Look behind the headlines – you know, the spin-driven articles pronouncing yet another quarter of glorious revenue growth – and Manchester United’s Q2/H1 financial statement once again paints a gaudy picture of the Glazer family’s ownership. It is a picture of a still heavily indebted club spending its profits buying back debt at an inflated prices, while struggling to compete in an increasingly hostile market.
United’s is a story of unfettered waste – millions lost on financing costs, interest and debt repayments; money that could otherwise have been spent in the transfer market, or on reducing ticket prices. It is an account of a club sprinting to stand still; an institution squeezing every last dime out of the market simply to keep the wolves at bay.
The good, the only news United releases and far too many media outlets lap up without question, is that revenues continue to rise – up to £175 million for the past six months, from £156.5 million a year ago – driven largely by increasing in media and commercial income, including the new training kit deal with DHL.
Elsewhere the picture is far from rosy. Operating costs rose to £110 million for the six months, from £96.9 million, as the club struggles to keep wages under control despite multiple summer departures. Wages increased by 17.3 per cent year-on-year, to £38 million during the final quarter of 2011.
Then there is the huge reduction in available cash, down from £150.6 million to £50.9 million, after a net £47 million spend on transfers last summer and further bond buy back.
Indeed, United has now spent more than £90 million on buying back bond debt since launching the £500 million notes in January 2010. That’s the infamous ‘Ronaldo Money’ and more. Season ticket sales this summer will bolster Old Trafford’s coffers, but history says that income may well be used to buy back bonds on the market.
The absurdity of the Glazers’ financial engineering is only truly understood when viewed in the full context of the Glazer family’s time in charge. Bought with debt, the family first loaded millions on to the clubs accounts, only to swap bank debt for – significantly more expensive – bonds in 2010. Now the family is embarking on a campaign to reduce bond debt, buying them back at a premium over the issue price using cash in the club’s bank account.
“Manchester United revenues continue to grow strongly although costs are increasing just as quickly so pretty much negating that growth,” said the Manchester United Supporters’ Trust.
“However the key figures of interest to supporters show the Glazers have now spent every penny of the money received from the sale of Ronaldo, and more. That’s now £92.8 million spent on buying back their own bond debt that they loaded onto our club. So statements at the time that all of the Ronaldo money would be made available for reinvestment were clearly just spin.
“Since the sale of Ronaldo net transfers have totalled just £90 million while they have taken out of the club £225 million to cover their debt payments and interest. What could the club have done with that extra £225m? Cheaper tickets for loyal fans, investing massively in the squad and stadium, developing and retaining the best youth players, competing on an equal basis with the very best teams in Europe. This is the true cost to Manchester United of the Glazers ownership.”
Yet, anger among the United fan base has waned, with too many happy to bury their collective heads in the sand and deny that any of the fundamentals underpinning United are in ill health. After all, Sir Alex Ferguson continues to work miracles even with his hands firmly tied behind his back. Almost inconceivably, United is still in the Premier League title race despite Manchester City’s vast sovereign wealth.
There is no talk about the ‘Ronaldo Money’ now of course – not with it having been spent largely on debt buy-back. Meanwhile, the new signings offer varying degrees of Sir Alex’ favourite quality: value.
But fans should be angry about the close to £500 million squandered by the Glazer regime since 2005, let alone the two hundred million since Cristiano Ronaldo was sold to Real Madrid in summer 2009.
Indeed, buried inside Old Trafford’s second quarter report, under the headline “Further development of the playing squad,” is the telling line: “New contract signed with Ryan Giggs and Paul Scholes re-joins the playing staff.” Much as those two legends remain a joy to watch, how Sir Alex must look with envious eyes at the midfield riches across town.
Yet, there is little sense in which United is still competing, as MUST might put it, on a equal basis with the continent’s finest. Financial Fair Play is yet to fully bite, but few expect the Reds to play at the top of the market come the summer. Indeed, word on the street suggests quite the opposite, especially with the Glazers’ long mooted IPO on permanent hiatus.
