ALL issues relating to the bond issue and club finances

[Wumminator]

I feel like the new television deal has all but cemented the Glazer's place at OT. If we're getting another 20 million mininum on the new deal a year, and the foreign rights could easily add another 20 million, then it seems to me that the debt is suddenly much much much easier to service. Of course this might mean that there is an increased in wages, but how much would they have increased anyway?

This news will be better for us than most clubs, as we're fecking saddled with constant interest payments on a big debt. If we use this to service the debt (sigh), we'll also reduce interest in the long run, freeing up more money.

Basically the Glazer's are lucky (or clever) bastards with the income increasing massively without them doing anything.

 

[Rood]

Yep, the new TV deal means our numbers are looking even better - it will also mean the club could be higher valued in the event of any float.

A lot of people were questioning where future revenue growth was going to come from as they thought that the media income was maxed out already but this deal has proved them very wrong indeed. And that is only the domestic rights, the overseas rights should see significant increase as well.

 

[KingMinger22]

Good news with the TV deal but as we have seen, revenue increases also lead to higher expenses in wages, and rightly so. So it's not going to be £20-30m extra profit.

 

[Wumminator]

Good news with the TV deal but as we have seen, revenue increases also lead to higher expenses in wages, and rightly so. So it's not going to be £20-30m extra profit.

Yeah if we plan on keeping to around 50% of turnover this should mean about 10 million more a year to spend on players (more likely buying back bonds)

 

[thegregster]

If and when the club does list, wherever that is, is the Phoenix Fund going to plough all its money into buying up shares?

Why would it? They are selling Class B stocks, which have basically no power in terms of influencing the direction of the club. The Glazers would still hold all the Class A stock, which is the portion that would allow any influence on the club.

This is why I asked.

Well, it might because its reason for existing it to own Manchester United. So if some MUFC is for sale, even without voting rights, it might want to buy what it can. What is it invested in now? FTSE? Bunds? Gold ETFs? Might as well invest in this as anything else.

You've got to wonder whether the class B shares valuation is even realistic in this current economic climate. Especially now that they are considering listing on the US market instead of an Asian one.

Anyways, its a very good method of raising financing and if they can somehow get the price they are looking for then I take my hat off to the Glazers because they have played it brilliantly. Not only will they manage to wipe out all/most of the debt (assuming they DO use the capital raised for this purpose) but they keep full control of the club.

Is all this bad news for us?



When new shares are issued it means there will have to be a dividend payout as well as interest payment. I doubt that the money raised will be used to pay off the debt.

 

[forevrared]

Would buying the stock if they do issue an IPO in the US make me a Glazer supporting asshole or is it okay since it ultimately helps the club?

 

[ravelston]

Is all this bad news for us?



When new shares are issued it means there will have to be a dividend payout as well as interest payment. I doubt that the money raised will be used to pay off the debt.

Why?

Would buying the stock if they do issue an IPO in the US make me a Glazer supporting asshole or is it okay since it ultimately helps the club?

It would make you a co-owner.

 

[DevilRed]

Terrible time to go for an IPO anywhere in the world. Maybe next year things will turn around. Maybe.

Yes. Its no coincidence that they have held off on a listing for almost a year now. Don't see them doing it anytime soon to be honest. Shit is about to hit the fan in Europe and we're in for a rough ride.

 

[davisjw]

Another news story about the US IPO:

The British soccer club, owned by U.S. businessman Malcolm Glazer, last year dropped plans to go public in Singapore.

British soccer club Manchester United has taken another step towards a U.S. stock market listing, selecting a team of bankers to manage its IPO, the Wall Street Journal reported.

One of the richest and most successful clubs in world soccer, Manchester United, whose star players include Wayne Rooney, last year called off plans for a $1 billion IPO in Singapore due to stock market volatility.

It wasn't immediately clear when exactly the club could seek to go public in the U.S. where its owners live.

The club is owned by the Glazer family, led by U.S. businessman Malcolm Glazer, which also owns the NFL's Tampa Bay Buccaneers.

The Glazer family has faced criticism from long-time fans since buying control of the club in 2005. Anti-Glazer chants and songs are a regular occurrence. A couple of years ago, a group critical of Manchester United's foreign ownership even prepared a buyout bid, but the Glazer family said it wasn't interested in a sale.

