ALL issues relating to the bond issue and club finances

[ciderman9000000]

You answer the question then ciderman, I think for a pair of self appointed financial experts the pair of you dont seem to know as much as you think you do. You are both good at giving politican type answers, in other words bullshit explanations

What are you on about? I've barely touched upon the intricate financial discussions because, under my own admission, i know practically feck all about it. I've been reading everyone's opinion though - those that seem to know what they're talking about as well as those that don't - and tried to reach some degree of understanding from it all. I haven't once appointed myself as an expert, but nor have i ever accused anyone of waffling or trying to be clever simply because their knowledge of the subject far exceeds my own.

roodboy's trying to answer your questions as best he can - he's been answering the exact same questions from you and Fred over and over every day - it's not his fault if the pair of you aren't educated enough to understand what he's telling you.

 

[ciderman9000000]

Look, i don't mean to sound insulting, but if you read the thread properly you'd see that roodboy has explained many times over, in as simple terms as he can muster, exactly how he sees the situation.

 

[fredthered]

it's not his fault if the pair of you aren't educated enough to understand what he's telling you.

You are working on the assumption he is correct.

If I told you that I was a brain surgeon and could remove the insides of your skull with a pick axe and an angle grinder and still leave you more intelligent than you are already ( not the most difficult task, granted, but hey... ) just because I sound convincing, it doesnt mean I am right...

The only reason you cling onto everything Roodboy says is because he happens to be saying what you want to hear. precisely what you accuse us of doing with MUS..

 

[fredthered]

Look, i don't mean to sound insulting, but if you read the thread properly you'd see that roodboy has explained many times over, in as simple terms as he can muster, exactly how he sees the situation.

HOW HE SEES THE SITUATION....

BUT THATS NOT HOW OTHERS SEE IT, AND SOME PEOPLE FAR MORE CLUED UP THAN HE IS ABOUT FINANCE CONTRADICT WHAT HES SAYING..

Just because he's saying what you want to hear, it doesnt mean he's right...

 

[fredthered]

Yeah, you're right! If anything, giving SAF loads of money to spend would PROVE that we're skint!

i'd like to see MUST spin that line

If they borrow it to allow Fergie to spend, then thats exactly what it would prove.

Just because I come home with a flash BMW, doesnt mean I can afford it, and doesnt mean I had the cash in my hand to pay for it.

 

[ciderman9000000]

HOW HE SEES THE SITUATION....

BUT THATS NOT HOW OTHERS SEE IT, AND SOME PEOPLE FAR MORE CLUED UP THAN HE IS ABOUT FINANCE CONTRADICT WHAT HES SAYING..

Just because he's saying what you want to hear, it doesnt mean he's right...

CAPS, Fred, calm down, mate.

Who are these 'more clued up' people than he? I've been reading this thread thoroughly and am yet to see anyone give a contradictory analysis. Your EBITDA wikipedia paste job missed the point entirely, and, if anything, most seem to agree with what roodboy's been saying; he demonstrated his analysis clearly enough, and subsequently you've tried and ultimately failed to find any holes in it.

SO STOP SHOUTING AT ME!

 

[fredthered]

SO STOP SHOUTING AT ME!

Its that or cyber slap you, and try knock some iota of common sense into you.

 

[ciderman9000000]

Its that or cyber slap you, and try knock some iota of common sense into you.

Boi, i'll open a whole can of cyber whoop-ass on your narrow e-behind!

 

[Pexbo]

I'm just going to put my thoughts on the Glazer issue into a nutshell.

The Glazer's are fecking over the fans.

Increases in ticket prices, and the Cup scheme makes it harder and harder for the average fan to support the club they have been supporting for XX amount of years.

The Glazer's are not fecking over United.

Financially, they are fine tuning the club into a mint. Revenue is increasing massively year upon year and if the latest reports are to be believed, given a few more years of growth, they will be making the same amount of profit as when they took over even though they are paying off the Bond and PIK's.



I think everyone has the right to be angry because it's us that is getting light in the pocket's because of their grand money making scheme when we were all happy how it was being run as a PLC, however I don't believe this propaganda that is being pushed around by anti-Glazer groups that they are putting the club into a dangerous and weak position. Quite the opposite, I think.

I even think the Glazer's themselves are happy to go along with it to an extent as it is putting us in a stronger position than we have been in for years when it comes to negotiation for players. We were always the money bags paying a premium on player's because of who we were. Now, Ferguson only talks of "Value" while the media talks about how weak we are finacially. Negotiating for anything is alot easier if the person your negotiating with can't see that bulging wad of £20 notes struggling to stay in your wallet.