Moreover, with United out of the Champions League, and knocked out early in both FA and Carling Cups, headline revenue growth is likely to stall. Football remains a lumpy business no matter the club’s urgent efforts to drive income away from the staple of playing matches and selling television rights. United may lose, or rather, not profit, to the tune of £3 million per round in prize money alone from competing in the Europa League. Extra games are unlikely to make up the shortfall.
There is little cushion now either, with the stockpile of cash gained from Ronaldo’s sale and AON’s pre-payment on a four year shirt sponsorship deal, back to historical levels. This alone may indicate Ferguson’s priorities in the coming summer – a break in which ‘value’ is unlikely to be seen and Ronaldo may well star at Euro 2012.
The Ronaldo Money
(64 posts) (14 voices)-
Posted 1 year ago #
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Stephen
Member
Posted by unregistered user: Stephenwhere’s your source for “educe bond debt, buying them back at a premium over the issue price using cash in the club’s bank account.”
Most other articles are saying the complete opposite that they are buying the debt at a far lower price and also avoiding the 8% coupon interest.
Feel free to correct me though
Posted 1 year ago # -
Drew
Member Posted by unregistered user: DrewI don’t mean to sound dismissive, as this is all incredibly worrying, but what should we do? Sit it out and hope that once the debt is paid off (if ever) then the Glazers will invest? Hope that they sell the club soon? What if they sell it to another charlatan? Or should we be proactive, and consequently what should that entail? Boycotting games/merchandise? Protesting is all well and good, but without real, tangible (negative) monetary outcomes for the Glazers (and the club unfortunately) will they have any effect? As long as the club continues to make money, then I fear the Glazers will continue to sit pretty. Very interested to hear your thoughts.
Posted 1 year ago # -
Stephen – They’re wrong. There’s a premium being paid on the bond launch price, although the club will of course avoid paying interest by buying bonds. Bonds rise and fall in price. Source for there being a premium – it’s in the accounts! So pretty black and white. If anybody tells you otherwise they haven’t got it right.
It’s not that buying bonds now is the wrong strategy, per se, but it makes absolutely no sense whatsoever to have swapped bank debt at around 5% for bond debt at 8%. Unless of course the Glazers wanted to pay down the PIKs using dividends (that the bonds allow) but got spooked by Green & Gold into finding US finance for the PIK debt….
Morally I find it repugnant.
Posted 1 year ago # -
Drew – fans need to keep raising the issue. Pressure has told before. The Glazers didn’t use dividends to pay off the PIKS – they had to find another source of finance for that. Pressure did that. Then there was the price freeze last season. Fans can also keep it in the public eye so the Dept of CMS may legislate change in football governance. In the end ownership will be decided by the market – the Glazers will either sell when they feel they’ve maximised value, or when the markets look more buoyant they’ll IPO. It’s all about their profit. In the meantime fan pressure does count.
Posted 1 year ago # -
footballfan
Member Posted by unregistered user: footballfanTo me the most worrying aspect of UTD’s financial situation is that the Glazer could sell the club to another family of carpet baggers who load up the club with debt.
And really what have the FA done to prevent this happening?
Nothing.
There should be rules in place that say a buyer of a football club should borrow no more than 10% of the purchase price. The Galzers would find it very difficult to make the outlandish profit they hope to make.Secondly there should be rules in place that says all PL clubs should be owned by English people.
If that was to happen just watch the value of clubs fall. Glazers would be lucky to get their £800 million back.
Posted 1 year ago # -
dozer
Member
Personally I don't think the debt would have anything to do with the ticket prices as long as the demand is high. Even if the Glazers were as rich as the Arabs next street, why would they reduce ticket prices and lose profits?
Sir Ryan Giggs? No no no. Sir Paul Scholes say.Posted 1 year ago # -
Alfonso Bedoya
Moderator
“Since the sale of Ronaldo net transfers have totalled just £90 million while they have taken out of the club £225 million to cover their debt payments and interest. What could the club have done with that extra £225m? Cheaper tickets for loyal fans, investing massively in the squad and stadium, developing and retaining the best youth players, competing on an equal basis with the very best teams in Europe.â€
Bought the north side properties on Railway Road, just below OT, and increased the size of the stadium to 90/100 thousand... given it to charity... spent it on booze, whores and fireworks for all the "Rant" regulars... anything but watch the Glazers play with it, as if it was a surprise 20 quid, they discovered while doing the fuckin laundry.
