So in simple terms, we *should* be ok and the major fun and games will be in 2017?
ALL issues relating to the bond issue and club finances
- Thread starter sammsky1
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In simple terms, major squad investment AND PIK repayment are tricky to do together would eat up most of the cash AND rely on continuing profit growth.....
The simple truth is that our owners are bad for the club. Nothing whatsoever has changed: it was a bad day when they took over, and it very much remains so today. The sooner they leave the better. Them leaving should be the number one concern for any true supporter of Manchester United.
I think that sentence pretty much sums up our position as succinctly as any other I've seen (other than the missing inclusion of a personal assesment of the Glazers as human beings, and their similarity to certain parts of the female anatomy
).Agreed.
Considering what we've been discussing over the last couple of days, anders, how would you suppose the Glazers will proceed?
Do you think they'll provide the funding SAF requires over the next few years, or do you think they'll eliminate the PIK's instead?
I've detailed which option seems more profitable in my opinion, but i haven't yet heard your's.
TBH i'm more concerned about what the Glazers do now they're here rather than dreaming idly about when they might leave.
I think there's a good chance that in ten years time we'll be looking back at this period and wondering what all the fuss was about.
We'll never know how the club would have turned-out had the Glazers never taken over, but i think that as the years go by we'll come to see that the club under Glazer ownership is not the Gekkodian nightmare that we've been led to believe it to be.
I think the Glazers can run a successful football club.
Then we agree to disagree. As for "...dreaming idly about..." you're already sleeping deeply with Mr. Sandman, and have been doing so for quite some time. Suggesting that: "...that as the years go by we'll come to see that the club under Glazer ownership is not the Gekkodian nightmare that we've been led to believe it to be..." should be enough to scare people from using drugs. Talking about dreaming.
Wake up.
The Glazers will sell this club. We can affect that timeframe. Anyone else claiming otherwise is lying. True fans know this.
Not that far off
Then we agree to disagree. As for "...dreaming idly about..." you're already sleeping deeply with Mr. Sandman, and have been doing so for quite some time. Suggesting that: "...that as the years go by we'll come to see that the club under Glazer ownership is not the Gekkodian nightmare that we've been led to believe it to be..." should be enough to scare people from using drugs. Talking about dreaming.
Wake up.
The Glazers will sell this club. We can affect that timeframe. Anyone else claiming otherwise is lying. True fans know this.
Ok.
I guess i'm just not a true fan like you then
Ok.
I guess i'm just not a true fan like you then
I guess not.
Sir Alex Ferguson is unable to slam them. Doesn't mean we shouldn't. The Glazers have hurt the club more than anything we have ever seen. You have to go back many decades for anything remotely as harmful as this ever threatened this club. To defend this is embarrasing. The Glazers should be treated as cancer, because that is what they are to this club. If you can't see that how on earth can you claim you have eyes?
Those were commercial mortgages taken out when the property market was still (or appeared to be) booming. Secured debt in a market awash with cash.
By December 2008, there was no credit for anyone. Even General Electric told the US Treasury it was worried about paying monthly salaries due to the collapse of the commercial paper market in the aftermath of Lehmans going under.
The fact that my mum's dog could get a loan in 2007 tells us nowt about credit conditions a year later.....
Edit: just to add, the key thing about the PIK purchase in late 2008 was that they came on the market then and at a discount. That was because of the credit crunch and in particular the hedge fund redemption tsunami caused by enforced deleveraging (by clients, hedge fund of funds, prime brokers and hedge funds themselves). In 2007 none of those pressures existed.
And that's the crux of it, I think. Clearly the Glazers feel they are in a very good investment so that they can turn down offers of £1.2bn or even £1.5bn (as reported) which after repayment of debt would leave them with something like £450m or £750m when it could be worth a net £2 bn in seven years - if debt is repaid. Even if the bond is refinanced at that stage the club would still be worth nearly £1.5bn - provided the PIKs are liquidated by then.
