ALL issues relating to the bond issue and club finances
- Thread starter sammsky1
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Shouldn't really affect us at all because we turn a profit.
Shouldn't really affect us at all because we turn a profit.
An important point - definitely worth mentioning twice
We have discussed these rules in the past and if anything they will benefit us by restricting those who spend beyond their means like Shitty
I have been of the opinion that ourselves and Arsenal would be the two clubs in the best financial shape as regards the FFP regs and I said this to Anders months ago.
I know that Anders has been busily digesting the finer details of the FFP Regs and was interesting to note that, of all clubs, his latest blog post is on... how Arsenal should be comfortable with the FFP Regs.
I might be wrong here but I would have thought a report on the situation with Manchester United would have made more sense for him but I know he doesn't like to report on good news for Manchester United's finances so it was hardly surprising.
What people have to bear in mind is that debt in and of itself is not a bad thing and is not viewed as a bad thing by UEFA.
What is important is the club's ability to service the debt and Manchester United are doing that quite comfortably at the moment (I am not sure if we technically have a debt any more in the strict sense of the word - what we have now is the Bond Issue which, to my mind, is slightly different???)
The PIK debt is, as stated by David Gill on several occasions, the Glazer's debt and won't be taken into account when the FFP Regs are brought in.
That's my understanding of the situation, anyway.
Yes all of that is probably true. Goodness, even Sir Matt had a reputation for being mean on occasions. Fancy turning down a wage increase request from Denis Law no less and putting him on the transfer list into the bargain.
Fergie, to his eternal credit, carried on the Busby tradition of giving youth a chance. However, there did seem to be money available to make one or two big signings and to pay relatively top notch wages as well for such players. The last of those was Dimitar, in the knowledge that his purchase price would never be recovered - certainly not at his age. So I think there has been a discernible change in transfer policy and the days of the big sigining with money splashed out on say a mature and established player who might cost the club over 100k a week, in addition to the fee itself, may have gone for the time being. They would rather focus on the Hernandez's of this world (if they can be found of course) who don't cost much upfront and whose wages are most probably half that demanded by an established world class star. Then if the player comes good, as Hernandez will undoubtedly, and if it suits them, the club can offload him at a handsome profit later when he's still relatively young. Anyway, I think that's the scheme of things.
So you're trying to suggest that because the £500m+ isn't due at the moment we're not in debt?
So you're trying to suggest that because the £500m+ isn't due at the moment we're not in debt?
No, I am just saying that technically, it might not be the same as a debt owed to a bank.
People have invested in Manchester United and we pay them a return on their investment. Not too dissimilar from a PLC way of working, really.
We don't actually "owe" £500million to a bank or other lending facility anymore.
It's probably all semantics and, for the purposes of calculations then we should probably view it as a £500million debt but how UEFA see it, I don't know. That's what I am saying.
It was a side issue to what I was saying though - which is that even with the Bond Issue, we are in decent financial shape and should have nothing to worry about with the FFP Regs because the interest payments on the Bond Issue can be comfortably met from revenues.
I'm not sure what your argument here is.
Those who criticise the Glazers for a lack of investment in the squad do so because over the 5 years they've been in charge, it's become clear that this is one of their strategies for paying back their mamouth debt. It was in the business plan leaked to the Times back in 2005 for a start.
Those complaints wouldn't apply to any of the other examples you gave.
1970s and 80s - United were still one of the biggest net buyers in the league - breaking transfer records for Birtles and Robson for a start.
In 1995 United embarked upon very "Glazeresque" activity in the transfer market, but within 2 season they had reinvested the money back into the squad on the likes of Andy Cole. Same with Stam - the money was reinvested (and more besides) in the squad. It wasn't spent on dividends to shareholders (or interest payments on debts, had we had any).
And Djemba and Kleberson? Believe it or not, they cost us a LOT of money.
Except in the amount of money going out of the club to pay for this "investment". Under the old PLC the club was forking out around £8m p.a. in dividends. Since 2005 the amount going out of the club has been £60m+ p.a. and the debt hasn't gone down at all.
United is now security for the PIKs isn't it?
How do "we" know this for sure?
