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A Manchester United Fan Unravels The Glazers' Debt And Predicts Destruction
With Manchester United's financial situation getting more precarious by the day, here's a United fan's view on the club and the 'businessmen' in charge.
‘’Malcolm Glazer’s gonna die… How we kill him I don’t know, Cut him up from head to toe, All I know is Glazer’s gonna die!’’
A couple of seasons ago, at the height of MUST’s (Manchester United Supporters Trust) ‘Green and Gold’ campaign this song was sung regularly at Old Trafford, usually with virtually the whole crowd joining in. For a while (whilst United where winning title number 19) the anti-Glazer songs took a step back and songs about the team became the most prominent. However, at stages last season, mainly in the middle of the season when United fans had to deal with seeing City mount what seemed like an unassailable lead at the top, the anti-Glazer sentiment came to the fore yet again (certainly where I sit at Old Trafford anyway). And now this is surely only going to resurface again with news that they are going to sell a portion of the club on the New York Stock exchange.
Of course, for a cynic or rival fan who either enjoys seeing the Glazers systematically destroy United or thinks that United fans have nothing to worry about, they might come to the conclusion that the anti-Glazer section among United fans only crops up when the team performs below expectations. They arguably have a point; however, the anti-Glazer feeling among the vast majority of United fans has never gone, not since the dark day in 2005 when they bought the club.
“But you signed Rooney/Berbatov/Nani/De Gea/Jones/Carrick/Hernandez (delete where applicable) and won loads of trophies since the Glazer’s bought the club….how can you even have the audacity to complain about having no money?!”
This is usually something I hear opposition fans tell me, and believe it or not something even some United fans spout. Of course, as a statement of fact, these people would be correct. But a fully functioning football team is more than just about winning trophies. Ask Leeds fans if they could swap that Champions League run for being in the Premier League now, I am sure most would say they would prefer to have missed out on semi-final heartache. Anyway, lets try and take a quick look as to why United fans are so upset about the Glazer’s ownership of the club.
So let’s start off by scratching the surface. Why have Manchester United won all these trophies and got to numerous cup finals since the Glazers bought the club? Well, quite simply this would rest on the shoulders of Alex Ferguson and the players. Despite being hamstrung, (even though he won’t admit it) Sir Alex has constantly managed to get the team to perform beyond expectations. Of course, he has been helped by having players such as Vidic, Ferdinand, Evra, Ronaldo, Rooney, Van Der Sar, Carrick, Giggs, Scholes and so on perform to a consistently high standard for so long. On the surface it looks rosy. United have performed very well since 2005, particularly in the League, but you need to dig deeper to see why the Glazers are ruining United. Of course United’s name and ‘brand’ also helped them in this period gaining them large profits.
Malcolm Glazer’s gonna die… How we kill him I don’t know, Cut him up from head to toe, All I know is Glazer’s gonna die!
The Glazers bought the club not with their own capital but with money they borrowed. Vast sums of money, that of course needs to be paid back eventually. When you borrow money to buy something, be it a car, a house or a football club, the bank/s will charge interest on that loan. United, despite winning trophies and selling players for £80million, are not making enough money to even pay off the interest on that debt, let alone EVEN PAY OFF THE ACTUAL MONEY BORROWED. As David Conn from The Guardian has pointed out, since 2005, the £525million that they borrowed, has already incurred interest charges of more than £500million.You do not need too be an editor of the Financial Times to see that this is not healthy.
At the start, the Glazers (I assume) thought they could try and recoup some of this money by increasing ticket prices and forcing season ticket holders to buy a ticket for EVERY single cup game (be it League Cup, Champions League or FA Cup). This hasn’t worked, and obviously, neither has selling Cristiano Ronaldo. Now the Glazers are desperate.
They may be bad businessmen, but they are not stupid businessmen. They have put their reputations on the line when buying United and they have about 420 million (where United’s current debt stands) reasons as to why they should want to wipe out some of this debt. In May the results of Q3 were announced and they did not make for very good reading. The United fan Andersred points out spectacularly on his blog that the Glazers’ trick of being able to sustain ownership of the club based on a limited budget and high profits is coming to an end. United were paying around £250k a DAY to pay off the debt.