Manchester United has won numerous English Premier League and European titles, but lost out in dramatic last-minute season this season to rivals Manchester City.

The Journal said Manchester United representatives declined to comment on the club's IPO plans.

http://www.hollywoodreporter.com/news/manchester-united-takes-step-us-338253

 

[Drainy]

Why?

even if all of the capital raised covered all of the debt they would probably keep some of the debt for tax efficiency reasons, what happens to the rest of the cash is the question.

 

[ravelston]

even if all of the capital raised covered all of the debt they would probably keep some of the debt for tax efficiency reasons, what happens to the rest of the cash is the question.

Tax efficiency is an interesting issue. It certainly played a role in the decisions regarding the PIKs - at 14% the tax benefits made them cheaper than other types of mezzanine financing; once the rate went up they lost that advantage and were paid down. For the existing debt, even if some debt is advantageous from a tax perspective, it would seem to make the most sense for it to be paid down and, if desired, to be replaced with a new issue at what would, presumably, be a lower rate.

Going back to the tax efficiency argument,

Spoiler

I'm not convinced that, for what is essentially a private company, anything other than the relative cost of funding is relevant. So where, for a widely held public company, we might argue that some debt would increase shareholder value, for a closely held public company the relevant criterion is likely to be whether the after tax cost of debt is lower than the dividend cost for an equivalent amount of equity financing. To put it another way, the Glazers, as controlling shareholders, have no incentive to use financial structure to maximise the share value unless they are planning a sale. And, even then, any advantage is likely to be negligible when compared to the advantage that could be gained through more investment in the team.

Any issue is likely to comprise of two components: a sale of "new" shares with the proceeds going to the club and, most probably, being used to pay down the existing debt; and a sale of "old" (Glazer) shares with the proceeds going to the Glazers. (In the original IPO the split was about 50-50 with the Edwards family taking about half the proceeds.)

 

[711]

TV revenue could double and double again, it wouldn't necessarily be good for supporters at all. The Glazers are in it for the money, and the money alone. They could pay off debt, or simply trouser the extra cash, whichever is best for them. They will spend on players or the club if they think that investment will make them more money, not for any other reason.

United went through a long period, including under the PLC, when fans knew that increased revenue would mostly feed through for the benefit of the club as a football club, now those days are gone, it's just not sunk in yet.

 

[ravelston]

TV revenue could double and double again, it wouldn't necessarily be good for supporters at all. The Glazers are in it for the money, and the money alone. They could pay off debt, or simply trouser the extra cash, whichever is best for them. They will spend on players or the club if they think that investment will make them more money, not for any other reason.

United went through a long period, including under the PLC, when fans knew that increased revenue would mostly feed through for the benefit of the club as a football club, now those days are gone, it's just not sunk in yet.

That really isn't true. Once Martin Edwards took control, the club was run for the benefit of the Edwards family both while the club was private and after the original IPO. Increased revenues were used to finance stadium expansion which, together with hefty ticket price increases, generated yet more revenue to repeat the cycle. The result was to increase the value of the shareholders' holdings from approximately 9 million (the total investment in the club by shareholders both before and during the IPO) to the 790 million that they sold out for. That was nothing to do with benefiting the football club - it was a masterclass in wealth creation.

 

[Ferguson]

I feel like the new television deal has all but cemented the Glazer's place at OT. If we're getting another 20 million mininum on the new deal a year, and the foreign rights could easily add another 20 million, then it seems to me that the debt is suddenly much much much easier to service. Of course this might mean that there is an increased in wages, but how much would they have increased anyway?

This news will be better for us than most clubs, as we're fecking saddled with constant interest payments on a big debt. If we use this to service the debt (sigh), we'll also reduce interest in the long run, freeing up more money.

Basically the Glazer's are lucky (or clever) bastards with the income increasing massively without them doing anything.

Clever, not lucky. They saw a growing business that was undervalued and bought it.

 

[711]

That really isn't true. Once Martin Edwards took control, the club was run for the benefit of the Edwards family both while the club was private and after the original IPO. Increased revenues were used to finance stadium expansion which, together with hefty ticket price increases, generated yet more revenue to repeat the cycle. The result was to increase the value of the shareholders' holdings from approximately 9 million (the total investment in the club by shareholders both before and during the IPO) to the 790 million that they sold out for. That was nothing to do with benefiting the football club - it was a masterclass in wealth creation.