When we were the richest club around, we could offer £20m for a player others could only offer £15 for and it would clinch us the deal. Nowadays though, if we offer £20m and City offer £25m, there is no point whatsoever in getting into a bidding war because you end up getting a player worth £20m for £30m. I think Ferguson saw this with Berbatov (who I am assessing at the time, rather than how it worked out) and decided it would never happen again.

 

[Crerand Legend]

What are you on about? I've barely touched upon the intricate financial discussions because, under my own admission, i know practically feck all about it. I've been reading everyone's opinion though - those that seem to know what they're talking about as well as those that don't - and tried to reach some degree of understanding from it all. I haven't once appointed myself as an expert, but nor have i ever accused anyone of waffling or trying to be clever simply because their knowledge of the subject far exceeds my own.

rudeboy's trying to answer your questions as best he can - he's been answering the exact same questions from you and Fred over and over every day - it's not his fault if the pair of you aren't educated enough to understand what he's telling you.

Look, i don't mean to sound insulting, but if you read the thread properly you'd see that roodboy has explained many times over, in as simple terms as he can muster, exactly how he sees the situation.

Ok so rather than rational answers I get insulted. Rude Boy is not doubt smarter than as you say us poorly educated beings and his financial talk is impressive to say the least, I have said this several times. Now where I coming from is that he has built a case to demonstrate with the Glaziers in charge we have little to worry about, now he has never used those exact words but that would be the height of it and he has done this in a very eloquent manner
My problem is despite his reassurances Im still concerned that they have wasted £430 m in interest money which would have left us able to compete in our rights with our own money against the sugar daddy clubs of Chelsea, Man City and Real, how can anyone argue that the Glazers have been good for us in that regard. Then we have the Ronaldo money which was'nt spent and is now to be shipped to America in July and replaced by a credit facility, how is this good for Manchester United. The debt which is huge could rise if the PIK problem is not sorted, if SAF buys or, and we are in a recession, revenues drop, but we should not be concerned, well I am
Roodboys explanation would be fine if Manchester United were your ordinary business but we are not and the Glazers have IMHO been a disaster and I fear will continue to do so. They may as he argues easily keep us from going under, I have no fear of that, but we will become uncompetitive shackled by their personal interest payments and SAFs skill wont save us for ever. No doubt I can expect further abuse but sure I can take it

 

[fredthered]

I'm just going to put my thoughts on the Glazer issue into a nutshell.

The Glazer's are fecking over the fans.

Increases in ticket prices, and the Cup scheme makes it harder and harder for the average fan to support the club they have been supporting for XX amount of years.

The Glazer's are not fecking over United.

Financially, they are fine tuning the club into a mint. Revenue is increasing massively year upon year and if the latest reports are to be believed, given a few more years of growth, they will be making the same amount of profit as when they took over even though they are paying off the Bond and PIK's.



I think everyone has the right to be angry because it's us that is getting light in the pocket's because of their grand money making scheme when we were all happy how it was being run as a PLC, however I don't believe this propaganda that is being pushed around by anti-Glazer groups that they are putting the club into a dangerous and weak position. Quite the opposite, I think.

I even think the Glazer's themselves are happy to go along with it to an extent as it is putting us in a stronger position than we have been in for years when it comes to negotiation for players. We were always the money bags paying a premium on player's because of who we were. Now, Ferguson only talks of "Value" while the media talks about how weak we are finacially. Negotiating for anything is alot easier if the person your negotiating with can't see that bulging wad of £20 notes struggling to stay in your wallet.

When we were the richest club around, we could offer £20m for a player others could only offer £15 for and it would clinch us the deal. Nowadays though, if we offer £20m and City offer £25m, there is no point whatsoever in getting into a bidding war because you end up getting a player worth £20m for £30m. I think Ferguson saw this with Berbatov (who I am assessing at the time, rather than how it worked out) and decided it would never happen again.

One slight flaw in your argument.

They arent paying off the bond..

And if rumours are to be believed, they arent paying off the PIK debts either now...

So given that the amount going out has now in fact risen due to the bond prospectus, and we're more in debt than we were, and the club only made a profit because the sold Ronaldo...

I'd say we're pretty much in the same position as before, only with a weaker team, more debt, higher payments..

If thats good for United.. then feck me.. I'm gonna shit houses when things get bad...

 

[EdWeatherall]

If thats good for United.. then feck me.. I'm gonna shit houses when things get bad...