The Glazers have come up with the solution that the best way to keep the club sustainable is to sell a part of it off on the New York Stock Exchange. They had originally tried to do the same in Singapore with the idea being that United’s appeal in the region would lead to a lot of interest. For various reasons this didn’t happen and the Glazers went shopping around again. They started looking at the NYSE and started looking for suitors. Morgan Stanley, the financial services company based in New York were one, but pulled out after claiming the Glazers were being greedy (nothing new there). But why New York, and not London? As Newsweek mentioned on an article about the subject:
“New York’s stock markets permit companies to sort their shareholders into different classes, allowing founders and owners to sell shares while maintaining control. In London, such a setup gets you excluded from key indexes.”
Of course, the line needs to be found where constant pressure on the owners does not lead to negative performances by the players (see Blackburn Rovers)
Of course the Glazers won’t admit this is the reason, but it is. They have tried to appeal to investors by claiming:
‘….It [United] has 659m “followers” worldwide. Coming after a season in which United were pipped to the Premier League championship by Sheikh Mansour’s lavish-spending Manchester rivals City, and were knocked out of the European Champions League in the group stage, the document boasts of a massive global TV audience and that “over 5 million items of Manchester United branded licensed products were sold in the last year”.
The “strategy” for United is also set out, specifying how the family intends to “increase our revenue and profitability, by expanding our high-growth businesses that leverage our brand, global community and marketing infrastructure”.
The Glazers state they intend to develop areas including “global and regional sponsors, retail, merchandising and product licensing, exploit new media and mobile opportunities, enhance the reach and distribution of our broadcasting rights [via United's MUTV channel] and diversify revenue and improve margins”.
The document states confidently: “We believe that we are one of the world’s most recognizable global brands with a community of 659m followers”; and it predicts that football’s popularity and profitability around the world will continue to grow.’ (David Conn, The Guardian)
If it sounds like a sales pitch, it is because it is precisely that. Investors have no guarantee that they will actually have a say in running the club, after all their shares will be worthless against those the Glazers have. Also, it is worth noting there are currently no plans for investors to receive any form of dividend.
The structure of the club will be completely changed. The holding company will be based in the tax haven that is the Cayman Islands, an English club, run by Americans, based in the Cayman Islands and listed on the New York Stock Exchange.
Let’s hope this does not become a reality, as Rangers, Leeds, Fiorentina and so on have all shown what can happen when reckless owners are put in charge and badly manage big clubs
It is certainly something that is hard to stomach for United fans such as myself, and we have to now ask ourselves, what can be done to rescue our great club? Well simple, put pressure on the owners. Of course, the line needs to be found where constant pressure on the owners does not lead to negative performances by the players (see Blackburn Rovers). But we need to find a way to reignite support without it coming across as negative to the players. More must also be done to help wake up a certain section of United fans who are more than happy with winning trophies rather than what goes on behind the scenes. Next season will see City spend even more money. Chelsea have and will continue to spend. United need to strengthen to compete, but Ferguson’s magic can only last a little longer. Yes they have bought players, but one has to wonder where this money has come from.
Lastly, the most saddening thing and the starkest warning about the whole scenario has come from the Glazers themselves. In the document they have to publish by law in order to outline to investors the potential dangers in doing say, it states that the debts, wholly imposed by the Glazers’ original takeover, “could adversely affect our financial health and competitive position”. Let’s hope this does not become a reality, as Rangers, Leeds, Fiorentina and so on have all shown what can happen when reckless owners are put in charge and badly manage big clubs. I only hope that someone, sometime soon, manages to have the cash to meet the Glazers’ ridiculous valuation of the club. Otherwise, particularly if City become more of a dominant force in the game, the long term future of the club looks bleak to say the least.
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COMMENTS
I don't understand your argument at all. You are worried about the debt. Now the Glazers are taking steps to reduce or eliminate the debt but you are still saying we have to get rid of them... because? Don't get me wrong, I detest the Glazers too. They have effectively stolen hundreds of millions of pounds from the club by making it pay the interest on their loans for them. But you don't seem to understand the significance of this proposed flotation. It could provide the means to wipe out the debt, leaving the club with £40m extra each to spend each year and making us competitive in the transfer market again.