Increased revenue certainly was used to finance stadium expansion as you say. Without borrowing. And also to purchase players on a much greater scale than today. Hence why it is true mate.

As for the shareholders then, good luck to them, I don't remember them dumping staggeringly massive loans on the club like our current ones.

If I can expand, and I'm being very subjective here, let's say pre-Glazer we managed to get a top top player free for whatever reason, then I would have thought 'great, now we still have money to buy someone else'. If the same thing happened today it would do nothing for me, I'd just think 'whoopee, now the Glazers can take some more home with them'.

 

[KingMinger22]

Pre-Glazer we signed some of the best talents in the league and world on numerous occasions, e.g Keane, Rio, RVN, Stam, Rooney, Veron.

Post-Glazer only maybe Berbatov falls in the bracket of high-profile big buy.

This bullshit idea that Fergie doesn't like/want to buy established players or the very best young talents is absolute rubbish. He simply can't due to wage restrictions.

Our odds of winning another CL title are extremely restricted by our refusal to pay market rate wages to top players.

 

[bsc]

From the FT

Manchester United IPO valuation in doubt

By Ajay Makan in New York
©AFP

Morgan Stanley will not participate in an initial public offering of Manchester United in the US because the Glazer family is seeking a valuation for the football club that the bank does not think is realistic, people close to the deal have said.

The US-based Glazer family, who have been bitterly criticised by many Manchester United supporters for loading the club with debt in a £790m leveraged buyout in 2005, have been actively looking to issue shares since at least last August.

The Glazers had hoped to establish a valuation of more than £2bn for one of the world’s most recognisable sporting brands. But a group of wealthy fans led by Jim O’Neill, Goldman Sachs’ chief economist, who tried to buy the club from the Glazers for £1bn in 2010, argued the club was worth far less.

The Glazers originally planned to list in Hong Kong, before moving to Singapore, with plans for a two-tier share structure that would have minimised the influence of outside shareholders.

Morgan Stanley, Credit Suisse and JPMorgan Chase were expected to lead an offering of up to a third of the club and raise up to $1bn. But with markets in thrall to the debt crisis in Europe, and high profile groups such as Graff Diamonds and Formula 1 postponing or pulling offerings in Asia, the deal appeared to have been postponed.

But now midsized New York-based investment bank Jefferies is set to lead an offering, after persuading the Glazers it can obtain their valuation by listing in the US.

Morgan Stanley, Credit Suisse and JPMorgan were all offered the opportunity to join Jefferies on a US offering. Credit Suisse and JPMorgan accepted, but Morgan Stanley declined, the people said.

For Jefferies, which has never led a US offering of more than $250m, according to Dealogic, top spot on a trophy brand offering would represent a milestone in financial and reputational terms.

But with the US market for IPOs effectively shut since the troubled debut of Facebook last month, a large offering faces challenges.

One banker said it was “a sign of desperation” that, so far into the deal, the Glazers would consider switching the deal to the US and drafting in a relatively small bank.

Another person close to the deal said the Glazers might seek to sell a smaller stake, raising $500m in the US, rather than $1bn.

Manchester United, Credit Suisse, JPMorgan and Morgan Stanley declined to comment. Jefferies did not respond to requests for comment.

 

[bsc]

From Bloomberg's Tariq Panja:

Because of Euros not been able to follow as closely as I'd like but Morgan Stanley's exit from Man Utd IPO bid very intriguing

 

[Ferguson]

Pre-Glazer we signed some of the best talents in the league and world on numerous occasions, e.g Keane, Rio, RVN, Stam, Rooney, Veron.

Post-Glazer only maybe Berbatov falls in the bracket of high-profile big buy.

This bullshit idea that Fergie doesn't like/want to buy established players or the very best young talents is absolute rubbish. He simply can't due to wage restrictions.

Our odds of winning another CL title are extremely restricted by our refusal to pay market rate wages to top players.

Chelsea and City have something to do with that.

 

[Will Absolute]

Pre-Glazer we signed some of the best talents in the league and world on numerous occasions, e.g Keane, Rio, RVN, Stam, Rooney, Veron.

