Yeah you're right, all those fans not re-newing until the last possible day must really have them shaking in their boots.
"The last POSSIBLE day!? DO THESE PEOPLE KNOW NO SHAME!!?!"
ALL issues relating to the bond issue and club finances
- Thread starter sammsky1
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Yeah you're right, all those fans not re-newing until the last possible day must really have them shaking in their boots.
"The last POSSIBLE day!? DO THESE PEOPLE KNOW NO SHAME!!?!"
Pat? and yes with every day more and more people's fears about the Glazers are being realised. My view of them would be that they are a crafty bunch of glorified conmen who in reality have not got a pot to piss in. They are good however in charming the necessary people to keep their shaky empire together
So have you renewed your ticket then?
If I am asked I will not renew
I stopped re-newing three seasons ago. Shame on you for not following suit when it counted!
Pat Crerand? Ringing any bells here? No? Ah feck it, i'm going to bed.
So why did you stop renewing then? surely it wasnt a Glazer protest?
nahAh right apologies, you sound like you could do with a good nights sleep
Yeah these twelve hour shifts are killing me; been covering for Tony at work cus he's broke his leg.
Poor Tony, you will be rewarded in Heaven
I'm his stand-in as the face of Frosties.
I beg to differ...
Roodboy's been sneaking the player amotisation in all along.
To be honest, I've always avoided the technical discussion of differetn profit measures, EBITDA etc up til now, as it's exactly the sort of tedium that steered me away from accountancy early in my career.
But one afternoon looking at this has immediately made it obvious that more than half of the "extra profit" RoodBoy has been confidently claiming all this time is entirely incorrect.
I dread to think what I'd find if I had any real in-depth knowledge of this and dug further into his claims.
Woah there! Before you start making various incorrect assumptions, we need to clarify that we are on the same page. So far I have just been answering your question about why I use EBITDA rather than bottom line net profit as a measure of our profitability. I have been trying to demonstrate that the figures that are widely reported as our 'profit' are not a good reflection of how much cash we actually generate on a yearly basis.
Im not really that interested in getting into the accounting theory of our amortisation numbers - the important point is that not much of the £80m of D&A actually affects our cash flow.
You already agree with the principle that we are making more money than our accounts and most media stories seem to suggest - as you said above, adding back goodwill amortisation (£38m) already give us a cash positive level of £63m after paying all interest payments.
Since the D&A are 'non-cash expenses', I excluded them all from my calculation and therefore reached a cash level of £109m. It was then pointed out that due to previous years losses, we wouldnt need to pay any tax so we can also ignore the £22m and reach a final cash balance of £130m.
Now I will agree that this is probably above the true cash figure as there are a few things that need to be taken off, most notably last years transfer expenditure (unfortunately we dont know how much exactly was paid upfront for Valencia or what installments are still due on Berba etc), and my actual conservative estimate of cash profit for 2009 is around £100m.
The only way to work out exactly how much cash we make every year would be a proper cash flow analysis, but it is difficult to do one as we dont have all the information we need to do it. So instead I tried to do a rough and ready calculation of how much cash we made last year using the figures from the bond prospectus.
My conclusions were that:
- we make more than enough cash to meet our senior debt obligations
- there is enough left over for player transfers
- over the years the Glazers have built up enough excess cash to now start repaying the PIK debt and thus decrease our overall debt levels
True, cash flow is king, and no company ever went under because of the state of its p&l.
But what are we proving here?
That the club's cash flow is currently enough to meet its obligations? We know that already, otherwise we would be where Portsmouth are now.
What needs looking at is whether the business model is healthy and sustainable going forwards, and that is what accounts are for.
Even on the cash flow side, you can't escape the fact that, however you spin it, there clearly isn't a massive amount available for players etc, despite an £80m windfall, and without the debt we would have around £50m a year more. Cash. In hand. To spend.
But what are we proving here?
That the club's cash flow is currently enough to meet its obligations? We know that already, otherwise we would be where Portsmouth are now.
What needs looking at is whether the business model is healthy and sustainable going forwards, and that is what accounts are for.
Even on the cash flow side, you can't escape the fact that, however you spin it, there clearly isn't a massive amount available for players etc, despite an £80m windfall, and without the debt we would have around £50m a year more. Cash. In hand. To spend.
Assuming we hit EBITDA £100m this year we should have around £50m for the team. This assumes £28m from the existing cash, after repaying £70m PIK debt, plus £22m net available at the end of this season.