I don't really see how anyone can actually say they've been good for United so far, perhaps long-term they could be, as they will have hugely improved the commercial revenues once the club is debt free

But right now, noone can surely think they've been good, especially if the figure of £437m going out of the club since they took over is true

 

[Allforone]

One slight flaw in your argument.

They arent paying off the bond..

And if rumours are to be believed, they arent paying off the PIK debts either now...

So given that the amount going out has now in fact risen due to the bond prospectus, and we're more in debt than we were, and the club only made a profit because the sold Ronaldo...

I'd say we're pretty much in the same position as before, only with a weaker team, more debt, higher payments..

If thats good for United.. then feck me.. I'm gonna shit houses when things get bad...

More ill informed totally inaccurate scare mongering, that’s all you come out with......its been explained to you time and time again but it doesn’t seem to sink in…..If you cant even comprehend the simple basics of the bond issue and how its improved the financial position at the club your totally out of your depth in the more complex aspects of all this, which is why your constantly getting corrected and resorting to copy and paste jobs from wikapedia.

 

[ciderman9000000]

Fredtheredipedia is a broken ipedia

 

[DanH]

what rumours are these about them not using the cash reserves to reduce the PIKS then?

 

[Crerand Legend]

what rumours are these about them not using the cash reserves to reduce the PIKS then?

It would seem they want the cash to stay in the club accounts until the end of June as they have to furnish the bondholders with accounts at that time. I would expect the money will then be hot footed across the Atlantic to pay off some of the PIKs. God knows what they will do to make the accounts look good next time

 

[ralphie88]

I also heard a rumour today that the Glazers are pushing Fergie to make a big signing before the WC starts to encourage renewals.

I find that very hard to believe. I can't see non-renewals being so far down that it would make economic sense to stump up £30m or so on a player. That would be, what, 40,000 delayed renewals? Infeasible.

 

[Pexbo]

what rumours are these about them not using the cash reserves to reduce the PIKS then?

From what I gather as part of the bond issue they now have to release certain financial infomation just as a P.L.C would and it has been noted that they have not used any of the cash reserves to pay off the PIKs as they were expected to.

The end of the footballing Fiscal year is apparantly June 30th, so it could be that they are waiting for this to pass before they use the reseveres as a PR exercise as it would then be another 3/6 months (I'm not sure) until the next figures are released by which time it could be that United have made a couple of signings and with the season ticket price frozen they might feel they are in a better position with the fans when it is released that they have taken their next chunk out of United's profits.

 

[Crerand Legend]

I find that very hard to believe. I can't see non-renewals being so far down that it would make economic sense to stump up £30m or so on a player. That would be, what, 40,000 delayed renewals? Infeasible.

Whats the crack with the RKs Ralphie alot of people are now scared its not going to happen?

 

[UnitedRoadRed]

Who was happy with the plc? We were winning trophies. We were happy with United on the pitch. 2007-9 have been pretty similar performance wise, except we've outdone Arsene's pure football and Chelski's big-spending.

The plc failed to break a wage structure to sign the absolute best back then - your Roberto Carlos, Zidane, Boksic, etc. The Glazers broke it to retain Ronaldo. They would break it again if it made financial sense to do so. They have a business plan, not a wage structure.

Yes, as fans we're fecked over and I gave my ST up. My weekends feel richer for having more time to spend with my kids while still being able to watch United. I'm now an armchair/barstool fan. I have no problem with that. I get to Old Trafford when I want.

 

[EdWeatherall]

what rumours are these about them not using the cash reserves to reduce the PIKS then?

There's apparently been media briefings in which they say that they haven't taken the money out of RF that is allowed under the bond scheme to be transferred to RFJV (or whichever way round the RF/RFJV is)

Here's an example of one of the stories on this

BBC - David Bond's Blog: Glazers in no rush to pay off Man Utd debt

 

[Pexbo]

Who was happy with the plc? We were winning trophies. We were happy with United on the pitch. 2007-9 have been pretty similar performance wise, except we've outdone Arsene's pure football and Chelski's big-spending.

The plc failed to break a wage structure to sign the absolute best back then - your Roberto Carlos, Zidane, Boksic, etc. The Glazers broke it to retain Ronaldo. They would break it again if it made financial sense to do so. They have a business plan, not a wage structure.

Yes, as fans we're fecked over and I gave my ST up. My weekends feel richer for having more time to spend with my kids while still being able to watch United. I'm now an armchair/barstool fan. I have no problem with that. I get to Old Trafford when I want.