Post-Glazer only maybe Berbatov falls in the bracket of high-profile big buy.

This bullshit idea that Fergie doesn't like/want to buy established players or the very best young talents is absolute rubbish. He simply can't due to wage restrictions.

Our odds of winning another CL title are extremely restricted by our refusal to pay market rate wages to top players.

Pre-Glazer we weren't competing with clubs with no financial limitations. We had the biggest chequebook in the Premier League. Now we don't.

The Glazers are spending the same percentage of total revenue on wages as the Plc. The 50% cap dates from before the Glazers came to the club. It's purpose is to maintain the club's capital valuation in the financial interests of shareholders. There's no reason to believe it would have changed if the Plc had continued.

It's depressing that we haven't succeeded in landing any of our major targets in recent years - Benzema, Villa, Ozil, Hazard, Toure, Nasri etc*. Is that the Glazer's fault though? We've wasted huge amounts of money on good old-fashioned bad buys.

* not when we've been in competition for a big player with a 'big' club.

 

[Wumminator]

It's depressing that we haven't succeeded in landing any of our major targets in recent years - Benzema, Villa, Ozil, Hazard, Toure, Nasri etc*. Is that the Glazer's fault though? We've wasted huge amounts of money on good old-fashioned bad buys.

* not when we've been in competition for a big player with a 'big' club.

Weve not wasted hardly any money
And
We've signed players wanted by other big clubs.

 

[finneh]

The Glazers are spending the same percentage of total revenue on wages as the Plc. The 50% cap dates from before the Glazers came to the club. It's purpose is to maintain the club's capital valuation in the financial interests of shareholders. There's no reason to believe it would have changed if the Plc had continued.

It's depressing that we haven't succeeded in landing any of our major targets in recent years - Benzema, Villa, Ozil, Hazard, Toure, Nasri etc*. Is that the Glazer's fault though? We've wasted huge amounts of money on good old-fashioned bad buys.

* not when we've been in competition for a big player with a 'big' club.

The difference is that there has been a huge shift from transfer fee's to wages. We haven't changed our policy to reflect this and it has cost us a few players (rightly or wrongly).

 

[Sir A1ex]

The difference is that there has been a huge shift from transfer fee's to wages. We haven't changed our policy to reflect this and it has cost us a few players (rightly or wrongly).

If we "haven't changed our policy to reflect this" it's not because we've just not been paying attention.

Wages are a straight-out expense, whereas transfer fees, if handled well, are not, as you are buying an asset. Yeah you probably have to ammortise that asset (I'm sure others here know the specifics), but if you go on to recoup a decent amount on sale, it's not cost us heavily.

The long and short is, high wages make it a sugar-daddy's game much more than the headline grabbing high transfer fees ever did. Or, more to the point, the game's sugar-daddies have caused the move from fees to wages, and we can't live with that.

 

[Denis' cuff]

TV revenue could double and double again, it wouldn't necessarily be good for supporters at all. The Glazers are in it for the money, and the money alone. They could pay off debt, or simply trouser the extra cash, whichever is best for them. They will spend on players or the club if they think that investment will make them more money, not for any other reason.

United went through a long period, including under the PLC, when fans knew that increased revenue would mostly feed through for the benefit of the club as a football club, now those days are gone, it's just not sunk in yet.[/QUOTE]

Exactly - makes little difference to the team how much debt the yanks have - spending will be comparatively frugal. They don't care about trophies. Just profit.

 

[McLovin]

I work for MS but not in the investment banking division, will dig around and see if I can get some more colour for us here.

 

[peterstorey]

They don't care about trophies. Just profit.

They don't care about trophies for themselves but they do care about trophies since they're important to drive commercials.

 

[Denis' cuff]

well, yes and I think they might just invest enough to keep us thereabouts, which will probably be enough as long as Fergie is here but after that it will depend on his replacement and unless we get lucky, we'll probably see a fairly regular turnover of managers as we try to keep up with wealthy clubs. We'll become Arsenal or even Liverpool or Spurs. Still, it's been a decent little run under the great man.

