Say what, Mr. Gill?

May 29, 2010 Tags: , Opinion 33 comments

Manchester United chief executive says there will be no Wayne Rooney sale to Real Madrid this summer, with money also available for further player signings if Sir Alex Ferguson wants them. Well he would, wouldn’t he? The ceo who cries wolf but really just wants season ticket and box sales before supporters realise the game is up!

For while United may well spend this summer – there is theoretically a £75 million credit card facility available to Ferguson – the club’s business model is so massively leveraged that it is now hemorrhaging money from every pore.

Gill remains tight to the party-line, claiming Ferguson is under no pressure to reign in the spending this summer or say anything to the contrary.

“The money is there,” Gill told the Manchester Evening News.

“People say Alex is saying that because he has to. Anyone who knows Alex Ferguson knows he wouldn’t say that if he didn’t mean what he said.

“We are not in a situation whereby Alex is restricted in what he wants to do with the club and his methods as a manager.

“We have never said: “You can’t do that, we have to pay interest on the debt.

“People don’t believe it. We never said to him: ‘You can’t go for that player because he’s too much’.”

Gill’s problem, with United’s financial predicament now exposed by the January bond issue, is that few take the 52-year-old executive’s word at face value.

Tellingly some analysts now believe that player sales are deeply ingrained into the club’s underlying business model. It’s hardly a surprise to fans following Sir Alex’ statements on the transfer market in recent weeks, with the Scot not only forced to shop at the bottom of the market but specifically required to buy players that retain a resale value.

The question fans must ask is why acquisitions require a resale value if the club isn’t de facto prepared to sell?

It’s a new paradigm that only the hugely naïve believe will have no lasting effect on United’s transfer strategy, with the club losing more than £66 million on non-football related expenses in the last quarter alone.

“The loss shows that the business model doesn’t work unless there are player sales,” Philip Long, partner at PKF accountants and business advisers,told the Guardian newspaper today.

“It’s an absolute mess – when the full-year interest is accounted in and there are no items like last year’s sale of Ronaldo, what’s going to happen?”

It’s a question that needs no answer.

Few believe that Rooney, United’s most valuable asset, will leave this summer, with the former Everton striker settled in the North West.

Indeed, optimists could point to the ‘guided’ net £25 million per annum transfer budget available to Sir Alex, plus the money from the sale of Cristiano Ronaldo last summer.

In reality if Ferguson spends anything this summer the pressure to sell leading players in a year’s time – before the club files the 2011 year-end accounts  – will be overwhelming.

Indeed, with the Payment-in-Kind (PiK) loans moving from 14.5 per cent to 16.5 per cent in August the smart money is on the Glazer family drawing down both the £70 million cash and the £6 million special management fees provided for in the bond document.

Those fans seeking a marquee signing this summer need only look at the numbers, with United sitting on a cash pile of £95 million set to lose 80 per cent of its value in the coming weeks.

While that raid will happen fans are now unlikely to discover the truth until the Autumn, with any cash removal taking place after the financial year-end on 30 June and therefore reported at the end of November.

As the Americans love to say: ‘you do the math’.


Peter - May 29, 2010 Reply

£75 million credit card facility? The interest rate on that must be even more expensive than the PIK notes! Credibility of article lost on basic error….

Ed - May 29, 2010 Reply

You get irony, right? There’s a £75m revolving credit facility negotiated as part of the bond. No error here.

Alfonso Bedoya - May 30, 2010 Reply

You’re probably the only one that didn’t appreciate the point being made… so who’s the “clown”?… Or just a pedantic twerp?

Peter - May 30, 2010 Reply

brilliant, ed makes a total tool of himself and then gets supported by his buddy in shooting all the dissenters aka me, Arjic, Mark and Kerry. All you are is a loyal hound dog.

Classy independent journalism at its best. As bad as the Glazers are, their certainly better than this shit.

Alfonso Bedoya - May 31, 2010

For the pedant in you… it’s “they’re… not “their”.

Mike - May 31, 2010

Pedant isn’t a word…..I also doubt the existence of a 75 million credit card facility. Finance is a fairly exact science and school boy errors don’t really wash.

Ed - May 31, 2010

There is a £75 million revolving credit facility as part of the bond issued in January. Just look at the prospectus, it’s there in black and white.