"Badges, to god-damned hell with badges! We have no badges. In fact, we don't need badges. I don't have to show you any stinking badges, you god-damned cabrón and ching' tu madre! Come out from that shit-hole of yours. I have to speak to you."Posted 1 year ago # -
FletchTHEMAN
Member Posted by unregistered user: FletchTHEMANDearly love to know how much previous owners took out of the club and averaged for inflation and valuation of the club how this stacks up to the Glazers. It is a bit daft saying the Glazers couldn’t make some profit and the profit seems largely to be going into paying the debt. Even though the terms of ownership allow significantly more to be taken out, this does not seem to be happening. I agree there are real problems with this model and it seems completely daft to me. But saying the Glazers have taken out 225M over 3 years on a club valued over 1Billion means little to me. If you told me that no other owner has ever taken that type of percentage (under 10% a year as a rough estimate) then I will have more to go on. I just would love to see a comparison if there is one to be had. Is Henry not expecting 10% return from Liverpool? Just saying….
Posted 1 year ago # -
19 and Counting
Member
Everything is sh*ts and giggles at the moment because we are still only 2 points behind City. But let's see where we end up at the end of the season and next year with virtually the same squad and no money to spend on quality players, especially in central MF where we have needed strengthening for some time now. Fletcher may never be the same player, Anderson has had his time, and Giggs and Scholes (although amazing servants) are approaching 40. Surely this 'patch up' mentality cannot work forever?
Perhaps a return to the green and gold, no?
Posted 1 year ago # -
han
Member
with financial planning like this, little wonder that the Yanks have fucked themselves in the US
we can only dream of what we would have become with the additional 225 million pounds invested in the club instead of paying back debt of 1 form or another - suffice to say, i doubt giggs and scholes would still be playing for us.Posted 1 year ago # -
The amount of cash utterly spurgled up the wall on this damned takeover - and it is the club's and therefore the supporter's cash - is mindboggling. We could not only be the best team in the league, it could be by a significantly long way. Instead we have to "make do and mend" with what we have - as the third richest team in the *WORLD*.
Utterly ridiculous.
The only way to really sting the club is to refuse to buy anything - no merchandise, no tickets, no memberships, no anything. Starve them out.
The thing I fear, though, is that the health of the club would be irrepairably damaged in that situation, left mid-table also-rans and no chance of champions league football without massive investment from a sugar daddy.
Awful situation.
Posted 1 year ago # -
Dinkinflicker
Member
The only way in which sufficient numbers will revolt and campaign against the Glazer regime is if/when our league form suffers.
There was a brief Green & Gold campaign within OT a couple of years ago, but that only really coincided with a spell where our league performances were poor and we trailed chelsea in the league. It was almost as if some fans were driven to protest at games through sheer boredom. As our form and performances picked up, the profile of the campaign waned.
If we found ourselves going through a similar spell as Liverpool have over the last couple of years, people might start to vote with their feet/wallet in greater numbers.
The sad fact is that whilst we're winning and challenging for the title, not enough people care - they're blinded by short term results and can't think about the bigger picture.
If we'd had a lesser manager than Fergie in charge over the last few years, we'd be in a clusterfuck of a situation.
Posted 1 year ago # -
Essi – I’d rather have owners who don’t waste £500m on debt repayments, interest and loans to themselves. I’d like owners who don’t throw away millions on debt swaps and the associated fees. I’d like owners who communicate with the fans and who’s agenda is the same as the fans’. I’d like owners who don’t increase ticket prices by more than 50% while the quality of the team declines. I’d like owners don’t repeatedly spin that all is well, fooling fans like you into believing the nonsense that you’ve just repeated is true. United doesn’t need a sugar daddy, but the club doesn’t need leaches sucking the life out of it either.
Posted 1 year ago # -
Red Devil
Member Posted by unregistered user: Red DevilSorry if I repeat what others have already said but what are fans to do about the situation?