However, there is no doubt the team requires money to be spent on it in order to remain competitive. I believe that is the case now, others when Giggs and co depart the scene in the next year or so. Admittedly the latter might free up something like £300k per week for new players. Even so it is doubtful that all that experience could be replaced virtually in one go for that number.
If success eludes us because the squad simply doesn't have the depth of talent needed, compounded by to be expected injuries to key players, then that will undoubtedly have an effect on revenues. Costs, however, will increase albeit in a measured way, but if revenues drop then there will be less scope for the Glazers to pay off debt and indeed to pay themselves with diminishing surplus cash. Indeed, as Anders has shown, the current surplus cash may be a bit of a mirage as regards the potential liquidity going forward.
We could have got rid of this situation had there been a massive boycott of the clubs merchandise and also a signifcant drop in attendances which would have had an immediate effect on revenues - sending a strong signal to the Glazers that they were not wanted. A near full capacity crowd at the opening game saw the death of that possibility. Indeed it was clear that not everyone was in favour of getting rid of the Glazers anyway following a successful period on the pitch since they took over. The meaningful boycott campaign seems a non starter for now.
However, it may re-emerge if the team struggles and it is perceived that it is because of Glazer frugality, brought about principally by their priority to clear their debt and to maximise their investment in the medium term, at the risk of United falling off the pace as far as success on the pitch is concerned.
Absolutely. But some people always fail to see what is right in front of them.
It's fecking tragic what they're doing to our club.
The reliance growth is the biggest risk/worry to me.
We are certainly not growing gate receipts this year, this is still the biggest revenue stream.
If we fail to reach the group stage of the CL, huge losses from both gate and CL prize money.
I would not even like to contemplate not getting in the top 4 spots in the league.
How do all the scenarios play out in figures, cash flow etc.. (rhetorical question)
This sport can never be taken for granted especially with a young squad with greats coming to an end of their careers.
I have hopes of another league title and even a stab at the CL but to ignore the risks and consequences of failure is risky business.
We are certainly not growing gate receipts this year, this is still the biggest revenue stream.
If we fail to reach the group stage of the CL, huge losses from both gate and CL prize money.
I would not even like to contemplate not getting in the top 4 spots in the league.
How do all the scenarios play out in figures, cash flow etc.. (rhetorical question)
This sport can never be taken for granted especially with a young squad with greats coming to an end of their careers.
I have hopes of another league title and even a stab at the CL but to ignore the risks and consequences of failure is risky business.
A thought for people on both sides of the argument:
The Glazers intend not to take dividends (using it as a PR ploy) but simply intend to maximise sale price, which is where their income will come from. If that's the case, then they're here to 2017 no worries.
The Glazers intend not to take dividends (using it as a PR ploy) but simply intend to maximise sale price, which is where their income will come from. If that's the case, then they're here to 2017 no worries.
I think we all appreciate that they are likely to be here for the next 7 years or so.
That was a foregone conclusion once the bond issue was announced. They were in effect buying time. If the bond issue hadnt happened then they would have been is deep deep doo-doo because they could not financially support the club the way it was. They would have gone broke sooner rather than later.
All the bond issue is, is a stay of execution. They are banking on increasing revenues, getting cash in, and hoofing the price up so that come 2017 they can sell United, pay off the bond and HOPEFULLY have some left for themselves.
The problem is, what happens if the value of United doesnt rise. They then have to come up with Plan D, which will carry them onwards into the next period and they then hope that the value goes up in that period.
The fact is, they are gambling that United stay at the top, they are gambling the TV money will keep coming in. They are gambling the supporters will keep buying STs. If one or all of them stop, they are well and truly up the creek.
Julian, i think you're making the mistake of thinking that the value of the club is dependent on how much debt it holds.
The value is calculated (not exclusively, but primarily) as a multiple of EBITDA.