We'll have to pay over half a billion quid to clear the bonds in little over six years. In the mean time, there's over £300m of interest to find between now and then. I expected someone to chuck in the revenue argument, but that's not exactly seen us shining in the last set of financial accounts has it?
Then there's the £31m each year that the Glazers can remove as per the bond prospectus, the replacement of key playing staff, the concern about match day revenues peaking and so on. That's without the smaller issues like taking half the four year Aon sponsorship deal money in the first year.
First off, I'm glad you've brought the Glazer shit back into the Glazer threads.
You're wrong about finding half a billion quid to clear the bonds in the next six years. We merely have to service the interest on the bond which is around £45million/year.
When the Bond issue expires (2017, I believe) I think they will seek to issue another bond and it all starts all over again.
In time, due to inflation, the £500million (and the associated interest payments) will not be seen as such an enormous amount of money.
This has been said over and over again on here.
The "revenue argument" is key to it all though! We are bringing in around £300million/year.
Out of that money, we have to pay the bond interest, the Glazer dividends (should they choose to take them) and the other various management fees (again, if they choose to take them).
The rest goes towards running the club and I would guess that perhaps Chelsea and Arsenal apart, there is no other club in the PL with as much "disposable income" (even after these expenses) as Manchester United.
As I have said many times before - the Bond Prospectus might allow the Glazers to take the money out of the club but I strongly believe that they will only take the full amount of the money they are entitled to if the needs of the squad are met.
There is absolutely no evidence that they will do otherwise (just because an entitlement is written into the bond issue does not mean that it is a carved-in-stone fact that is bound to happen) and it wouldn't make sense for them to take short term cash at the expense of the long-term value of their asset.
of all the money that has gone out of Manchester United over the last few years, very little of it has actually gone into the Glazers' pockets. Surely this says something?
We don't know exactly how much of United is secured against the PIKs but in any case, it doesn't make it United's debt.
If you owned a business and took out a personal loan or mortgage for a home, your business does not also become indebted by that amount, does it?
If that were the case and the fans owned the club then we'd be royally stuffed because between us all, we probably owe billions in mortgages!
There can be no question that the money going out now is more than the money that used to go out in dividends in the past (there are other things which need to be considered in a like-for-like comparison though, such as Corporation Tax and the fact that our revenues are over £100million more now than they were before the takeover).
I believe GCHQ did something in one of these threads that attempted to give a theoretical comparison though and the difference was nowhere near as great as you're suggesting.
In any case, I was mostly thinking aloud with what I was saying there. It is probably still viewed as a debt (even though we are not at the mercy of banks who might recall it for whatever reason nor are we at the mercy of their interest rates).
As for the debt coming down or not - I dunno about that, to be honest.
We were always led to believe that the Glazers borrowed every penny to buy United and United cost them somewhere in the region of £830million.
The bond issue is Manchester United's only true obligation and that is around £500million. Even if we add the PIK debt (and I see no reason why we should except out of a fairness that some of us extend to you in the discussion which is never reciprocated) then that is around £220million and the Glazers apparently owe at least 20% of that to themselves (!?) so, what, exactly is the debt at this moment in time and has it gone up, down or remained the same?
That must be because you didn't read the posts preceding that one where I was saying that shit happens at United, it always has and it always will but some people tend to see what is happening now as a direct consequence of our ownership when, in fact, similar or even worse stuff has happened in the past.
And one of the main things that you simply cannot seem to get your head around is that every time a player receives his wages, that is the Glazers investing in the squad. Every time a player is bought (and despite what you say, there have been some significant purchases in the last five years) then that is the Glazers investing in the squad. Every time a player gets an improved contract then that is the Glazers investing in the squad.
They OWN Manchester United, therefore whatever money comes into the club is their to do with as they wish once the obligations of the time have been met.
If they had no interest in maintaining United's position then why give Fergie the funds to buy players? Why give the likes of Vidic et al their improved contracts? Why not tell Fergie to sell them all and get cheaper, inferior players in and let the club drop like a stone?
What you are getting confused with is that you think the Glazers should be funding Manchester United and not the other way around.
If you're funding your business then you're not in business - you're in a mess.
Exactly we dont know shit, it may not be Uniteds debt but United money will pay it off I think we can agree on that.