Supporters can protest as much as they like BUT if the Glazers won’t sell, then what?
Other people with considerable financial clout have made attempts to buy the club and the Glazers have resolutely refused to sell!
I imagine it would take an oil sheik to offer something in the region of £3 Billion (2x the value of the club) to even make the Glazers think about selling and the answer could still be no.
So what then?
As frustrating as it is for United fans to see vital funds disappearing to banks, institutions or bondholders there is no way the Glazers can be made to sell the club!
Fans can protest until they are blue in the face but only IF and WHEN the Glazers decide to sell will they do so.
I am as annoyed as the next man in seeing United stagnating as a club when it is clearly obvious that new quality players are either needed now or will be during the forthcoming season as the continued renewal of contracts for Giggs and Scholes was never on anyone’s agenda by choice and as we have seen, has been forced upon the club by a supposedly lack of financial clout to compete with the likes of City, Barce, Real and now PSG and Malaga.
Fans can only sit and wait and hope that in time, sooner rather than later of course, the Glazers lose interest in Man. Utd and sell up.
There would certainly be no lack of takers as the club is successful in winning trophies and leagues on a regular basis and that appeals to anyone interested in sport or of business.
So to conclude, patience is the key. Difficult I know to just sit back and await events but there is little else anyone can do, maybe except shooting the Glazers and I don’t for one minute suggest should anyone do that!Posted 1 year ago # -
mikeydtan
Member Posted by unregistered user: mikeydtan (URL)makes sense and yet think its the overhanging debt which raises more concern than just the pounds taken out of the club … that means high revenue is required just to stave off financial meltdown. if just taking money out … if club makes less then less for them to take out. just my thought.
Posted 1 year ago # -
19 and Counting
Member Posted by unregistered user: 19 and CountingSo I guess we’ll have to make do with our current squad and transfer targets like Hazard and Gotze will go to rival clubs. Maybe Giggsy and Scholes can play on ’til they’re 50!
Hopefully the Glazers will sell the club and move on before we’re in deep, deep shyte.
Posted 1 year ago # -
rob
Member Posted by unregistered user: robFair comments but your article omits emerging talent like cleverly and pogba etc who I would rather see flourish in the team , then buy some other players for big money. United have plenty of young talent coming through , the need to spend like city is not necessary.
I would rather the glazers then sheiks, because when they leave , city will soon be ihr conference. Whilst uniteds, thanks to sir Alex , and commercial success will get increasingly stringer.Posted 1 year ago # -
stan – it’s almost as if it comes out of the mouth of David Gill himself. I don’t see why fans should “lighten up” about £500m being wasted, which is what has happened over six years. Before the debt kicks in the club is the most profitable in the world. Afterwards the club spends far more on the costs associated with debt than it does on new players. Oh and just so we’re accurate – half year results actually showed an increase in debt. Helps if you get it right, before believing the spin.
Posted 1 year ago # -
Freyan – you conclude your post by saying your “real fear is selling to someone like Hicks….”, well your real fear has come true. The Glazers have placed United under more debt (both gross and ratio of EBITDA), wasted more on interest, created bigger annual repayments and restricted Ferguson’s spending far more than Hicks and Gillet did at Liverpool. United has benefited from Ferguson’s genius, and stronger cash generation.
I love when apologists like you bang on about “supporting the club” as if debating the issue is some how contradictory to that. It’s an effort at muting those who point out the disgraceful way the Glazers have run this club. I’ve been to hundreds of games at home, away and in Europe over the past 25 years. I’d say that’s support enough. How about you?
Posted 1 year ago # -
Violent Banana – FFP basically locks in the status quo. So it’s good for United. FFP says nothing about debt, so as long as United meets its debt obligations within revenue UEFA doesn’t care.
Posted 1 year ago # -
19 and Counting
Member The problem is not that we haven't spent the 'Ronaldo money.' The problem is HOW we have spent it. 30m on Berbatov who now graces the United bench and can barely get a game. We could have sold him for 10-15m last summer but no. Then we go out and spend 47m on 3 players who may or may not turn out to be quality players. Bebe was bought for 7m - where was the logic there?