 

[ravelston]

Salaries went from £77m in 2005 to £153m in 2011. Average annual spending on new players was £32m over the six years before the takeover, £46m over the six years after. Just doesn't seem to be consistent with the view that we're being starved of money to spend on players. That's not to say that we've not fallen behind City and Chelsea, but that's somewhat inevitable when they get £1 billion dumped on them. Our best hope is obviously that FFP will be effective, which would mean that our revenue base would restore the advantage we had before the purchases of Chelsea and City.

 

[Ferguson]

Re: Morgan Stanley

It doesn't look good for the Manchester United IPO, unless this is the result of the Facebook IPO fiasco and Morgan Stanley's involvement in that.

Perhaps Morgan Stanley wants to avoid failure or mishandling in a second major IPO in so many weeks, or perhaps the Glazers want to avoid the association of Morgan Stanley so soon after that fiasco.

Morgan Stanley needs to cool things a bit until things blow over.

 

[Denis' cuff]

Salaries went from £77m in 2005 to £153m in 2011. Average annual spending on new players was £32m over the six years before the takeover, £46m over the six years after. Just doesn't seem to be consistent with the view that we're being starved of money to spend on players. That's not to say that we've not fallen behind City and Chelsea, but that's somewhat inevitable when they get £1 billion dumped on them. Our best hope is obviously that FFP will be effective, which would mean that our revenue base would restore the advantage we had before the purchases of Chelsea and City.

I know this has been done ad nausea but our net spend of 10 m per season puts a little more perspective/reality to that figure. Or put another way, we lost the wpoty and have gone backwards in terms of personnel since that time and should've done much better in terms of replacements of not only Ronaldo but in other positions. Apologies for the same old but you know it's true.

I'm very much an FFP sceptic but you'd think it might bring just a little bit of restraint.

 

[Ferguson]

Net spend reflects Cristiano's transfer fee, right?

For me, it's simplistic to say you just turn around and spend the money recouped from his transfer. You still have to find the players that are available and which add something to the team.

I'm quite content with the players United has added. Only in hindsight can one say that United should have added a CM, and I'm not sure splashing the funds on Sneijder would have been wise in the end.

 

[Denis' cuff]

Net spend reflects Cristiano's transfer fee, right?

For me, it's simplistic to say you just turn around and spend the money recouped from his transfer. You still have to find the players that are available and which add something to the team.

I'm quite content with the players United has added. Only in hindsight can one say that United should have added a CM, and I'm not sure splashing the funds on Sneijder would have been wise in the end.

Of course it includes the Ronaldo money.

I agree with everything you've said but don't think it needed hindsight to bolster the mf as we should've and for all the excitement about Raphael, we've been vulnerable in both fb positions. All that apart, for the club with the world's biggest profit margins to be scrapping around whilst mid-table clubs outspend us is a joke. I know it isn't a spending contest but we should've replaced players better than we have done.

 

[prateik]

The salaries might have doubled, but so have the revenues.

The Glazer ownership is annoying and the debt, though manageable, is an unnecessary risk that has been saddled on to the club. But I dont think* the club wouldve been in a different position (in the transfer market/running the club) had there been no takeover at all.

The problem is the fact that there are owners who are pumping money into clubs rather than the clubs being self sustaining.
Its hard to compete with that..
We're doing alright though.


*my opinion.. might be wrong.. but cant see how being a PLC wouldve made us more competitive in the market

 

[gooDevil]

I do find it a little disturbing that, if you take out the Ronaldo sale, which was something that surely wasn't in the financial plan, United have lost money over the last few years.

Yes, the commercial gains are similar to the money lost from loans, but all that had to happen was for United to be sold to someone who could actually afford it.

The big winners here are the banks that gave the Glazers the loans.

 

[prateik]

Glazers are the biggest winners.
Put in ~200m. Took some of it back. Have a club worth nearly 10x that.

You cant just take 80m out.
It doesnt work that way.
If we werent going to sell Ronaldo, we probably wouldnt have signed Berbatov.. or at least it wouldve affected our future signings.

 

[gooDevil]

Sure, we probably wouldn't have bought someone else, and we also would have likely had more income from success and commercial opportunities.

Just seems that, with the huge amount of success we've had in the last 6 years, we should have made even more money. We're in better financial shape than any other club in England, but with such a huge stadium and all the extra money from our success I'd have thought we'd make more net profit.