"It could provide the means to wipe out the debt, leaving the club with £40m extra each for the Glazers to take for themselves" Fixed that for you
100 million only still reduces debt to 340 million, these people are parasites who have extracted £550 from United and if they somehow eventually clear the debt they will then continue to extract money from United to help prop up their faltering business in the States and to also continue the lavish lifestyle to which they are accustomed, the sooner we are rid of this vermin the better and the quickest way to do this is for the "639" million of us to unite and not support them but this will never happen because the majority haven't a clue and couldn't care less LUHG
Hate the glazers, but the g&g campaign achieved SFA. Ffs, people in the ground were wearing the scarves!!!! United have remained successful during their reign because the nucleus of a good side was there and we got lucky with Ronaldo (in the sense that he fulfilled all his potential). By the home their plan is finished they will own a majority share of the club, and will have risked very little of their own cash. Although I am confident that they are parisitic in-breds, they are pulling off a rather large buy-to-let. If anyone wants to look at blame for allowing this to happen, look at the board prior to their arrival...
Firstly the floatation was cancelled in the far east due to lack of interest and nothing else.They [Glazers]went to New York and had to withdraw the floatation due to lack of interest[which was forecast by some experts i listened to].The monies recieved from Ronaldo was paid as a gold bond into banks in the Caymen Islands and never reached Utd A/C.Glazers have five years to react to the spiralling cost of debt and that is why they are now trying to raise funds and no moneys of same will or can go into the transfer budget.Some high ranking financial gurus say that their is a very tight spending policy with a large bonus to a very high ranked member of Utd to keep costs down[signings,wages].
@JLF - United was a PLC before the Glazers bought the club. The Glazers bought enough shares, and were able to buy the club. @Chris - Really? Pretty much every person who has an interest in football finance and spoke about the issue have said it is a bad thing, a massive gamble that will certainly not bring the benefits you claim it will.
Also @JLF - the G&G campaign just became a massive cliche. Tourists would buy the scarves as it was the new, must have thing. Sellers did, and continue to, make a mint selling them.
If Utd fans are so against the Glaziers, why don't they just boycott the games? Never mind those silly Norwich scarfs., looking at debt spreadsheets, and singing anti-Glazier songs. You're all being treated like mugs!
Carrick, a consistently high performer... Dream on. The guy is terrible. No wonder we lost the league we wer playin with 10 men most of the time. The guy cant run, doesnt get stuck in, cant shoot and cant pass forward. Waste of a player and wages.
@Matt - many have and continue to do so. However it is not , as easy as that as anyone who has supports a football club knows only too well.
I agree Jon, but wearing a protest scarf AND buying a ticket every week defeats the object, no? They can sing as many anti-glazier songs as they like, the only way they'll get any sort of change of ownership is if they stop buying tickets/ merchandise etc...
@Matt - again easier said than done. United have such a vast global appeal that few thousand people not renewing their season ticket and not buying merchandise will barely make a dent. Anyway, thed Glazers have gone too far now. I can't see them selling the club just to cut their losses. They will be their for the long haul until they get bought out.
@ Jon my point exactly re g&g, and yes, we were a plc, but the board could have defended the club better...
Its a sham PLC though as control can not be purchased with 30%+ of the share capital being bought, voting rights will be 90% with the Glazers as long as they own 10% of the club, that is the proposed scheme, its that simple. The £100m that is being spoken about wont put much of dent in the debt owed via the bond, however this is the minimum to prescribe for, so its likely the Glazers will wipe the debt completely(?), by placing at least £300m into the prospectus - we'll see as the Glazers have 3 months to issue the volume and price of shares to be placed -we'll then be bale to work out what the valuation of the club is. Most share placements in the states have been over valued recently and and stock has plummeted at least 10-15% on the open - the proposal is the Glazers over valuing the club, fleecing the fans again who will see a discount to their share value almost immediately should it be incorrectly valued - the Glazers should use this cash to repay the debt, and free up club cash-flow to run the club / transfers - however the quid pro quo will be for the glazers to take cash out of the club via heightened dividends for Class B shares for the loss of shares placed to repay the debt. There is always a downside!
Forget this stock market nonsense, we all know United is one of the most popular clubs in the world and has been for a while now. However, when someone buys something with liability (bank loan in this case) and doesn't pay it back in a certain amount of time say 7 years? Then it isn't looking too good if you ask me...The best solution is a group of people or somehow a single investor to buy the club as soon as possible. Debt is never good in any situation and especially when its in the 500 million dollar range...