Alfonso Bedoya - May 31, 2010

   /ˈpɛdnt/ Show Spelled[ped-nt] Show IPA
a person who makes an excessive or inappropriate display of learning.
a person who overemphasizes rules or minor details.
a person who adheres rigidly to book knowledge without regard to common sense.
Obsolete. a schoolmaster.

Knob is another good word…

Peter - June 1, 2010

Legend, poor Ed still struggling with the credit card facility. I wonder will they use a debit card instead to pay the wages next season…….

Loyal hound dog to the rescue with his big words freshly googled….. To be fair I am a knob having a bit of banter and yes this is a quality site.

Alfonso Bedoya - June 1, 2010

Here’s another good word for you… “desultory”.

Seriously… what is your point?

You’ve got your bowels in a knot, because Ed used the term “credit card facility”… instead of… “credit facility”?

And then you smugly, (and quite ridiculously, if you ask me), repeat this argument, as if you’ve said something important…. when in fact… you’ve contributed absolutely nothing to the debate.

Come on Mate… must try harder.

Ed - June 1, 2010

More to the point I WAS BEING FACETIOUS because it’s so utterly ridiculous that a club in £720m debt should have a credit facility (by whatever name) at all. It’s wasn’t an error, it wasn’t a typo, he just didn’t get the joke.

arijc - May 29, 2010 Reply

Glad to see you tried to give a balanced point of view…or not.

alfonsobedoya - May 29, 2010 Reply


The truth doesn’t need balancing.

Auld Super - May 29, 2010 Reply

Christ Utd are in the shit alright. They’ll be buying nobody decent for a long long time and the squad is mediocre at best.

mark - May 29, 2010 Reply

Some people are just never happy. If we dont spend were skint. If we do then you’ll say we will just sell key players in 2011. How about looking at it this way, if the numbers were that bad the Glazers would have taken the 1.5 billion supposedly offered recently and ran back to the us. Think about it, why would they stay unless they thought they could make it work. Now i’m sure your no fool but I would guess the glazers might now a thing or two more about business.

Alfonso Bedoya - May 30, 2010 Reply

You just don’t get it, do you?

Since the Glazers took over United, they’ve spent over £400 million pounds on servicing the debt, paying consultants and taking personal wages… £400 million ffs!… Never mind the players we could have bought with that… what about improving facilities, reducing ticket prices? How about giving it to fuckin charity… or setting it on fire… anything at all would be better than putting it in the greedy hands of those parasites!

aj - May 29, 2010 Reply

why dont you just shut up, i mean god you must be the biggest fake fan on the planet- talking of deluded, you really are. what the mental home not what you back…saddo…wazza wouldnt be leaving, gill is telling the TRUTH, we have £95m CASH and we will buy Big, try believing the club for once and not the invisible man….your just a protesting whore who sold his soul down the river long ago, you aint fit to claim yourself to be a united fan you joke.

Alfonso Bedoya - May 29, 2010 Reply

There is an old saying…

“Better to remain silent, and be supposed a fool.
Than to speak out loud, and remove all doubt.”

You really should take such advice.

john - May 29, 2010 Reply

You make some good points in this article .Unfortunatly they are wasted on day trippers like aj. who in defending the present set up has the nerve to call you deluded.There is only one saddo on here pal and thats you swallowing the glazers propaganda. with so called fans like you i seriously fear for the future of our club. what.a.twat.

aj - May 30, 2010 Reply

yeah john day tripper whatever, im manchester born and bred so dont make stupid remarks like that outer desperation cause you dont know me. This article is perfect for gloryhunters such as you who probably think we should waste cash, people like you bitch about unable match others spending- get in the real world, our club makes more than we lose easy no matter what and we will oust the the debt easy, your type just wanna rant on over a matter your clueless in, IDIOTS. Keep believing ya lil skintknights.

Alfonso Bedoya - May 30, 2010 Reply

Bloody hell… do Manchester a favour and quit claiming to have been born there.

vinoth - May 29, 2010 Reply

hey aj people like you r helping the glazers…..shut your bloody mouth

Kerry - May 29, 2010 Reply

Yeah, but you are just making stuff up now because you have been outflanked by the Glazers, of all people. The club has £96m cash reserves. Why would they need to touch the credit facility? It’s this sort of rubbish that gives us a bad name. It’s why fans of other clubs laugh at us. The rubbish you come out with. Give it up. The Glazers, love em or hate em, trounced the red knights and MUST and we should be directing our anger at them, not the Glazers. They haven’t changed since day one. You lot let us down.