I am doing a very simplisitc exercise where EBITDA increases at 10% pa going forward and that £25m per annum is available for the transfer kitty, as originally promised by the Glazers. This amount escalates at 10% pa. I've taken the bond interest at a flat 8.75% and the PIK debt at 14.25% although the latter will be 2% higher temporarily (I've read until next Feb).
The situation is that the PIK debt can be paid off in 5 years and in 2017 the bond debt could be reduced to £269m which would then be subject to re-financing. Say the interest bill is a similar 8.75% then that amounts to £24m but can be reduced quite quickly as EBITDA will have grown to £195m by that stage based on these assumptions.
Based on the Forbes valuation of £1.2bn on a multiple of 12 x EBITDA the club will be valued at £2.34 bn at the end of the 2017 financial year with debt of £269m - assuming no further borrowings.
However, the concerns in all this are - will EBITDA continue to grow at 10% per annum bearing in mind the uncertainties regarding United itself (team, on-going success. managment, plus effects of any boycott). How difficult will it be to grow the brand into new markets and maintain growth in existing markets assuming a period of little or no success? Then there is the small matter of fees, dividends to the Glazers which are not accounted for here at all.
As I said, very simplisitic, but maybe a key as to why the Glazers think they need not sell right now. Having said that what they have to weigh up are the uncertainties facing the club, the major one being - can the team remain competitive (highly successful as in the last few seasons since the Glazers took over) on a limited budget for new players and also whilst keeping the wage bill under control ?
I
I am doing a very simplisitc exercise where EBITDA increases at 10% pa going forward and that £25m per annum is available for the transfer kitty, as originally promised by the Glazers. This amount escalates at 10% pa. I've taken the bond interest at a flat 8.75% and the PIK debt at 14.25% although the latter will be 2% higher temporarily (I've read until next Feb).
The situation is that the PIK debt can be paid off in 5 years and in 2017 the bond debt could be reduced to £269m which would then be subject to re-financing. Say the interest bill is a similar 8.75% then that amounts to £24m but can be reduced quite quickly as EBITDA will have grown to £195m by that stage based on these assumptions.
Based on the Forbes valuation of £1.2bn on a multiple of 12 x EBITDA the club will be valued at £2.34 bn at the end of the 2017 financial year with debt of £269m - assuming no further borrowings.
However, the concerns in all this are - will EBITDA continue to grow at 10% per annum bearing in mind the uncertainties regarding United itself (team, on-going success. managment, plus effects of any boycott). How difficult will it be to grow the brand into new markets and maintain growth in existing markets assuming a period of little or no success? Then there is the small matter of fees, dividends to the Glazers which are not accounted for here at all.
As I said, very simplisitic, but maybe a key as to why the Glazers think they need not sell right now. Having said that what they have to weigh up are the uncertainties facing the club, the major one being - can the team remain competitive (highly successful as in the last few seasons since the Glazers took over) on a limited budget for new players and also whilst keeping the wage bill under control ?
I
Not a bad analysis JD.
I think a lot of the disagreement on the business model revolves around the angle we are looking at it from...
Does the current set-up have a reasonable chance of making the Glazers a whole heap of money? Yes. Form which point of view it's a decent business model.
Is the current set-up to the detriment of the financial strength of the football club, and the pockets of the fans? Yes, without question.
I think a lot of the disagreement on the business model revolves around the angle we are looking at it from...
Does the current set-up have a reasonable chance of making the Glazers a whole heap of money? Yes. Form which point of view it's a decent business model.
Is the current set-up to the detriment of the financial strength of the football club, and the pockets of the fans? Yes, without question.
Yes on this model they make just short of 22% pa from what they would get out now - say a net £ 500m on a £1.2bn offer as opposed to what they could get net in 2017 - say £ 2 bn. It assumes no income in the meantime though.
I still think there are too many imponderables and it has to be relatively high risk. For example, expecting the fans to pay higher prices each year when the team isn't necessarily performing, will be asking too much. Then again perhaps they think it's worth the gamble and perhaps that position also depends on what % of their overall assets United is in the bigger scheme of things.
From yesterday's Sport Business
Apolgs if you've already covered this -
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The interest rate on the loan taken on by the Glazers to fund their investment in Manchester United will rise from 14.25 to 16.25 per cent this August as the club looks set to break financial rules set out in the Payment in Kind agreement.