This is just my point, yes they fecked over us fans, but no they are not ruining the club. I think the anti-Glazer parties all have their own agenda, but their hearts are definately in the right place because they just want the average fan to be able to watch a game at Old trafford without remortgaging their house.

Would they have got everyone in the stadium wearing Green and Gold if they knew the actual agenda was to keep ST prices down? I doubt it, a massive % of match goers these days are corporate or "well off" and a few hundred quid a year isn't that big a deal. MUST have been pushing propaganda for a long time now about how unstable the club's finances are but when you see the cold hard figures on what we are making now compared to pre-Glazer's youcan see just how well they have fine tuned the business model of the club. Yes they have to pay money out of it and yes this does not please me at all and I'd rather it wasn't like this (don't think that I'm pro glazer for one second), but I'm realistic. We are not in as bad shape as people would like you to believe and while there are many disadvantages to the Glazer's they do have the odd positive.

Before you anti-Glazer lot try and roast me, be aware that I am anti-Glazer, however I have been reading the fact's and would like to think that I can look at the situation objectively.

 

[Crerand Legend]

This is just my point, yes they fecked over us fans, but no they are not ruining the club. I think the anti-Glazer parties all have their own agenda, but their hearts are definately in the right place because they just want the average fan to be able to watch a game at Old trafford without remortgaging their house.

Would they have got everyone in the stadium wearing Green and Gold if they knew the actual agenda was to keep ST prices down? I doubt it, a massive % of match goers these days are corporate or "well off" and a few hundred quid a year isn't that big a deal. MUST have been pushing propaganda for a long time now about how unstable the club's finances are but when you see the cold hard figures on what we are making now compared to pre-Glazer's youcan see just how well they have fine tuned the business model of the club. Yes they have to pay money out of it and yes this does not please me at all and I'd rather it wasn't like this (don't think that I'm pro glazer for one second), but I'm realistic. We are not in as bad shape as people would like you to believe and while there are many disadvantages to the Glazer's they do have the odd positive.

Before you anti-Glazer lot try and roast me, be aware that I am anti-Glazer, however I have been reading the fact's and would like to think that I can look at the situation objectively.

You are entitled to your opinon mate and believe me you can roasted on here for being anti Glazer. I woudnt be as confident as yourself on our future with the American's, they really are a crafty bunch who are in it not for the love of Manchester United but for the love of the Glazer family bank account. However it is hard to see where our relief is coming from and we may be stuck with them.

 

[Pexbo]

You are entitled to your opinon mate and believe me you can roasted on here for being anti Glazer. I woudnt be as confident as yourself on our future with the American's, they really are a crafty bunch who are in it not for the love of Manchester United but for the love of the Glazer family bank account. However it is hard to see where our relief is coming from and we may be stuck with them.

I don't think they ever intend to pay off their debt.

They bought United for £800m, of which they borrowed a massive percentage of it. As they were already share holders before their take over they had access to infomation about how the club was run and marketed.

These are businessmen, they could see that while it was a successful club, there were lucrative areas that were not being exploited and they formed a business plan to unlock the potential earning power that a massive product like Manchester United has.

So now they have taken the club over with borrowed money they have got the club working for them and paying off the money they borrowed and while they do this they are increasing the value of the club by unlocking it's full earning potential.

I'm sure the eventual plan is to get it to a place where they feel that it is nearing or at the peak of it's earning potential and sell it for a huge, huge profit and in doing so, pay off every single loan that they have taken out (best case scenario), or (worst case scenario) leave that to the next owner to do. If the reports are to be believed, they already turned down a £1bn offer and called a £1.5bn offer pointless.

Back in 2004 our turnover was £173m, this is just before the Glazer's took over they have taken that to £288m in 08/09 and if they keep on progressing as they are, they could be doubling the £173m revenue they started with in just a few years. I have no idea what they see as the potential turnover but if they keep expanding it as they are doing then all of a sudden the £700m they owe doesn't seem quite as scary.


If they are to do this however, then the club has to be successful on the field, they are aware of this which is why a few tens of million here and there is really no problem when it comes to transfer allowance.

 

[Rood]

i thought i felt my ears burning

It is clear that some people have made up their minds and no amount of evidence or explanation is going to change that so I am not going to bother wasting my time with them any more.

I have gone to great lengths to explain my point of view in as much detail as I possibly can, if that is not enough then there is not much else I can do. Thankfully I know from several comments on here and also PMs that I have received that many posters have followed the analysis and understand what I have been trying to do here.