The interest payments each year are certainly bigger than our profit, with the exception of the year we sold Ronaldo, that can't be a good thing. At least the Glazers paid off some of the debt, that should be the main goal, to get rid of the debt within the next 5-10 years.

 

[prateik]

We have made more money. It has gone to reduce the debt. Not just the interest payments.
Or have I got that wrong?

edit: I didnt read the post fully.. Yeah. Guess the extra money has gone to reducing the debts.

 

[GCHQ]

Of course it includes the Ronaldo money.

I agree with everything you've said but don't think it needed hindsight to bolster the mf as we should've and for all the excitement about Raphael, we've been vulnerable in both fb positions. All that apart, for the club with the world's biggest profit margins to be scrapping around whilst mid-table clubs outspend us is a joke. I know it isn't a spending contest but we should've replaced players better than we have done.

That statement is absurd. Way beyond absurd in fact. Firstly let's actually get the facts right. The total net cash transfer expenditure in the six and a half years of the Glazers ownership has been £115.2m (not £46m), giving an average annual net spend of £17.75m. These are figures taken from the club's independently audited financial statements and are therefore ACCURATE. They are not the workings of a MUST sympathiser attempting to create the smallest possible net spend figure based on his own guess work (I'm referring to ''decorativeed'' or whatever his name is).

The gross cash transfer spending in that period has been £297.5m or an average annual gross expenditure of £45.75m. The club's wage bill has been £75m-£100m higher than those mid-table clubs over recent years.

I've said this before, but if some of our supporters seriously believe that the club's wage bill would be higher than it currently is if the PLC had remained in place then they're living in cloud fecking cuckoo land.

 

[gooDevil]

Comparisons to the PLC era are difficult because there's been a huge increase in the TV money and inflation lowering the value of the pound.

I'd be interested to know what % of net income was spent on transfers under the PLC vs the Glazers, what % of net profits are put back into players, what % of money is going to the owners. Buying Rio or Rooney for 30mil pounds back then would be like spending 45mil pounds or more now, something that many of us think is fundamentally silly. But those numbers are really only relevant compared to what we bring in, thus my interest in %s.

Maybe we spend just as large a % of our money on players as we always have, we've simply spread the money around a squad instead of concentrating nearly all of it on the fist XI.

The % of additional profits that the Glazers have brought through developing the commercial side is also crucial, I've read we've increased our profits on the commercial side as much as we've paid in interest from the Glazers purchase, so that it comes to being the same as if we'd never made those commercial advances and stayed a PLC in that one regard.

Would you say that's accurate, Mr. Code Breaker?

 

[GCHQ]

Comparisons to the PLC era are difficult because there's been a huge increase in the TV money and inflation lowering the value of the pound.

I'd be interested to know what % of net income was spent on transfers under the PLC vs the Glazers, what % of net profits are put back into players, what % of money is going to the owners. Buying Rio or Rooney for 30mil pounds back then would be like spending 45mil pounds or more now, something that many of us think is fundamentally silly. But those numbers are really only relevant compared to what we bring in, thus my interest in %s.

Maybe we spend just as large a % of our money on players as we always have, we've simply spread the money around a squad instead of concentrating nearly all of it on the fist XI.

The % of additional profits that the Glazers have brought through developing the commercial side is also crucial, I've read we've increased our profits on the commercial side as much as we've paid in interest from the Glazers purchase, so that it comes to being the same as if we'd never made those commercial advances and stayed a PLC in that one regard.

Would you say that's accurate, Mr. Code Breaker?

Well the massive gains made on the commercial front are clearly hugely significant when we're looking at any comparison between the Glazers and the PLC. Some people will argue that the PLC would have made the same commercial progress as the club has under the Glazers ownership. I believe that argument to be patently ridiculous when you consider that the PLC had just two sales people in the sponsorship department in 2005 and given that they were still having a massive circle jerk over the Nike deal nearly five years after it had been negotiated. Incidentally that 13 year agreement made by the good old folks at the PLC is now costing us in the region of £20m per year until the contract ends in 2015.

Once you factor in the Glazer inspired commercial gains and the dividend and corporation tax savings compared to the old PLC model then I'm perfectly happy to state that we're better off with the Glazers than we would have been had the PLC remained in place.