We never did replace Ronaldo and his quality and that looks set to continue. No one is asking for complete overhaul or panic buys. I just want a quality central MF that can compete with the best teams in Europe for years to come. Is that to much to ask?
Posted 1 year ago # -
baggio365
Member
berbatov was bought before ronaldo was sold. maybe it was a deal done with the knowledge that ronaldo money would be arriving, but it was still a deal doe prior
bebe was a waste, but i'm certain his was a deal to pay off ronaldo's agent (mendes) for brokering that deal.
as for last summer's spending spree. well i'm sure everyone was shocked by that given our transfer record in recent past. but cant fault the players. not the best money can buy, but jones and de gea will be good for us, and young, well....
fact is if we had 250mill odd to throw around in the last few years, we could have bought aguero, silva, toure, mata, nasri, bale etc. you cant go into a bidding war knowing that you have a cap. thats not how its done. sometimes you have to spend silly money. and united and fergie have done that plenty of times in the past. its just that now we play in the transfer market with a massive handicap. so if a player is deadset on joining united, like berba, then we'll still win. but if a player just wants a big money move, like nasri, we'll most likely lose out
i dont think you can argue the fact that the glazers have been the worst thing to happen to united in recent history. you could argue that becoming a plc made us vulnerable to this kind of takeover, cause the free market (which has more faults that positives) allows it. all we can hope for, is that this nightmare ends soon
Posted 1 year ago # -
DeadRevel
Member Posted by unregistered user: DeadRevel“Bebe was bought for 7m – where was the logic there?”
Well obviously no-one bought him hoping he was going to be shit. And he didn’t cost 7 MIL.
And in United’s history we have never spent huge money on a ‘finished’ player of Ronaldo’s quality. Do you not remember how we got Ronaldo? We spent about 12MIL on him as a teenager and HOPED he would become a great player.
And which 3 players are you referring to? Phil Jones? Looks a bargain. De Gea? Will look a bargain in the future. Young? Not same level as a young Ryan Giggs, but improved our squad and options immeasurably.
Also, Chris Smalling 10 MIL. Bargain. Chicharito 6MIL bargain. Rafael and Fabio, 3MIL each – bargain.
Football is never certain. It’s about whether net spend equates to a better squad, and for United it certainly has.Posted 1 year ago # -
19 and Counting
Member Commenter said:
“Bebe was bought for 7m – where was the logic there?”Well obviously no-one bought him hoping he was going to be shit. And he didn’t cost 7 MIL.
And in United’s history we have never spent huge money on a ‘finished’ player of Ronaldo’s quality. Do you not remember how we got Ronaldo? We spent about 12MIL on him as a teenager and HOPED he would become a great player.
And which 3 players are you referring to? Phil Jones? Looks a bargain. De Gea? Will look a bargain in the future. Young? Not same level as a young Ryan Giggs, but improved our squad and options immeasurably.
Also, Chris Smalling 10 MIL. Bargain. Chicharito 6MIL bargain. Rafael and Fabio, 3MIL each – bargain.
Football is never certain. It’s about whether net spend equates to a better squad, and for United it certainly has."When Manchester United announced that they had signed the Portuguese striker for £7.4 million in August 2010, there was confusion aplenty around the football world. Relatively unknown even in his own homeland, Bebe was plucked from obscurity by Sir Alex Ferguson - who admitted that he had never even seen the striker play before agreeing to sign him."
Well who has egg on their face now?
Posted 1 year ago # -
Ian
Member Posted by unregistered user: IanI don’t think Utd’s spending has been much different to the last 20 years or more. There was a big signing every few years (may be due one this summer, Eriksen?, Gaitan?) and never more than about 4 in the squad at any one time. The rest of the squad was made up from home grown and cheap players like Irwin, Sharpe, Kanchelskis, Solskjaer etc. These days it’s Hernandez, Samlling, Park etc so I don’t see that is much different to now. The real difference is that Chelsea and City have had silly money to spend and also these days we are compared more with Madrid and Barca. I bet if you compare Utd’s spending to Spurs, Villa, Everton over 20 years you won’t see much difference.
Posted 1 year ago #
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