I dont expect everyone to agree with what I say and am happy for people to question it but I cant be arsed to engage with someone who just keeps repeating the same bullshit myths over and over again.

 

[Pexbo]

i thought i felt my ears burning

It is clear that some people have made up their minds and no amount of evidence or explanation is going to change that so I am not going to bother wasting my time with them any more.

I have gone to great lengths to explain my point of view in as much detail as I possibly can, if that is not enough then there is not much else I can do. Thankfully I know from several comments on here and also PMs that I have received that many posters have followed the analysis and understand what I have been trying to do here.

I dont expect everyone to agree with what I say and am happy for people to question it but I cant be arsed to engage with someone who just keeps repeating the same bullshit myths over and over again.

I read through a few of your posts going back through this and you are probably more objective about it than I am, in a nutshell do you agree with my post or do you think I'm way off?

My posts are just my perception of the whole situation based on what I have seen and read, I'm happy to hear anything that contradicts it or backs it up. The more infomation we get the bigger the picture we have.

 

[Rood]

I read through a few of your posts going back through this and you are probably more objective about it than I am, in a nutshell do you agree with my post or do you think I'm way off?

My posts are just my perception of the whole situation based on what I have seen and read, I'm happy to hear anything that contradicts it or backs it up. The more infomation we get the bigger the picture we have.

Yes I agree with you - I have been trying to get across the same general message for a while now.

If you want to read back then I suggest starting from this post where all the most recent discussion has stemmed from:
https://www.redcafe.net/f6/all-issu...-cash-out-etc-280859/index30.html#post8061091

 

[Pexbo]

Yes I agree with you - I have been trying to get across the same general message for a while now.

If you want to read back then I suggest starting from this post where all the most recent discussion has stemmed from:
https://www.redcafe.net/f6/all-issu...-cash-out-etc-280859/index30.html#post8061091

Ah nice one, those solid figures are a good read.

The funny thing is there's a Chelski twat that comes into my work and we have a bit of banter, and he was painting the United picture as dier. I would love to have him read through this and understand the actual situation but he, like alot of United fans, find it more convienient to paint this picture of the Glazers liquidising the club and turning us into the next Leeds because it's fashionable to hate them.

Like I said earlier, by al means complain about how they treat us as fans but actually believing and spreading the myths about United being on the brink of financial ruin is only going to damage the club (and in some cases their own health )

 

[Rood]

You might want to point the Chelski twat in the direction of this article which was just flagged up in the RK thread:

UNITED 'WOULD PASS FINANCIAL TEST' |

Manchester United insist they will pass the new UEFA 'financial fair play' test which is set to become part of European football's rules on Thursday.

Under the regulations to be rubber-stamped by UEFA's executive committee, clubs in European competition will only be allowed to spend what they earn - although some leeway will be given for the first six years of the scheme.

Clubs will also still be permitted to have large debts, but only if they can service the interest payments as part of their overall spending.

In the Premier League, the new rules would threaten the participation of Manchester City, who made a £93million loss last year, in European competition as well as Chelsea - who made a £47million loss - unless they change their spending habits.

Arsenal and Tottenham both made a profit and would pass the test, and Manchester United claim they would too - despite payments of £45million annually to service the interest on the owners' £507million bond scheme...

 

[Rood]

I find that very hard to believe. I can't see non-renewals being so far down that it would make economic sense to stump up £30m or so on a player. That would be, what, 40,000 delayed renewals? Infeasible.

Well clearly they wouldnt expect to recoup whatever they spent through renewals, they dont need to anyway as there is so much extra cash available - they are probably just encouraging Fergie to try and get his spending done before the ST deadline rather than after.
Although that might be difficult with the World Cup just around corner as Im sure several potential targets will be focusing on that already.

 

[Rood]

''The cost of not finishing in the top 4?''

some great input here from GCHQ as usual, includes a link to some very interesting analysis from JP Morgan - this is the first detailed analysis of our financial situation that I have seen since the bond prospectus ...

I thought I might try to help with this question as it seems to have been one of the burning issues in the Mains discussion over the last 24 hours.

Did you ever get a chance to read JP Morgan's research note on the bond issue?

Link: http://www.slideshare.net/guest364ed...ted-2010-03-26

It is 48 pages long and does include some very technical info but the majority of what they say is perfectly understandable and really does offer an excellent insight into the club's finances. Well worth posting it on the thread in the Mains.

There are financial results projections for the next five years including three scenarios: a base case scenario, an upside scenario and a downside scenario. The downside scenario assumes that the club will not finish in the top 4 for two out of the next five years.

