Manchester United’s Finances – A closer look by a man in the know
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Manchester United’s finances seem to always be in the press and I thought I’d voice my own opinion about the level of debt and club support at a time when people are questioning the future of the club. So here we start with a bit of history.
Going Public
Since being formed as Newton Heath in 1878 Manchester United remained under private ownership for almost 100 years before going public in 1990.
The Result
The inevitable result of going public was that the club would be subject to various takeover bids; the most notable of them coming from property tycoon Michael Knighton and Rupert Murdoch’s BSkyB, before Malcolm Glazer then showed his hand gaining his stake in 2003. Glazer increased his stake from just over 3% to around 15% by the end of 2003, and in 2004 he had around 28% of the club; just below the 30% threshold that would force him into making a takeover bid.
The Takeover
In May 2005 the Glazers stake was pushed to 57% and only a few days later Malcolm Glazer had taken control of 75% of the clubs shares. The result of this was that the head of the family now had the power to delist the company from the stock exchange, and within weeks he owned 98% of Manchester United. The total takeover cost Malcolm Glazer around £800 million, a figure that would come to haunt the Manchester United fans.
The Dreaded Loans
Once the Manchester United takeover had been completed, it was then revealed that most of the cash used by Malcolm Glazer was in the form of loans secured against the clubs assets. The result of the loans was the club incurred insanely large interest payments of £60 million per annum. The rest of the finances were covered by PIK loans that have since been sold to hedge funds. The only change to the financial structure of late was the bond issue that you may have seen in the news. In January 2010 Manchester United carried out a £500 million bond issue, and as a result the club had a gross debt of £500 million, or so we thought…
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The Panorama Show In June 2010 the BBC show Panorama investigated the level of debt surrounding our club, and nobody liked what they found out. The show stated that they had found evidence that the clubs owners were now in £1.1 billion worth of debt, which may threaten the Glazers hold on the club. The BBC Panorama show caused outrage with the fans, many of whom believe that the level of debt that the club now has may impact the clubs ability to finance the purchases of new players for the future, placing the clubs overall future in doubt. I also hold this fear, and the lack of ‘world class’ signings has been evident in recent transfer windows. Sir Alex Ferguson has said the recent lack of signings is simply down to the fact that we don’t need them, but my own personal opinion of the situation is that we simply don’t have the funds. Whether I’m right or not, we may never know. David Gill has said on numerous occasions that the finances are there if Sir Alex needs them, so maybe we do? I think we will find out the truth when legends such Scholes and Giggs retire as they will have to be replaced with world class players if we want to remain at the top of our game, so in this aspect only time will tell. Green and Gold Protests As a direct protest to the Glazers ownership many fans have decided to take part in a green and gold protest by wearing items of clothing carrying the said colours. The colours represent the original colours worn by Newton Heath before the change to Manchester United. The people who started the green and gold protests have a website which is now over 150,000 people strong, signalling amazing support. I for one am sceptical about the ownership, I feel that the holding back of the finances instead of re-investing in the team could cause some long term damage, but that’s my own personal opinion. I think that if Sir Alex had 50 million to spend, then why wouldn’t he re-invest in the team? It’s a well known fact that the season Ronaldo was sold to Real Madrid; if it hadn’t been for the £80 million we would have recorded a massive loss. On the other hand however, since the Glazers took over, we’ve had an amazing amount of success, and we’ve brought in some quality players, from the likes of Antonio Valencia to the new signing ‘Chicharito’. I think the emphasis and attention will return to the Glazers when the fans become restless, a few bad results here and there, and eyebrows will start to be raised once again. The future Outside of the inner circle, who really knows what the future holds for the club? The answer is plainly no one, for all we know a deal could be getting worked out as I type, or the Glazers might really have no intention of selling the club. It’s no secret that a financial group who call themselves the Red Knights have been gaining a lot of attention in the media. They have said that their aim is to approach the Glazers with a £1 billion offer, but they’ve also said that they are not willing to pay over the odds and they only want to pay a ‘fair price’, which I do respect. I recently read an article that said some analysts believed that it would take a bid of £1.6 billion would be needed to match the expectations of the Glazers, so it all depends on who wants to budge first, there must be a compromise somewhere along the line. In my opinion, the evidence does point towards a takeover, when that happens and whether it’s the Red Knights that get the chance to finally buy the club, nobody outside the inner workings really knows. On the other hand, if we go on (hopefully) and win the Premiership crown this year, which in turn leads to a big marquee signing, then the heat may be off the Glazers for a short while. It’s fickle to say but I think that these things do have a bearing on the clubs future, and only time will tell.