England / English Premier League / Manchester United / UEFA Champions League

The trouble with United

There has been a lot in the British press over the past week about the shocking level of debt being carried by Manchester United, which currently stands at £700m or $1.114b. That’s right, more than $1 billion.

manchester united's ownership structure in chart form

The Glazers new unorthodox tactical system for Manchester United

Last Monday the Glazer family, owners of the club and proud Americans, announced a plan to float a bond for £500m to address the club’s rising level of debt, although financial experts in London warned that the Glazers’ plan could be “hampered by a glut of similar high-yield bond offerings.”

Along with that announcement came a lot of very distressing details.

First came the news that without the sale of Cristiano Ronaldo the club would have been in the red. Thanks to that record breaking deal of £81m, the club was able to report a pre-tax profit of £48.2m (£26m after tax) instead of a loss of £31.8m.

Then came the news that the six members of the Glazer family who sit on the club’s board have loaned themselves £10m, this in addition to paying themselves a further £10m in “management and administration fees.”

financial breakdown of Manchester United's expenses

The numbness is in the details

Things went from bad to worse last Tuesday when reports emerged that the Glazers were considering transferring ownership of United’s training complex to a holding company they control and then leasing it back to the club.

Today it was reported that the Glazers could take £127m out of the club next year alone if enough investors sign up for the bond issue. The £127m figure includes £70m from the club’s cash reserves (which includes money received from the sale of players), £25m as a dividend to themselves from the club’s cash profits, £6m for “administration and management services,” and £3m “‘in respect of services provided by directors, officers or employees’ of companies the Glazers use to hold their shares in United.”

These payments, combined with the estimated £45m that will be paid out as interest on the £500m bond issue, mean that, next year alone, some £172m will be taken out of the club to service money the Glazers borrowed to buy the club in 2005. Since then the club has paid out £124m in interest payments on the Glazers debt.

At a meeting over the weekend of the Manchester United Supporter’s Trust, which had opposed the Glazers’ takeover of the club in 2005, founding member Johnny Flacks proposed that a letter should be written to Sir Alex Ferguson asking him to resign in protest of the Glazers’ handling of the club. Said Flacks, Ferguson “claims to be a socialist, a former shop steward and a man of the people, so he must be horrified by what is going on,” though he acknowledged that asking Ferguson to resign “would work only if thousands of people sent a copy of this letter to Ferguson letting him know that our fear, if the Glazers stay in control, is that his legacy is going to be destroyed.”

On Monday, the Supporters Trust distanced themselves from Flacks’ idea: “We believe Johnny Flacks and indeed every Manchester United supporter is absolutely entitled to express their views but it is important to distinguish individual views from those of organizations or those present at a meeting.”

A protest march is nevertheless still scheduled for before Manchester United’s Champions League match against AC Milan in February. The idea of the march is that ticket holders will arrive to the match ten minutes into the first half. It is hoped that a great expanse of empty seats will be on view for the television cameras before the kickoff.

Ferguson has said that he does not have”any concerns about the financial situation.” Said Ferguson shortly after the announcement of the bond issue, “I have absolutely no issue at all with the club’s finances and I am really confident about that.” He has said that the club’s debt level had no effect on his refusal to enter the transfer market during the January transfer window, adding “I have all the money I need; the money is available. If I wanted to buy someone, I could get the money.” Ferguson has thus far been silent on the current concerns of the Supporter’s Trust.

He has made his views known about FC United of Manchester, the protest club formed by Manchester United supporters who were disgusted with the Glazers’ takeover of the most successful club in the short history of the Premiership. Ferguson, in the words of the Guardian, “dismissed” the club, nicknamed the “The Red Rebels” and currently playing in the Northern Premier League Premier Division, the seventh tier of the football pyramid in England, as “self-publicists.” Such a view begs this question: are Flacks and his supporters self-deluded in thinking Ferguson will support their cause?

Manchester United captain Gary Neville has made it clear that he wants nothing to do with the planned protest. “”We’re always very well protected and we never get involved in the financial side of things . . . As players we never get involved in those things; our job is purely on the pitch and we allow people who are paid to do jobs in other areas of the club to do their job. It’s nothing to do with us at all.”

Nick Towle represents the interests of those that all of this has everything to do with as chair of the Manchester United Supporters’ Trust. Towle said that, instead of “United’s success and profits” being used to keep ticket prices down and investment in the team up, “immense amounts of money [are] being leaked out of United to pay banks, lawyers, the Glazers themselves and interest, to pay for a takeover none of the supporters, or the United board itself, wanted.” Unless one of his members is a philanthropic gazillionaire, there seems to be little the Supporter’s Trust can do to actually affect any real change in the troubles with United.

For particulars on the details of the £500m bond offering and further alarming insight into Manchester United’s financial health, see this analysis by Neil Hume of the Financial Times.

One Comment

  1. This is a great article.

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