Anyway, I’m glad it’s over. I’m fed up with morons pronouncing on financial matters they know nothing about.

Alfonso Bedoya - May 30, 2010 Reply

The Glazers ” trounced the red knights and MUST”?

Are you having a laugh? Just what did the Glazers do? They said “NO”! Wow… what a performance.

And you’re as deluded as you are wrong, if you think MUST is finished. The animosity towards the Glazers is not going to go away… in fact it will continue to grow.

RedAlert260599 - May 30, 2010 Reply

I think some Glazer lackies are infiltrating our forums now. AJ,Kerry, what a pair of Plonkers. Come form Manchester? My arse!

vinoth - May 30, 2010 Reply

all the glazers has done is that they have made us a second class buyers,looking out for free transfers or cheaper options.SAF is constanly talking about a inflated market, but he has’t realised the fact that he is missing out the top talents (benzema …) just for the reason he is too costly….now gill is sayig that, we haven’t backed off from any move since because of money(bluffing)..

think of it people strengthen the yello green army..

KD - May 30, 2010 Reply

So I’m reading the guardian article on this. I thought it was interesting how Utd lost money. Seems like most of the loss is coming from two things.

First thing is “show a £40.6m one-off charge linked to closing down an interest rate swap – or protection that companies buy against interest rate increases”.

What the Glazer’s did I think was to insure against the Interest Rate the US Government pays going up. What’s happened is that went down (hence the loss) and the rates of interest on companies like Utd have gone up huge. So they lost both ways on this. They say they are hedging but this is dumb.

The second area of the loss is that they borrowed in US dollars but all the income and assets of Utd are in pounds. “the company posted a £19m non-cash foreign exchange loss due to the increase in the US dollar against sterling”.Again this is really dumb. It’s pretty similar to how all the people in Iceland lost their money recently, getting their mortages in Euros and when their local currency went there loan was still the same amount but there homes were worth very little as the Icelandic currency had lost so much.

I don’t think I’m doing a very good job of it but what I’m trying to say is that the financial guys that the glazers are using are rather inept.

Now if your a company like Utd are, leveraged as much as they are at the moment the one thing you can’t be doing is losing money. They can’t be burning through cash as people won’t want to lend to them and get them into a bigger hole. They can’t pay back the current amount.

The Glazers can talk all they like, they have to be getting desperate to sell. The debt the club holds is increasing and now their ability to pay it off is getting more and more deminished. You often hear of Football Chairmen saying XTZ is not for sale and it only being a bargining position as the player gets sold. This is where we have to be.

KD - May 30, 2010 Reply

If you also look at where the Glazers made their money I believe it was in property in Florida, owning caravan parks and malls. Can you think of a worse area to have your money over the last few years? It’s up there. They are hurting.

The interest rate on the Pik loans are so high they make no sence. They are something like 16-17%. The only way the Glazers wanted to finance this way was for a year or two to get the deal done and then they would switch to lower cost loans like the bond they issued. The problem is because of the credit crises they haven’t been able to get rid of the Pik loans. The bonds went for 8-9% so the Pil loans are costing them like an extra 8% or so for nothing really. Do you think they can afford this? I don’t.

So you boil it down, you look at what seem to be the facts as much as you can get them, the club, the buisiness model is in a horrible position. You can also see that the club has faied to make any significant reinvestment in the squad. You can also from the recent threats about renewing that the club is really worried. That’s a small pr disaster. You don’t threaten your customers/fan base unless your under a lot of pressure.

Now if the Glazer’s were a Wealthy family they would probably be ok, but they are not, they took a huge gamble on Utd and their business model just doesn’t work in the current enviroment.

SO what does it mean if Utd go bankrupt? Well the fa will do something stupid and deduct points but in truth the club will survive. It has to. The assets it holds are fair more valuable as the great Manchester United Football Club.

TLDR version. Glazers are/have to be screwed. They have to be sellers, no way they can’t be. Man Utd won’t be able to pay down these loans. For United fans we are in for a rough time til they realise this but the Glazers will be out.