12.5X EBITDA would today give a valuation of £1.25bn for United. For the club to be worth £2bn by 2017 it would have to have an EBITDA level of £160m; regardless of the state of the PIK notes by that time, if the the club had £160m EBITDA (a figure that is unaffected by debt) then it would be worth £2bn.
To reach that level of EBITDA the Glazers would have to ensure solid growth each year at an average of 8%. This isn't an easy task.
This task becomes virtually impossible if the Glazers starve the club of necessary investment by taking dividends enough to eliminate the PIK's; the PIK's don't effect EBITDA, but having a crap team certainly would in many ways.
We'd receive less matchday revenue, less prize money, sponsorship deals would be less lucrative, overseas markets would be less enthusiastic, we'd probably see persistant and heavy boycotts, the United brand would stagnate and so would its EBITDA levels. No growth = No £2bn club.
If the Glazers aim to eliminate the PIK's by 2017 then United wont be worth shit.
This is why i do not believe that this will happen, because if the Glazers eliminate the PIK's then their asset will suffer greatly.
Invest in the squad as a priority however and simply keep the PIK's under control with minimum payments and the club will flourish; if the team remains commercially attractive then 8% growth per annum should be a piece of cake. Looking forward, that's where United's true value lies, in it's brand power; kill off that brand power by neglecting the needs of the squad and you're left with nothing.
£250m of PIK debt will be feck all to the Glazers if they provide their asset with the funds it needs to grow at this crucial period. A £160m+ EBITDA level would render £750m debt as virtually insignificant.
This imo is how they'll play it.
If they do not then i'll be firmly anti-Glazer.
Whilst i see what you are saying Cider, there is the point that the club has to survive each season and interest has to be paid.
WHilst EBITDA could be up to £160million per season, that doesnt show what is left in the bank after the bills are paid, and THAT for me is the all important issue.
Its a bit like Gross and Nett earnings.
You can earn £60,000 a year which on paper looks like a nice huge wage, but if what you are paying out mortgages, loans, etc which come to £40,000 a year then you are far from well off.
EBITDA looks great on paper, but what it doesnt show is what the bank account looks like after all the bills are paid, and for me the latter is the most important issue, not how much money is coming in.
In a nutshell, the money coming in is great. Whats worrying is the money thats going out, and EBITDA doesnt show that fully.
''It is not trying to make a political point''
Laughable Anders, and that's being kind. I'm not going to take that article remotely seriously until you've edited it to inform your readers that there is a £75m RCF to cover the seasonal fluctuations in cash flow.
Even in your doomsday scenario, whereby £123m leaves the club in dividend payments, the club could finance a £75m net cash outflow on player capex over the next year and only be required at worst to draw down c. £15m from the RCF in March/April 2012 before returning to a positive cash balance of c. £60m at the end of the 2012 financial year. I mean, big fecking deal.
Do you accept that a £75m net cash spend on players over the next 12-18 months would represent major squad investment?
Funding that major squad investment and the PIK repayment will not in any way be ''tricky''. What on earth is ''tricky'' about it?
That article is of yours is extremely political as you're blatantly attempting to lead the reader into thinking that it's a choice between PIK repayment or major squad investment. No such choice has to be made.
Don't make yourself look completely daft two years running Anders.
The fact is they are businessmen, not football supporters like you and I.
They will do whatever it takes to make the business profitable.
For all their faults, they know how to run businesses better than you, or I, or Anders or GCHQ, or anyone else on here. Thats how they got into this position.
WHat seems perfectly logical to you and I, is complete horse-shit to them though, and they will do something completely different.
If they feel paying off the PIKs has more benefits than spending money on the team, that is what they will do. No amount of abuse we give them will alter that. However, its perfectly possible your theory could be what they do. THey may well go on the mother of all spend ups hoping to create a team capable of competing on a level playing field with Barca, CHelsea, City et al.