P22 of the document states that the club estimate the negative incremental EBITDA impact of failure to qualify for the Champions League to be £15m per year. This failure to qualify for the CL assumes that the club will qualify for the Europa League. On the same page they note that the players contracts have a bonus relating to Champions League qualification and failure to qualify would save ''high single digit millions'' in player costs (wages).

So the main point is that even though the failure to qualify for the CL will substantially hit media revenue (£25m) the club's partcipation in the Europa League (hello Automatic Cup Scheme) will help maintain its matchday revenue whereas at the same time player costs (wages) will fall by nearly £10m leaving a net decrease in EBITDA of £15m.

So a £15m impact on EBITDA would leave the club with EBITDA of £75m based on last year's figure. Clearly £75m allows the club to service the bond interest (£45m) leaving £30m for transfer fees and other corporate and capital expenditure. I wouldn't exactly describe £30m after interest as very comfortable, far from it in fact and no dividend could be taken out at that level, but even so failure to qualify for the Champions League would clearly be nowhere near the doomsday scenario that many people think it would.

Even if people don't want to look at the figures I would suggest they simply think about it logically.

Would highly qualified people from around the world stake £500m on a company that would be in dire strates just from its failure to make the top four in one year out of the next seven?

Clearly not in my opinion, and the figures above support that view.

My own personal view is that I can actually see the club outperforming JP Morgan's Upside scenario but people who feel negatively about the club's finances should focus on the downside scenario and calculate its impact on the club.

Regards,

GCHQ

 

[afrocentricity]

Promote that guy!

 

[afrocentricity]

Look, i don't mean to sound insulting, but if you read the thread properly you'd see that roodboy has explained many times over, in as simple terms as he can muster, exactly how he sees the situation.

they're up to something....

 

[Julian Denny]

I don't think they ever intend to pay off their debt.

They bought United for £800m, of which they borrowed a massive percentage of it. As they were already share holders before their take over they had access to infomation about how the club was run and marketed.

These are businessmen, they could see that while it was a successful club, there were lucrative areas that were not being exploited and they formed a business plan to unlock the potential earning power that a massive product like Manchester United has.

So now they have taken the club over with borrowed money they have got the club working for them and paying off the money they borrowed and while they do this they are increasing the value of the club by unlocking it's full earning potential.



I'm sure the eventual plan is to get it to a place where they feel that it is nearing or at the peak of it's earning potential and sell it for a huge, huge profit and in doing so, pay off every single loan that they have taken out (best case scenario), or (worst case scenario) leave that to the next owner to do. If the reports are to be believed, they already turned down a £1bn offer and called a £1.5bn offer pointless.

Back in 2004 our turnover was £173m, this is just before the Glazer's took over they have taken that to £288m in 08/09 and if they keep on progressing as they are, they could be doubling the £173m revenue they started with in just a few years. I have no idea what they see as the potential turnover but if they keep expanding it as they are doing then all of a sudden the £700m they owe doesn't seem quite as scary.


If they are to do this however, then the club has to be successful on the field, they are aware of this which is why a few tens of million here and there is really no problem when it comes to transfer allowance.

Of course they intend to pay off the debt or at least bring it to manageable proportions. When they took over they thought the United brand was a cash cow whose commercial possibilities knew no bounds and could be exploited to the full - much more so than teh Plc was doing. They also rejoiced in the concept of owning one of the greatest, if not the greatest, brands in world sport. What they didn't realise were the actual costs and intricacies involved in owning a football club despite having a successful team managed by a great manager. Yes they have grown revenues but costs kept pace.

After 5 years it has not been a great investment for them. They could have done a lot better with their money elsewhere. On top of that they are treated like pariahs by their own customers. They cannot bask in the pride and glamour of being the owners of Manchester United. Notwithstanding, and unless they get a really attactive offer - one nobody in their right minds would refuse - they will push on regardless in the hope that they can continue to push up revenues exponentially, retain costs at a reasonable level and yes, pay off most of the debt in the next seven or eight years. If that can be achieved then it will have been a reasonable investment but one which has taken the best part of 12 to 13 years to achieve. But what has not been factored in here is the great uncertainty facing United as a team in the face of well resourced competitors and consequently as a brand which will continue to grow no matter what. They cannot pay off debt and put the kind of money into player resources to the extent required to keep United competitive with main rivals both at home and in Europe. Their ageing team manager, on whom they rely totally in this regard to weave his magic on limited financial resources, won't be around much longer. Who can they attract as a suitable replacement and ask him to perform with limited resources and so on ?