Joel Glazer - May 31, 2010 Reply

Hi there y’all!

Us guys here at Glazer towers are all avid man u fans! We’re all looking forward to another super title showdown. Don’t worry guys. We’re here for the long term and we’ve got you guys to thank. Wthout you guys we couldn’t make any of this happen!

Happy days!


Truth - May 31, 2010 Reply

People have been pointing at the £95 million that United have in the bank as proof that the business model is steady. Not true. Think of it like this people. Did you ever get a bank statement that says you have a nice bundle of cash sitting there,appearing like it’s ready to be spent, only you know that there’s a couple of big direct debits comming in a couple of weeks? You know that even though it appears like you’ve got plenty of cash, most of that will disapear into payments so you can’t touch it. Same thing here. It’s like how they repeated over and over that the Ronaldo money was still sitting in the bank, that SAF could use it at any time. Then bank JP Morgan pointed out that while they hadn’t actually taken the money, it had alll been earmarked for loan repayments.

The fact remains that it is obvious to me what the Glaziers are doing. They toook a gamble on a great company with massive fixed assets and no debt by buying it with massive loans with toxic debt levels. If the markets stayed where they were, they’d have been fine, but the recession hit and they’re stuck. I believe they have quietly put the club up for sale, but want as much money as possible. If you tell the truth, then your asset is worth a tenner, a packet of crisps and a mars bar, so you say everything’s hunky dory. You claim to have received bids of £1.5 billion which probably didn’t happen, and you delay certain payments until after you publish your yearly accounts, thus looking like you have loads of cash. Hence you attract the highest possible ammount for your asset.


Peter - June 1, 2010 Reply

Ok, so you meant to say credit card facility as you were being facetious. Hmmmm……….

Anyway back to real issue which is the level of debt supported by the club’s earnings. I don’t really see any issue given the asset base and earnings of the club, which has show reasonable trading growth given some recent shrewd commercial deals. I’d be more inclined to focus on the club’s EBITDA and free cash flow as opposed to net figures and absolute cash positions at any given time. Cash piles are irrelevant when no context is provided in terms of other working capital balances and short/medium term cash flow forecasts. The bond issue would never have been successful, particularly in the current depressed environment, without the numbers stacking up. Granted PIK notes are by definition priced at crazy levels but they are effectively quasi equity and therefore attract a high premium. Undoubted they should be repaid as soon as possible. While there is some short / medium pain, the long term works as long as the Glazers stay in place rather than selling to a new highly leveraged syndicate who will effectively restart the debt clock and put us back to square one and ultimately require a higher level of growth to support the inevitable higher levels of debt. It would be a lot cheaper to service the Glazers dividends in the long term than service the new debt that would be required as part of any new take over. Unfortunately the leveraged buyout should never have happened but it would be far worse to replace the Glazers with a similar leveraged buyer. Hopefully some rich arab will buy the club instead but its now a very expensive trophy asset and probably has an enterprise value in the region of 1.25 billion. So there you have my view based on a former life as an investment banker..go on knock me out .

Ed - June 1, 2010 Reply

Oh now you’re trying to impress with some banker speak? Yawn. The EV was published in Forbes. You might have heard of it.

It’s a very big assumption that there would be new leverage as part of a future takeover. In fact although the bond is redeemable at 101% on change of ownership any acquirer would almost certainly ask the market to forego this right as the Red Knights had planned with no additional leverage. They just couldn’t come up with the cash or a viable plan it seems.

Interesting comment on the ‘debt clock’ though, after all the Glazers have been paying down debt rather than letting interest roll up and compound at eye watering rates for the past five years. Oh…

But as a former investment banker you’d know this already.

Peter - June 2, 2010 Reply

I don’t read Forbes, I’m able to draw my own conclusions without having to revert to the opinions of some journalist……..

It’s a very fair and reasonable assumption that any future takeover would be required to take over the existing debt while also adding acquisition debt to cover some of the remaining equity value……..this acquisition debt would be more expensive than the existing debt has it would rank behind it. This would be a vicious circle which can only be supported by continued increases in EBITDA, which of course in football is not very likely. Eventually somebody will be left holding the baby….

Comment on debt clock is irrelevant on the basis that it would all restart on a new deal irrespective of current arrangements…

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