• Manchester United Message Board

  • dsteer_lfc_68 dsteer_lfc_68 Jan 12, 2010 07:00 Flag

    Any serious threads on financial questions at OT

    I've just scanned the first page of your board, and don't see any serious threads on the financial situation at OT. I'm sure this will invite all the wind up merchants, but wondering what the Manc faithful think of the figures recently released. They do show a healthy profit, but when the sale of Ronaldo is taken into account it’s not such a rosy picture, and brings into question if the 60M or so remaining from the deal is really available.

    So serious questions:

    Will the bond deal help?
    What's the impact if you’re not as successful on the pitch this term, or beyond?
    I know you have some kiddies coming through, but are these enough to replace the older veterans that may need replacing over the next 1 to 3 seasons (VDS, Rio, Neville, Scholes, and Giggs) along with some who might not be performing as well as expected (Nani, Anderson, Berbs) if big transfer budgets are not available?

    Mancs and those in for serious discussion only please. There is enough cr@p on these boards already.

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    • I questioned earlier why there's no mention of plans to reduce the PIK loans. The following extract from today's Grauniad may provide part of the answer:
      "... the fact that £70m in existing cashflow has been earmarked to pay down the £200m high interest payment in kind debt secured on the Glazers' shareholding in Manchester United."

      Just how the accounting works I don't know as the PIK loans are in the G's personal names and the cash is in Utd's bank - Mismanagement Fees / Interest Free Loans to G's? And "we still have all the money that SAF needs for squad improvement". SAF doesn't want any squad improvement as there is "no value" in the market which is ideal as there doesn't seem to be any money earmarked for transfers till summer at the earliest!


      http://www.guardian.co.uk/football/2010/jan/14/manchester-united-bond-scheme

    • HAHAHA iM going to remove your STU{ID Thread!!

    • Hi Robert

      Para 3 - The value of a fixed rate, fixed bond will depend on current & expected future interest rates, the rate on the bond and the quality of the redeemer ( in this the G’s) ie past performance and expected ability to redeem the bond on maturity. As the G’s have no history with this kind of financial instrument, these bonds carry the lowest possible rating. Would you value an identically termed bond for say £50k from the Glazers as much as you would one from the owners of City? I think not.

      Para 4 – It is quite clear from the references in the prospectus to the Carrington ground etc that no Utd asset can be touched as they are the collateral for the bond issue! But I do agree that thy can be bought in a open market prior to maturity - don't expect to buy the whole of £500m without forcing up the price ridiculously.

    • I've just read Jim White's article. Very chilling stuff and Utd aren't the only club that will find themselves with an uncertain future me thinks.

      As a Liverpool fan, this gives me no pleasure whatsoever.

    • Well said Steer!
      Regardless of reported debts Man United are still in massively good financial health Assets/Brand/Renues/ etc. as a business.
      Obviously the Glazers have got money tied up all over the place but if some was to put Man Utd on the market there would be a rush of buyers even possibly the owners of City who really thought they were buying United in the first place.
      Glazer seem to be letting the experts AF get on with their job while they deal with the finance

      • 1 Reply to Blueskies
      • Judging by the proposal which I have scanned over today it seems that the Glazers are worried people on quite a few fronts, the first being the performance of the team going forward and also SAF's replacement not being as good at winning trophies.I wouldn't touch this bond scheme because like any investment it comes with a risk and I would prefer they sell outright making them a small profit but we would be back to square one without any debt.I don't think there are too many Arabs out there looking to buy United nor any Russians so it looks like we are stuck with them at least for the next few years.

    • Good thread dsteer - thanks. When the Glazers bought Manchester United they formed a holding company and saddled it with 100% of the debt they had used to effect the buyout. The finances show that the club still operates as a profitable enterprise but all the profits are required to fund the interest on the debt. I assume the bond issue is required to raise a capital sum to meet debt repayment deadlines. Generally bonds are raised at a premium that is usually more expensive than interest. You have to give the bond holder a guaranteed return. I assume the Glazers are opting for a Bond Issue because it is difficult to restructure the debt in the current economic environment. I share the view, already expressed in the thread, that the real answer lies in a change of ownership that is not encumbered by such punitively high debt. But liquidity is tight and it is difficult to see where new ownership might come from for the next year or so. If the Glazer's ownership is to be sustainable they have to start paying down at least some of the debt. If they want to hold onto United they should try and offload some of their other assets in the US and invest the proceeds in United. Again, not the best time to attract the best value. I assme the Glazers business model is to use debt to acquire assets that will grow in value and be resellable with a significant capital gain. Otherwise they are simply working for the banks, not themselves. The fact the Glazers have not gone under in the current credit crunch is the only silver lining here - it shows the quality of the assets they own: None greater than Manchester United Football Club.