It's a risky business and the future is far from certain. If a decent offer emerges they should take the money and scat.

 

[Walrus]

On the beeb today:


BBC - David Bond's Blog: Glazers in no rush to pay off Man Utd debt

Glazers in no rush to pay off Man Utd debt

Post categories: Football

David Bond | 14:04 UK time, Tuesday, 25 May 2010

Spoiler

With the interest rate due to jump to 16.25% in August, you would think the Glazer family, Manchester United's unpopular American owners, would be anxious to start paying off their notorious payment in kind (PIK)loans as soon as possible.

But it is understood there are no immediate plans to start using United's bulging cash reserves to pay off the £225m chunk of debt - even though their £500m bond refinancing earlier this year has given them the freedom to do so.

Team building is more important than debt repayment, says a source close to the Glazers.

Now, if this were you or I and we had a mortgage on our house which was costing us more than 16% in interest a year, I reckon we wouldn't waste too much time in paying it off.

The Glazers have been subject to sustained protests at Old Trafford The Glazers have been subject to sustained protests at Old Trafford

The Glazers originally borrowed the money from three hedge funds - Och Ziff, Citadel and Perry Capital - at the time of their £800m takeover in 2005. It was one of three tranches of money, worth about £275m, to complete the buyout.

Unlike other forms of borrowing, these loans came with extremely expensive strings attached. Rather than pay off the loan and the interest each year, the interest simply rolls up and is added to the final bill.

Even allowing for the £175m which was paid off at the time of the Glazers' first refinancing in 2006, it is estimated that by the time the loans mature they will be worth £600m.

One of the reasons why the Glazers took out a £500m bond to refinance what they call their "senior debt" (a term which basically tells you it has priority over the PIKs) earlier this year was to free them from the restrictions which prevented them from taking cash out of the club to pay off the PIKs.

The bond has now liberated them and, with the club predicting cash reserves of £150m by June, the money is there to start paying them off.

And yet, they don't expect to start removing cash from United's hugely successful commercial operation in the near future - certainly not before the end of the current financial year which closes on 30 June.

Why? Implausible as it may seem the Glazers are apparently comfortable with the loan. They view it as a tax deductible, benign security.

Plus, the club's owners have obviously been shaken by the Green and Gold campaign prompted by a possible takeover bid from the Red Knights even though that campaign seems to be running out of steam, according to my colleague, BBC business editor Robert Peston.

Despite that, they know taking money out of the club to pay off their controversial debts at this moment in time would be a huge public relations disaster.

A series of recent off the record briefings with journalists - unheard of in the five years the Glazers have owned the club - demonstrate a desire to close what they see as the reality gap between the public perception of United as a business crushed by their weighty debts and what is really going on.

The Glazers believe their 2007 commercial shake-up is starting to pay off with that part of the business forecast to overtake matchday and media revenue in the next few years.

In 2008/09 matchday revenue - ticketing, hospitality, programmes etc - was the biggest earner for United with £109m, or 39% of their income; second was media with £99.7m, or 36%; with commercial third with £69.9m, or 25%.

United's decision to divide up their sponsorship rights globally has turned out to be a masterstroke. For example, they have sold mobile marketing rights to six territories - South Africa, Indonesia, Nigeria, Saudi Arabia, India and Malyasia.

Each company pay United for the right to use the club's badge and players to promote their products and services and give them a share of sales.

But then United can use the new mobile users to raise even more money by charging customers for a subscription to the club's mobile content services including clips, news alerts and ringtones.

Make no mistake - with United's global reach this is a licence to print money and must be extremely alarming for the rest of the Premier League teams.

United's ability to make money - witness the new four year £88m shirt sponsorship deal with Aon which starts next season - remains unrivalled. Last year (08/09) they brought in £288m in revenue.

But no matter what the club say, whether in public or private, they are held back by the Glazers' enormous acquisition debts.

And until they start paying them off, it's difficult to see how they can turn these vast mountains of cash to their advantage at the same time as winning the trust of United's most loyal supporters.

Note: spoiler tags are just so it doesnt take up so much space.

 

[Gambit]

A Panorama documentary, BBC1 on Monday, June 7 based on the United debt and the Glazers.

 

[peterstorey]

P22 of the document states that the club estimate the negative incremental EBITDA impact of failure to qualify for the Champions League to be £15m per year.

Would highly qualified people from around the world stake £500m on a company that would be in dire straits just from its failure to make the top four in one year out of the next seven?

