now and hoping things changed in the short-term.

I agree with that and have said as much earlier in this thread, here . I didn't agree with comparisons being made between the Glazers ownership of United and the potententially criminal actions of the person he
was making that comparison with.

AS far as we know there is no basis in fact for such accuastions and so they serve no effective purpose in this discussion other than as a clever sound bite, Tabloid journalism at it's best so to speak.

20goto10

http://www.boards.ie/vbulletin/showpost.php?p=65468556&postcount=20323

Pro. F wrote: »

No, there's also the PIK debt... there's details on it and a discussion in the finance thread knockin around somewhere

There's a misconception that new owners = no more debt. As if the debt will just go poof and disappear in a cloud of smoke. They may convince investors to clear the debt with the banks but the club will still be in debt with the investors, and even more so. It's like paying off your credit card debt with another credit card. You may get a good deal, maybe 0% apr for the first 6 months or even a better rate long term. But the debt is still there.