Kabir, there is no Bank Loan, it is a Bond!! A bond never gets repaid, unless the club wants to pre-pay, (i.e. there are no repayments as with a loan), thats the idea, a bond stays out there and can be refinanced easily (well subject to business performance level) whenever the club needs more money or is cash rich and pre pays. Easily accessible capital, that is flexible as there are no repayments or pressure on cash flow. I agree with you that repayment of any debt is better though, however this structure doe snot allow for this other than when the club over performs and is cash rich to prepay - and that is not the case now as we know. Kabir, do you think the rich investor will invest £1.5bn+ without requesting a return on his investment -of course not, so by getting a rich sugar Daddy in, all you are doing is transferring one interest payment on a bond, to a dividend payment to a rich individual, and equity to buy shares of the club which is what a rich individual would be doing costs more than bond yields currently, so arguably your proposed solution could cost more than the current structure!! Unfortunately there are not many rich oil barons around that give their money away on a free basis, (blue sky wishful thinking I am afraid, sprinkle the fairy dust and it will all be fine!), plus we all know the Glazers valuation is way over the top, and will never be met by the market or a rich individual whilst the economy is floundering around, and even rich individuals have lost a plie of money and are not as wealthy as they were in 2007 when the crisis started, so less likely to pay the valuation. United is a business and needs to be run like one; difficult to see this changing, but never say never! The stock market will get United out of the mire in the next few months which is far from nonsense Kabir!! The club could have either no debt, or less debt, what is there not to like - fans buying the shares see no dividends and have no voting rights, so all cash stays within the club, and the bond is repaid.
@Salford Red, spot on. It's not a suprprise that most football fans have little knowledge of finance. Why should we have to understand such things? But its a shame that so many journalists (and Internet wannabe journalists) spread so much disinformation and ignorance on this. No one with any real understanding would call United's current situation "precarious", never mind predicting "destruction". And as you pointed out the club's "debt" is not like a mortgage that has to be paid off, as the writer of this article seems to believe. This is probably the single biggest misconceptions that there is about Manchester United's financial situation and a lot of the blame here must go the the Glazers and David Gill for not communicating the situation clearly to the fans. But let's not let the fans off the hook either: we often come across like spoilt rich kids. Supporters of a fabulously successful and rich football club we are somehow outraged that we don't get to to use every bit of our huge profits to reinvest in the team so we can crush our opponents even more comprehensively. But the fact is that United makes huge amounts of money and whoever owns it is inevitably going to take a little of that for themselves, in one way or another, as they are legally entitled to do. This is a far better position for us to be in than to be supporters of a club that loses money and needs rich benefactors just to survive as a top club. Let's also remember that the bond debt provides big tax advantages so the effective cost to United is less than the £40m a year interest payments. But anyway, it would still be a good thing to get rid of the debt: it provides more flexibility as the Glazers can allow big spending when it is needed. It would be a big mistake to think the Glazers don't care about the success of the team - financial success and success on the pitch go hand-in-hand. The Glazers may be greedy but I think they have proved they are not stupid. This flotation will be good for the club and it has been stated that the proceeds will be used only to pay off debt and that dividends will not be paid on the new shares that are issued. The doom-mongers seem to have been wrongfooted by this because it poses an awkward question for them - if the debt can be cleared this easily why were we so worried about it for so long?
As a Rovers fan I take great excetion to your comments on the fans putting too much pressure on the owners, thus causing relegation. As a, clearly, intelligent person, I urge you, and anyone reading this to look more closely at the events at Ewood over the last 20 months. I am tired of saying this. THE FANS AT EWOOD ARE NOT THE PROBLEM. Do some research. :(
@Dave - I am not blamIng the fans. If I was In your position I would probably have done the same. The artIcle perhaps doesnt make It clear. My maIn point Is that I believe the negativity created within the stadium probably didn't help the players perform.
As a Rovers fan I have to endorse Dave's comments. You have fallen into the media crap of "dignified" Steve Kean etc. Do not comment on our fans reactions and outcomes of these or any relevance they have had until you know the story at Rovers. This is an ongoing situation for the supporters at our beloved club which will become all too apparent in the very near future.
@ChrIs and Salford Red. Anyone who has an interest sport finance has said it's a bad thing.
funny how the G&G scarves were suddenly absent August 10 - May 11. *strokes chin*
@ John G name the faceless 'Anyoone' so I can shoot them all down! I have originated leverage buy-outs for the last 14 years, public and private, so think I am qualified to give a view, over somebody that clearly can break up a balance sheet properly - i.e. in the article above. Try looking to Andersred's blog for an intelligent view on United's financial situation, "the IPO has the potential to transform the club'. So John, read around the subject matter and listen to folks in the know instead of witless journalists and people who read the daily mail!!