According to UK newspaper The Times, the rate hike would mean United will owe an extra £75 million in interest on the £138 million loan taken out in 2006. That total will have hit £662.6 million by the maturity date of 2017.
United must keep the debts of its operating company at less than five times the level of their profits before interest under the terms of the PIK notes. Company debt currently stands at £539 million but the club’s profits will result in a shortfall of several million.
Jonathan Moore, an Evolution Securities analyst who covers United’s bond, said: “People knew this [interest rate hike] could happen, but it increases pressure on the Glazers to get money to pay down this PIK debt. And the obvious place for them to find that money is in the club itself.
“The Glazers said in the bond prospectus they could take out a dividend of £70 million. We expected them to do that sooner rather than later and for them to have done it already, although they haven’t told us that yet.”
The two per cent rise will strengthen fears of Manchester United fans that the Glazers will try to pay off the high-interest loans rather than spend money on the team.
Interest hike to cost United extra £75m
The supporters trust led by Goldman Sachs chief economist Jim O’Neill, the Red Knights, is still working on an offer to buy the club.
Apolgs if you've already covered this -
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The interest rate on the loan taken on by the Glazers to fund their investment in Manchester United will rise from 14.25 to 16.25 per cent this August as the club looks set to break financial rules set out in the Payment in Kind agreement.
According to UK newspaper The Times, the rate hike would mean United will owe an extra £75 million in interest on the £138 million loan taken out in 2006. That total will have hit £662.6 million by the maturity date of 2017.
United must keep the debts of its operating company at less than five times the level of their profits before interest under the terms of the PIK notes. Company debt currently stands at £539 million but the club’s profits will result in a shortfall of several million.
Jonathan Moore, an Evolution Securities analyst who covers United’s bond, said: “People knew this [interest rate hike] could happen, but it increases pressure on the Glazers to get money to pay down this PIK debt. And the obvious place for them to find that money is in the club itself.
“The Glazers said in the bond prospectus they could take out a dividend of £70 million. We expected them to do that sooner rather than later and for them to have done it already, although they haven’t told us that yet.”
The two per cent rise will strengthen fears of Manchester United fans that the Glazers will try to pay off the high-interest loans rather than spend money on the team.
Interest hike to cost United extra £75m
The supporters trust led by Goldman Sachs chief economist Jim O’Neill, the Red Knights, is still working on an offer to buy the club.
You sound suspiciously like a man who isn't taking into account the power of compound interest... "the most powerful force in the universe", as Einstein may well not have said.
The 2% hike is only temporary apparently and will revert to 14.25% in Feb next year. I have little idea why this is except to think that by paying down 70m of the PIKs this year the punitive increased rate is no longer applicable. That's why I only used 14.25% in my exercise.
as noted by JD the 2% increase will only last for 6 months so in effect only makes 1% worth of difference - which as I said above is not a big deal in the grand scheme of things
Apparently it was to do with the overall debt ceiling being breached. It's a pretty bloody useless article since a chunk of the PIKS is going to be paid off soon and they'll never run full term.
Well most importantly I am trying to disprove a lot of the myths and propoganda that surrounds our financial situation.
Do you agree with my view that the way our financials have been reported by the media is not a true reflection of our real situation?
More importantly to me, I am trying to prove that not only do we have enough money to service out debts, we also have enough to spend on transfers and stay competitive on the field. I would say that Fergie realistically has around £30m to £40m cash at his disposal to spend on players in this transfer window - this amount could buy pretty much any player in the world on a standard installment deal.
Not if it reverts quickly I guess.
Not really, as I think that if there's one thing this conversation has provied, there is no such thing as one "true reflection" of our finances. You can look at it from all sorts of angles and make all sorts of interpretations, most of which are valid.
Some may be a little extreme at either end, but I think it's fair to say that, form the point of view of the fan (not the Glazers) we are worse off with them around. My opinion.
Probably true, but I really don't think he would had we not sold Ronaldo, which was a bit of an unpredictable windfall.
The cashflow is enough to keep the Glazers in plcae, and on their target to slowly drain the fans' hard-earned into their own pockets, but I really don't think it's enough to offer substantial player investment.
Fergie may well genuinely believe that the time is right to develop from within, not splash the cash, but if so, then that is another stroke of luck for the Glazers.