I think that £15M is an underestimate, when I did the numbers for Arsenal I reckoned it would cost about £30M revenue pa.

The argument that 'experts' wouldn't do this or that is particularly rubbish. Though a year or two out of the CL would be painful but not fatal.

 

[Rood]

I think that £15M is an underestimate, when I did the numbers for Arsenal I reckoned it would cost about £30M revenue pa.

The argument that 'experts' wouldn't do this or that is particularly rubbish. Though a year or two out of the CL would be painful but not fatal.

Well that is the main point of course.

Have a look at the report when you get the time, they also think the gross cost of missing out on CL will be much higher than £15m, but are offsetting it by the fact that wage costs will come down (as players get CL related bonuses) and that playing in the Europa League would bring in some extra TV money and matchday revenue.

 

[peterstorey]

The 'appeal to authority' fallacy just mashes my buttons. Link doesn't seem to work by the way.

 

[Pexbo]

Of course they intend to pay off the debt or at least bring it to manageable proportions. When they took over they thought the United brand was a cash cow whose commercial possibilities knew no bounds and could be exploited to the full - much more so than teh Plc was doing. They also rejoiced in the concept of owning one of the greatest, if not the greatest, brands in world sport. What they didn't realise were the actual costs and intricacies involved in owning a football club despite having a successful team managed by a great manager. Yes they have grown revenues but costs kept pace.

I didn't say they wouldn't bring down their debt's to a manageable level, just that they wouldn't ever pay them off. The PIK's are potentially crippling so I'm sure they will be addressed at some point. I think this could even be done in a similar manner to the Senior debt, just maybe not a bond.

The reason they originally took out the PIK was because no one else would touch them, there was too much risk involved due to the unknown nature of how things would pan out so all they could do was go for a loan which came with a ridiculous interest rate.

To put this into relative terms, it is the equivalent of somebody with a poor credit history shopping around for a loan. Most credit facilities won't have any interest in them and for the sake of this example, won't be able to offer them their standard 8% APR loan, so they keep shopping around to the point that the best deal they can get is 30% APR. Eventually, after 5 or so years, if they have proven they can meet these payments they can shop around to other loan companies who can see that they are trustworthy and their money is safe and they are in a position to negotiate a much better price.

Why would other credit facilities not want to lend the Glazer's £300m at 8% (instead of the 16.5%) when they know they can definately keep up with payments. The Glazers have shown that they can keep up payments on a much higher rate so the credit facility can be comfortable with handing out this loan and reaping the rewards.

After 5 years it has not been a great investment for them.

Says who?

They could have done a lot better with their money elsewhere.

They have just turned down a bid for £1.5bn, thats almost double what they paid. If you can pick me out multi-million pound investment that will double in value in the space of 7 years, then you are a financial guru and there's a street in New York with your name on it.

On top of that they are treated like pariahs by their own customers. They cannot bask in the pride and glamour of being the owners of Manchester United.

This is the Glazer family, it's not that clown Mike Ashley.

Apart from one appearance when they had just taken over the club, and quietly watching a few games, they have run this company with no bells or whistles. David Gill is the front man and they are quite happy working in their offices.

Notwithstanding, and unless they get a really attactive offer - one nobody in their right minds would refuse - they will push on regardless in the hope that they can continue to push up revenues exponentially, retain costs at a reasonable level and yes, pay off most of the debt in the next seven or eight years. If that can be achieved then it will have been a reasonable investment but one which has taken the best part of 12 to 13 years to achieve. But what has not been factored in here is the great uncertainty facing United as a team in the face of well resourced competitors and consequently as a brand which will continue to grow no matter what.

12 or 13 years to achieve? That's great in business terms. You really don't have a clue about business do you.

They cannot pay off debt and put the kind of money into player resources to the extent required to keep United competitive with main rivals both at home and in Europe. Their ageing team manager, on whom they rely totally in this regard to weave his magic on limited financial resources, won't be around much longer. Who can they attract as a suitable replacement and ask him to perform with limited resources and so on ?

Have you read any of the actual cold hard figures? They can afford to do that and it is part of the business plan to do that. Last summer was Ferguson's choice to go forward with the team he had rather than panic buying the wrong player.

We nearly bought Benzema if you have forgotten, for £30m. Had we done that it would have been Berbatov, Valencia and Benzema, Smalling and Hernandez in the space of 2 years. £97m to be precise.

It's a risky business and the future is far from certain. If a decent offer emerges they should take the money and scat.

Well I'm sure they they read RedCafe and see what a financial wizz you are they will read this and do a runner.