No. We won't agree on that Crerand because, as usual, you refuse to observe facts.First of all, as the owners of United then any so-called "United money" is, in fact, the Glazer's money. Would you agree with that? If you owned a business, would you not consider the money that came in yours? If not yours then whose else is it?
Secondly, as the owners, they are entitled to a share of the profits. The Bond Issue gives specific details as to what exactly this share is.
Once they take whatever they are entitled to, however, then it truly does become their money. It is in their bank account and they can spend it on whatever they want. Just as the rest of us do when we receive our pay-packets. Can we agree on that?
If they choose to spend it on a mansion, prostitutes, drugs or to pay off their debts is absolutely none of our business any more than it is our business what Sir Alex, Wayne Rooney or anyone else at United spends their cut on. Can we agree on that?
If we can agree on these things as facts (even if we don't agree that it is "right" or "proper" or "ethical" or whatever the hell word you want to use) then maybe we can move on. If we can't then we're probably doomed to the endless loop.
Personally, I've accepted these things and I feel better for it.
The bond prospectus states that the PIK is secured against the assets of MUJV, namely the 100% shareholding in Red Football. Is that exact enough?
That doesn't make the debt United's responsibility.
The full amount of outstanding PIK debt plus interest could be paid off with the Glazers' United dividend entitlement, but they could also have other plans for it. As has been proven by the revelation that the Glazers, unbeknown to anybody but themselves, bought 20% of the debt at 35% of its original value, we just don't know what's going on. You sneered at Gill when he tried to highlight the nature of the PIK notes, you overlooked his point, ridiculed him and let yourselves believe instead that the pessimistic warblings of an internet blogger with cripplingly limited data, never less than six months out of date, and a big fat agenda were the gospel truth of the matter.
I think it's time for the unnecessary hatred towards the owners to be put to bed. Let's move on.
Sit down cider, the grown ups are talking.
TMRD said "We don't know exactly how much of United is secured against the PIKs". We do, it's in the bond prospectus.
Anders may be biased, but any more than Gill, who is on the payroll of the Glazers? The Ronaldo money being ring-fenced for example. That's money that the apologists on here accept could well leave the club to pay off (or not) a large chunk of the PIK debt. That's without the about face he did before and after the takeover about the Glazer strategy.
Are you sure about that?
Our costs have increased a lot too.
I don't think there will be any big increases in revenue in the next 2-3 seasons. Very little if any at all probably.
I also believe we will need some quite significant investment in the team at the end this season. A couple of top quality signings are needed.
Have the latest quarterly figures been released?
URR said:
I'll wait and see what happens before passing judgement on our transfer expenditure, but i'll say this; if the owners take their full entitled carve-out, i'll not be stupid enough to overlook the fungibility of the situation and say, "Well, there goes 'The Ronaldo Money'!"
Because it is in all the financial statements!
That money is there is not up for debate (around £100m at last count) - although we will never know how much of that was available to Fergie for transfers. I do remember you estimating that you thought at least £30m, if not £40m, could have been used and I agree with you.
There is no such company as MUJV.
Cider is correct so I suggest you sit down!
We do not know how much of the Glazer shares are secured against the PIKs - it is something I have discussed with andersred, he believes it is 100% and I think it is far lower, probably as little as 20 to 30%. But the point is that we dont know.
No - end of the month.
IIRC in the prospectus it's worded simply as 'secured against the shares of...', giving no indication as to the exact volume of the company's shares which are being used as security. Anders believes that 'the shares' means 100%, all the shares, but he admits that the wording is vague and non-definitive. We really don't know.
No, it isn't really and even Anders accepts that the wording is open to debate. It says "the assets" - you might reasonably assume that this means ALL the assets but it doesn't necessarily does it?
Besides, as the Glazers own 20% of the PIKs themselves now, it has made things a little less clear, hasn't it? If they default on the PIKs then, presumably, they have to hand over at least 20% of the assets to erm... themselves, it would seem.
EDIT: Erm... yeah... what cider said! (posted this before reading through all the following posts!)
First of all, as the owners of United then any so-called "United money" is, in fact, the Glazer's money. Would you agree with that? If you owned a business, would you not consider the money that came in yours? If not yours then whose else is it?
Secondly, as the owners, they are entitled to a share of the profits. The Bond Issue gives specific details as to what exactly this share is.
