With news that the Glazers have bought back 20% of the club’s debt, Andreas Nicolaides, a finance writer and Manchester United fan from MoneySupermarket.com thought he would give us a proper insight into how the club is actually working.
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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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