@Jon Grinham, let's say the flotation, and possible subsequent share issues, pays off all the debt. So we end up with the club debt-free, controlled but only part owned by the Glazers, and making profits of £100m a year before transfer spending. How would this be a bad thing? In fact how would it not be a considerable improvement on where we are now? All the negative commentary I've read in the press is just saying irrelevant things like the shares won't be a good buy or that the Cayman islands arrangement sounds dodgy. No one has actually said they think this will be bad for the club financially, have they?
'has the POTENTIAL to'....that is pretty much the problem. What if it goes horribly wrong? I honestly cannot see how on earth you can accept what they have done and continue to do to the club.
Jon, I dont accept it, far from it, but to say the IPO is a 'bad thing' is just incorrect, that was the point, in fact t could be a worthy solution by diluting the Glazers value based shareholding and repaying debt! Of course, it has to be potential at the moment as it has not happened yet, but momentum is gathering, so be prepared for an event. An announcement to IPO (place shares) has been given. As for horribly wrong, its a share issue at a price for a small amount of the club. if it doe snot happen we are back to square 1 which means no change, that for me would be the worst thing, (and their should be a revolt at that stage, rather than for a prospective positive event like an IPO), and if it does happen the worst is fans who buy shares for capital appreciation don't get it, (thats a risk they have been informed about!), and the clubs value wanes, probably back to where it should be if we are honest. I don't understand the negativity. There is upside to the plan.
@Salford Red, I see where you're coming from now. I overlooked the "bond" and assumed it was a loan, thanks for the explanation though. I was confused as to why we were turning to the stock market as a possible solution, but it makes more sense than my original proposition!
Salford Red, have you read the Telegraph today? The IPO is in doubt after failing to attract potential investors.
Why all the cynicism and vitriol towards the Glazers? They have advantaged themselves of the situation first implemented by chairman, chief executive and owner Martin Edwards. When they have had sufficient financial return and/or enough of the crass interference of the non-influential cynics they will put the club up for sale for the profit their investment deserves. Make no mistake that potential buyers will be numerous and money will be available to take United forward on their next stage of soccer dominance under the necessary business plan that is vital in today's game. The Glasgow Rangers debacle that is being heralded as a victory for fan power will soon reveal the danger of allowing the average football follower any say in the progress of the game. Scotland is on the verge of armageddon and it is only by keeping fans down south - especially at United and the other top clubs in the premier league- at arms length that the game will continue to survive and excite.
Don't buy season tickets. Don't buy memberships. Don't buy the horrible new kit. Boycott all United's sponsors. If we'd all done that in 2005 the Glazers would be long gone by now. In my opinion the Glazers are hanging on for the formation of the closed shop of a European Super League where clubs can negotiate their own media deals. That is where the real money will be made. And unless they run out of money before that time they aren't going anywhere.
This article became ludicrous when it suggested that united fans sing, sing regularly and everyone sings. Nobody sings, you need a PA system to pump in the sound of people singing and then most people leave early even when winning. Library.
Anyone ever get the impression that half the comments on this article aren't by real fans. There seems to be a small collective of people who are always around to put a positive slant on anything the owners do, no matter how damaging and embarrassing it is for the club. Wouldn't surprise me if they paid people to scour the internet and post positive comments in an effort to fight the fires.
Oh dear. Poor @Mark has shown his true colours and they certainly aren't red and white. Why is it that anybody who does not voice anger and disapproval at the management/ownership of Manchester United cannot be a fan of the club? Sorry to inform you Mark but there are thousands of reds fans who don't agree with some of the criticism that is constantly levelled at the Club. We don't always agree with decisions taken - whether that be team selection or club policy - but we view such matters over the longer term. I think United's success on and off the field with both SAF and the Glazers has stood the test of time and produced more positive results than negative. Sadly there will always be the minority who can see nothing good and the greater the success the more they snipe. If you honestly think the club trawl the Internet to find negative comments you are indeed disillusioned. The manner of the cynicism and vitriol directed at the club in most instances is so obviously a result of deep-rooted bitterness and jealousy that there really would be no point.
If anything, the article above shows that the fans of a football club should have more power than the money bag men that have their own interests at heart rather than football or the fans of football
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