Once they take whatever they are entitled to, however, then it truly does become their money. It is in their bank account and they can spend it on whatever they want. Just as the rest of us do when we receive our pay-packets. Can we agree on that?
If they choose to spend it on a mansion, prostitutes, drugs or to pay off their debts is absolutely none of our business any more than it is our business what Sir Alex, Wayne Rooney or anyone else at United spends their cut on. Can we agree on that?
If we can agree on these things as facts (even if we don't agree that it is "right" or "proper" or "ethical" or whatever the hell word you want to use) then maybe we can move on. If we can't then we're probably doomed to the endless loop.
Personally, I've accepted these things and I feel better for it.
You have really over complicated that. It does not matter what way you defend it it is the profits of Manchester United that is paying off Glazer debt, that cannot be argued against, it is fact
If I wanted to be really awkward then I would ask you to produce proof that the Glazers have used United's profits to pay off their personal debts but I won't because I'm sensible enough to agree that what you're saying there is probably going to be shown to be the case at some stage in the future.
If I take out a bank loan in order to fund a business start-up or purchase then, obviously, I will be looking for the business to produce sufficient profit to pay off the loan.
This kind of thing is done all the time, every day, all over the world.
That is a fact. And not a particularly earth-shattering one.
Where we disagree is that you see this common-place business activity as wrong or bad or unethical and I cannot fully understand why you view it with such strong feelings of anger.
If you want a debt to get really annoyed about, consider that the Public Sector debt is currently over £1 TRILLION and it costs us £120million per DAY in interest alone.
Bloody socialists... gotta love 'em.
Technically the bond is a debt in the strict sense of the word and one more expensive than its predecessor (the bank notes). Both would be treated identically in the determination of FFP's break-even result. Bond interest is a 'Relevant expense' and will be categorised as a 'Finance cost' (as would the bank notes).
'Dividends must be included as relevant expenses.' Dividends taken to service the PIK will be treated as an expense. Hence, the cost of servicing the PIK will be included in the calculation of the break-even result.
This from Annex X (Calculation of the break-even result) of the FFP Regs:
Fair enough. That's cleared that up then.
You just can't help yourself can you? Any dividends taken by the Glazers will obviously be counted as an expense. What is completely irrelevant, as far as we are concerned, is what the Glazers do with those dividends.
We all know the PIK debt is there and we all know it has to be paid off, is it really necessary to keep labouring the point that you believe they will be used to pay off the PIKs?
From everything written there, it doesn't seem to matter if we're £10 in debt or £10billion in debt, it is our ability to service the debts that is key.
It would seem that we have the £45million Bond Interest and the £25million Glazer Divs (the other expenses we will have to wait and see, I think).
That's £70million/year. Add the £130million wages = £200million.
From revenues of around £300million, that leaves around £100million to deal with all other costs incurred in the running of the football club.
I would suggest that the vast majority of clubs in the world would very much like to have £100million to play with after the wage bill has been taken care of.
I believe that the average revenue of a PL club is £100million (all 20 combined is being tipped to reach £2.2billion this year by Deloitte).
In summary, we should be fine as far as the FFP Regs go. Agreed?
The FFP rules will be a blessing for United, that much is clear. They're designed to curb the rapid escalation in the cost of running a football club by interrupting the inflow of cash from rich sugar-daddys who push up wage-bills and transfer fees with their reckless spending (City), as well as ensuring that poorer clubs aren't able to gamble the club's existence away on a do-or-die shot at the big time (Pompey). United fit into neither category.
If you believe that United won't be used to pay off those PIKs you're living in dreamland.
No, I'm merely stating that prior to 2005, Manchester United essentially funded itself, minus a pretty small dividend payment. When you paid your increased ticket prices, you saw the vast majority of it invested back into the club - whether it was in wages, transfer fees or stadium redevelopment.
The vast majority of Manchester United's income is now spent on servicing the Glazers' debt.
The money is there (or was there). That's different to saying it's there for investment on players. I did think around £30m was available, but that was a hunch and personally I'm beginning to wonder. The chances of us reinvesting the Ronaldo money on the squad are getting slimmer with each passing "no value in the market" transfer window.
Can we ask the mods to introduce a head banging against the wall emoticon?
You can do what you want, I'm off to the pub.
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