The truth is, we dont know what the hell they are going to do. We are all guessing.
No doubt all will come clear in the next 2-3 years, but one thing is certain. They are gambling that United continues to grow in value, and historically, as we've seen before, 6-7 years after United have a big period, there is a lull. We tend to drop off the pace a bit. With the loss of Fergie, the aging team and the debts rising, I wouldnt put my money on United being worth £2 billion any time soon.
How would they return to a positve £60 million cash in the bank situation the following season ?
Unless you are talking about the money in the bank at the start of the season when no bills have been paid out.
Whats going to sustain United through the season if they spend it all on players in August next year ? Oh sorry.. They will have to go deeper into the RCF. WHich in basic english means MORE DEBT.
"United have a history of holding substantial cash balances at the end of each season and has occasionally had to use its "Revolving Credit Facility" ("RCF"), a sort of overdraft facility."
Read it again Fred.
The club drew down £25m of the RCF in the 2008/09 financial year and a similar amount in 07/08.
We're talking about drawing down c. £15m of the RCF for a few weeks. Really tricky that.
Knowing how you like a prediction, I will boldly make one:
They will not both take repayments of around £90m to repay PIKs and invest in the order of £75m ni the squad.
The club drew down £25m of the RCF in the 2008/09 financial year and a similar amount in 07/08.
We're talking about drawing down c. £15m of the RCF for a few weeks. Really tricky that.
That's coherent... did you even look at what I'd quoted from you, or are you just hoping to seweep that under the carpet and move on?
Nobody will take you seriously while you keep dodging anything that doesn't suit you like this.
Oh, and you did one of those evil edits, I see!
£75m to spend on players is hardly a big deal when they sold our best player for £80m
So what you are saying is once they pay off the PIKs in Apri, then come August they can have £60 MILLION in the bank again.
What will they have in the bank in April 2013. By your estimation ?
My bank account looks fantastic at the start of the month. Whether I am living within my means depends on whats there at the end of the month.
You are just looking at the start of the year and saying "whooopee fecking loaded" totally forgetting that theres a full seasons bills to pay out.
£75m gross spend on the squad between now and the end of the 2011/12 financial year? I'll take that bet.
No, net you plonker. How could gross spend possibly be relevant, we could sell Rooney for all I know!
And I was talking about over one season, but I can't see it topping that figure over two either, to be honest.
One thing I'd like to point out, that Anders has shown in his blog.
The Glazers took over United in 2005 with £60 million in the bank.
They now have £163 million.
So in the last 5 years they've put £100 million into the kitty.
£36 million from Ronaldo
All that up front sponsorship money
Not an awful lot really. If they hadnt sold ROnaldo, hadn't been fortunate enough to get AON to stuff the cash up front, what would the bank account really look like.
That bank account is basically just full or "exceptional items" and the day to day running of United has put feck all into the kitty.
The Glazers took over United in 2005 with £60 million in the bank.
They now have £163 million.
So in the last 5 years they've put £100 million into the kitty.
£36 million from Ronaldo
All that up front sponsorship money
Not an awful lot really. If they hadnt sold ROnaldo, hadn't been fortunate enough to get AON to stuff the cash up front, what would the bank account really look like.
That bank account is basically just full or "exceptional items" and the day to day running of United has put feck all into the kitty.
Here you go again..
Lets talk net.. No lets talk gross. oops lets talk net.
You said they could put up £75 million for players from the current bank account, as it stands, and still pay off the PIKs and be only £15 million in the red.
I'll take £50 that they cant..
Forget what money they get from player sales, or up front payments.
Can the Glazers give Fergie 75 million in January to spend, then find £123 for the PIKs as you said they could and remain only £15 million overdrawn, .
No, net you plonker. How could gross spend possibly be relevant, we could sell Rooney for all I know!
And I was talking about over one season, but I can't see it topping that figure over two either, to be honest.