So you are still in denial
I think you are being a bit disingenuous here - I feel I have proven to you without a shadow of a doubt that our cash flow situation is a lot better than what you (and most others) previously assumed. You should acknowledge that at least.
This discussion is about our current state of finances and I prefer to keep this thread as the place to post financial information, analysis etc - the impact of the Glazers on the average fan is a different issue and Im sure we will continue to debate it in other threads.
Glad you agree on that at least - which is why you might understand that it annoys me immensely when we get muppets who havent got a clue proclaiming that we are 'skint' and have no money to spend on players etc.
Whilst i admit to knowing virtually nothing about corporate finance, i've always seen the press articles on the subject of United's finances for exactly what they are; misleading, sensationalist, scaremongering propaganda. I find it very odd and wholly frustrating that the vast majority of fans cannot see, accept, or even acknowledge the possibility of this simple truth. The journalists and the guys at MUST briefing them, through their slur-campaign based on silly deceptions and misinformation, could be leading our fans towards widescale boycotts, and for what? We need to wake up and get back to supporting United, put an end to this bollocks before it gets out of hand.
Something of a contradiction there. Claiming to know nothing about corporate finance yet all articles are misleading,sensationalist and scaremongering
So you are still in denial
I think you are being a bit disingenuous here - I feel I have proven to you without a shadow of a doubt that our cash flow situation is a lot better than what you (and most others) previously assumed. You should acknowledge that at least.
This discussion is about our current state of finances and I prefer to keep this thread as the place to post financial information, analysis etc - the impact of the Glazers on the average fan is a different issue and Im sure we will continue to debate it in other threads.
Glad you agree on that at least - which is why you might understand that it annoys me immensely when we get muppets who havent got a clue proclaiming that we are 'skint' and have no money to spend on players etc.
I think "skint" is relative. No, we are not about to go to the wall, but neither do we have anything like the sort of spending power that a club with our revenue should do by rights.
I'm not being disingenuous, this is what I've consistently said all along.
When did we ever stop supporting United
There's 2 parts to 'Love United, Hate Glazer' and our support has always been completely behind the shirts. If anything G&G has revitalised our support and we manage to rustle up a half decent atmosphere even for smaller games like Burnley or Hull or Pompey.
I'm always amused by people who come out with this tripe.
Admittedly I have no statistical evidence to back this up, but from what I've seen with my own eyes at Old Trafford, it's patently obvious that the average active protestor does more to support United than the average tool on internet forum mouthing off against MUST and the G&G campaign.
When did we ever stop supporting United
There's 2 parts to 'Love United, Hate Glazer' and our support has always been completely behind the shirts. If anything G&G has revitalised our support and we manage to rustle up a half decent atmosphere even for smaller games like Burnley or Hull or Pompey.
Don't worry, something tells me Ciderman's idea of supporting his team doesn't extend much past defending the club's owners on the internet.
I don't think it's contradictory. I don't have to be a financial expert to have my suspicions raised by clearly biased, sensationalist and misleading newspaper articles any more than i'd have to be a football manager to know that 99% of transfer stories are founded on nothing but the writer's vivid imagination and a desire to shift more copies. It's how newspapers work.
That's a fair point but my non-renewal next season is not down to MUST sound bites. I do believe however, that the Glazers are, like most owners of anything, in it for their own benefit and I'd prefer not to help them line their pockets. It's that simple.
I'm not going to be any less of a fan, just one that spends more time on his armchair.
The irony that by making a stand against them, prevents me from attending games where I can actually make my feelings known to them is not lost on me either but I'm comfortable with the decision I've made.
When did we ever stop supporting United
There's 2 parts to 'Love United, Hate Glazer' and our support has always been completely behind the shirts. If anything G&G has revitalised our support and we manage to rustle up a half decent atmosphere even for smaller games like Burnley or Hull or Pompey.
Yeah, protesters are the toppist reds of them all!
That is very true and is likely to be the case until after 2017 even if things go as swimmingly as the Glazers obviously think they will.
Ah... the top red card! A sure sign of desperation.
Ironically, given your lame attempts at sarcasm and tired choice of phrase, you're pretty much right. Old Trafford is awash with fans in Green and Gold, making loads of noise and supporting the team with every ounce of energy they have. But I don't think you can really relate to that.
Maybe we should turn this round... given your demand that we all "get back to supporting United", coudl you explain to us how you presonally go about doing this, so that we can follow your lead?
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