      • 3 Replies to welshmu
      • One question on the bonds. I understand the logic that the owners maybe able to get a better rate by offering a bond with a fixed yield over the high interest rates on at least some of the clubs debt. However, while I'm not expert on the bond market, I would think if a bond issue was successful then this might make the club less attractive to an invester who could pay off all or a majority of your existing debt. Bonds are normally issued for a fix period of time, commonly 15 to 30 years, so I think any new owners would be locked in to paying the yeild for the life of the bonds.

      • "But liquidity is tight and it is difficult to see where new ownership might come from for the next year or so."

        Isn't your best hope to get some mega-rich playboy to buy it, like City and Chelsea?


        Robert

      • Excellent thread. They need to take advantage of the lower interest rates now on offer. The Glazers are gambling on the emotions of Man U supporters and it'll work. They'll buy the bonds and probably make a small profit. Not as much as if they worked the market intelligently but they'll be happy with it. What hasn't been discussed in the press is how these "foreign" takeovers have happened, their motives and the likely result. I was abused when Abromovic took over Chelsea (one day I was Ok the next I was an arsehole without doing anything) but we were lucky. Most foreign takeovers are done for profit for them. Portsmouth are the worst example. They might destroy that club and they don't care because they have no allegience to it. The Glazers don't care about Man U - they care about their money. Same with Liverpool. At least with Chelsea and Man City it's a status symbol rather than a "cash cow". They want success. I wish all clubs were owned by those who supported them but it isn't going to happen. Be thankful: Iceland will sell West Ham to the highest bidder, who will want to make a personal profit. They've not much to work with.

    • Apparently, all the money received from the sale of Ronaldo have been utilised to service the interest payments.

      Basically, Fergie will have to sell the deadwood in the squad (Nani, Berba, Anderson, Park, Foster, etc) in order to raise money for any new signings.

      • 1 Reply to A Yahoo! User
      • Lads, appreciate the thoughtful replies. Think most understand while this may impact Man U right now, this is a bigger issue. We Liverpool supporters are also concerned, but with so many clubs now either being owned by investors with no real roots in a clubs community, and or taking out huge loans to leverage ownership, there are many more clubs that could find themselves squeezed. However most of them have far fewer options than the larger clubs as they don't have world class players to sell to help the balance sheet, and no where near the same earning potential either commercially, or directly from on field success.

        btw, sorry to see your board has been hit by the spammers. While ignore does work, I'd suggest also those who have football to talk about start opening up new threads, so you can help drown out the noise.

    • I am getting sick of the glazer much the same as the scousers are getting sick of their yanks gillette and hicks
      If the glazers want to sort their mess maybe its time they started paying off some of the debts, its pretty aparent they they have been doing the opposite.

    • I'm not a Manc but here's my take:
      Glazers borrowed 100% of the money to buy Man U at exorbitant interest rates. If Man U had not sold Ronaldo they would have made a significent loss. Glazers have also been "skimming" the profits (quite a few personal loans apparently). The bond issue is to try to reduce the interest rate. They want you, the fans, to pay for it. I don't envy you at all.

      • 2 Replies to gary
      • How can he borrow 100% under the club to buy the club?

        This doesn't make any sense. Otherwise, anyone can buy any clubs.

        I think what happened is Glazer used his personal money and bought majority shares and then use club to finance the cash to make MU private from public.

        If that's the case, it's no big deal. The interest we paid would have been the dividend anyways.

        Given our turn over, if Glazer want to sell it, we will have plenty of buyers.

      • There only seems to be two options open to them and that is raise the cash on a bond scheme which would be akin to paying share holders a dividend or failing that sell the club but who wants to buy a debt so big in todays global cash crisis.I have never said either way they are good or bad for the club but the accounts released don't make for pretty reading so maybe I was wrong to sit on the fence.

        The other question here is why Gill told the fans that SAF had ALL of the Ronaldo cash to spend because clearly this is just not true and if he did go out and spend the 80 million then we would have made a loss anyway so who is telling us the truth.I am also wondering why we loaned them 10 million only to get it back in 5 years interest free, surley if we are skint we shouldn't be allowing this to happen.Sorry but the more I think about it, it is time for them to go but that magic wallet isn't that easy to find.

    • The Bond system will still mean high interest payments each year. Which will mean we have to sell players if we don't get a lot of success every season.
      The youth cannot in any way, shape or form be relyed upon, yes we had youth coming through in the early 90s, but since then it has been few and far between, Fergie is forced to look towards the youth as he does not have the money to go head to head with any other big cliub in a bidding war, if you look at our current first team you see only 1 player under 25 who has come through the youth system, the De Silva brothers don't count as they went through the yough system of another club, Evans is the only one and he still has not really secured a place, if Rio and Vidic were fully fit Evans would not get a look in, O'shea would also be ahead of him.
      If the Glazers don't sell soon then Fergie will really have his work cut out to bring any further success to Utd.
      Giggs and Scholes have not been replaced, two of the players you mentioned as under performing are the two that were expected to replace them.
      If it wasn't for the inconsistancies of Chelsea, Arsenal, Liverpool, Villa, City and SpursUtd would most likely already be out of the prem race.

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