Oh don't be ridiculous. Of course gross spend is relevant given that we very rarely sell players that we'd rather keep (Ronaldo being the exception).
If you want to stick to net spend then that's fine and I'd still be tempted to take the bet if your prediction relates to total transfer cost and not cash flow.
So £75m net spend on players between now and the end of the 2011/12 financial year based on book additions and disposals rather than cash flow (or reported fees even)?
I'll take that.
A £75m cash outflow in January?
I really don't know why I get dragged into this, you're clearly mad as a brush, but...
When we sell players who are suprless to requirements, such as the likes of Fraizer Campbell, Ben Foster, Kieran Richardson, Alan Smith etc, do we give the proceeds to charity or something?
What difference does it make whether we'd rather keep them or not? We still get the money in.
In addition to £125m taken out to pay for PIKs?
Yeah, even with your labyrinthine conditions, I'd say unlikely, even over two years.
Definitely not over one season, which was my original statement (the point being that £75m means a couple of really big signings, as opposed to the more regular turn-over of players which can cost us around £20m a season anyway).
I really don't know why I get dragged into this, you're clearly mad as a brush, but...
When we sell players who are suprless to requirements, such as the likes of Fraizer Campbell, Ben Foster, Kieran Richardson, Alan Smith etc, do we give the proceeds to charity or something?
What difference does it make whether we'd rather keep them or not? We still get the money in.
In addition to £125m taken out to pay for PIKs?
Yeah, even with your labyrinthine conditions, I'd say unlikely, even over two years.
Definitely not over one season, which was my original statement (the point being that £75m means a couple of really big signings, as opposed to the more regular turn-over of players which can cost us around £20m a season anyway).
A gross spend of £75m would clearly be very relevant because like you say it would mean a couple of really big signings. That's my point.
I think a £75m net cash outflow on players between now and the end of 2011/12 is unlikely because we'd structure the payments for next summer's transfer fees over at least 12 months so in order to make a bet possible I've asked you to shift your position slightly.
That's not to say it would be in any way ''tricky'' for the club to finance a £75m net cash expenditure over that period. It quite obviously wouldn't.
One thing I would like to know is why we are deducting two lots of divs in the same financial year. Surely this won't happen? We don't even know that ONE lot of divs will be taken with absolute certainty yet.
For those of you struggling with what GCHQ is saying about the cash-in-bank scenario, consider that we started this financial year with £164m in the bank and we are likely to bring in a further £290m during this financial year - a total of around £450m to play with.
Now start to take off all the bits and bobs and what you have left is Fergie's transfer kitty.
For those of you struggling with what GCHQ is saying about the cash-in-bank scenario, consider that we started this financial year with £164m in the bank and we are likely to bring in a further £290m during this financial year - a total of around £450m to play with.
Now start to take off all the bits and bobs and what you have left is Fergie's transfer kitty.
Stop playing games.
You said we could afford EASILY to pay off the PIKs and spend £75 million NET and be no worse off than £15 million in the red.
You said you would put money on it.. I'll go with you on that one.
by 30th April 2012 they've paid off £125 for the PIKs and they've spend £75 million nett on players, and still no worse off than £15 million overdrawn.
No are you up for it or not ?
What ever the scenario you are saying that in April 2012 there should be £200 million in the bank or receipts to say that the PIKs are paid, and players have been bought... I am betting you £50 there wont....
TMRD you claim to be a financial expert, how then can you claim that we are going to have an extra £290m in the bank at the end of the financial year, no bills no wages no nothing to come out of that. GCHQ's financial thinking is constantly being torn apart but this has to be his biggest plonker yet
I understand what you mean, but given that in only ONE season since they took over has the bank account gone up from the previous season, ( and that happened to be the one that they sold ROnaldo in, and took the money from AON ) I dont hold out alot of hope for his argument.
Bear in mind almost £250 million of that money will go in wages to players.
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