Manchester United £660M debt now being traded at a low low price
ScoopeX
Hopes for greater financial transparency in football take another hit as
the champions' loans are traded around the City
by David Conn
How are we to make sense of the news that Manchester United's enormous
debts – £667m as of last year's accounts – are being sold at a loss by
crisis-stricken financial institutions in the City of London? Banks,
hedge funds and private equity speculators, all wrestling with the
economy's general collapse, are, according to the financial data company
Markit, flogging off United's steepling loans at 70% of their value.
One well-informed City source said that is the price only of United's
"senior" debt, the £425m secured on Old Trafford, the Carrington
training ground, the gilded players, season tickets, commercial
contracts, on the lock, stock and corporate barrel of English football's
most glittering club. A further £90m of loans, which are not secured,
are being sold for 50p in the pound, while the rest of the £667m – £152m
"payment in kind" debt, loaned originally by hedge funds at a swingeing
14.25% interest – is said to be available for buyers who can name their
price.
Yet stark as it looks, this does not, apparently, mean United are in
trouble, struggling to bear the massive borrowings taken out by the
Glazer family to buy the club in 2005, then loaded on to United to pay
off. Given United's level of success, the TV fortunes made from winning
last season's Premier and Champions Leagues, the 75,000 bums on Old
Trafford seats, and all the club's industrial moneymaking, their 2007–08
accounts, shortly to be announced, are certain to declare the highest
turnover and profit ever made by an English football club. In 2006–07,
the club's profit was wiped out by the eye-watering interest, £81m,
payable on the Glazers' loans; this time the interest will certainly be
higher, but there may even be a little profit left over.
The selling of the debt at a discount speaks more of the global economic
crisis than a crumbling of the Old Trafford ramparts. Banks and other
financial institutions are starved of the ready cash and wholesale
credit that serviced the bubble, so are selling their loans, even at a
loss, to get money in now.
There are, nevertheless, specific problems with being traded like this
on the "secondary debt" market. First, United's debts are up for sale to
any financial outfit, including the merciless and ruthless, who would
leap punitively on United if the club were to breach any covenant,
however minor.
Second is the question of accountability. The public, including United
fans, cannot know who holds the debt in United. When the Glazers bought
the club for £831m, the family itself paid £272m cash, £284m was loaned
by their bank, JP Morgan, and "syndicated" to other banks, and the other
£275m, which the family could not borrow at standard rates, was advanced
at very high interest by three hedge funds, Citadel, Och-Ziff and Perry
Capital. In 2006 the Glazers managed to refinance those original loans,
but there has been no public disclosure of who holds the £425m, the
other £90m, orthe high-interest £152m "payment in kind" loans.
The discovery that this debt in Manchester United is now a commodity on
the screens of City traders drives home the still-staggering facts of
the takeover. Here was a great, pre-eminent football club that prided
itself on being well-run, owed not a penny to anybody, financed Sir Alex
Ferguson's awesome achievements and rebuilt Old Trafford entirely with
cash, yet was loaded up with £667m of debt, massively more than any
other football club ever, solely to pay for the Glazer family, whom
nobody wanted, to take over the club.
When asked about the legitimacy of this, or the value of allowing it to
happen, the Premier League has always shrugged its shoulders and pointed
out – with some justification – that such things are legal. "Leveraged
buyouts" were what passed for unquestionable financial wizardry until
the very recent discovery that not everything the City devises is quite
so clever after all.
"We understand that the sale of United's debt does not mean the club is
struggling," acknowledged Nick Towle, chair of the Manchester United
Supporters Trust. "But there are dangers, and it highlights that the
club's money, paid by hard-pressed fans, is being taken out to pay the
huge interest on these loans introduced by the Glazers."
United's spokesman, Phil Townsend, pointed out that United still have
money remaining after servicing the debts to assemble their squad,
including August's £30m signing of Dimitar Berbatov: "With our turnover,
we can meet the obligations on our loans and debts, and still buy
world-class footballers and provide first-class facilities at Old
Trafford and Carrington," Townsend said.
Yet the revelation that Manchester United's debts are now a discounted,
traded commodity feeds the concerns expressed last November by Andy
Burnham, the culture secretary, when he called for football to "wholly
reassess its relationship with money". One of the seven questions asked
of the football authorities was whether unhealthy levels of debt were
being ladled on to clubs when they were taken over.
The Premier League and the Football Association are understood to be
preparing separate responses to Burnham, with the Premier League
expected to announce theirs first, early next month. The league is
understood to be addressing worries about debt by proposing a "going
concern" test, in which the size of a club's debt is measured against
its turnover, cash flow and general financial position, to assess
whether it is too onerous.
It is difficult, though, to believe that any such test will be drafted
to restrict United or any other current club, who, after all, pay the
£1.3m salary of Richard Scudamore, the chief executive framing the
response to Burnham. The Premier League is understood to be preparing to
reject the argument that there are different kinds of debt – that
United's, loaded on by new owners just to have the club pay for their
takeover, might be viewed as a useless drain, compared, say, to that of
Arsenal, who borrowed £260m to move to the Emirates Stadium, a visionary
investment made to generate more money.
Lord Triesman, the FA chairman, is understood to stand by the comments
that provoked Premier League fury last October, that now is not a good
time for football clubs to be loaded with debt. The FA is expected to
present proposals for clubs to carry less debt, including "soft" loans
from sugar daddies such as Roman Abramovich, Mohamed Al Fayed and Dave
Whelan, which Triesman believes also leave clubs potentially vulnerable.
With Burnham stressing that the government has no plans to legislate, it
remains to be seen whether this process will bring about any meaningful
change.
Certainly the Premier League will argue there is nothing at all wrong
with what the Glazers did to United, a club built by generations of
working-class supporters, and by players paid a maximum wage, many of
whom auctioned off their medals in later life as the only way to finance
a decent retirement.
Any criticism the Premier League has will be reserved not for the
Glazers and their leverage, but for Triesman, if he should dare raise
his head above the parapet again, and question whether this really is
the ideal way for football to conduct itself.
Basically they are in the deepshit do do big time and personally the
fuckers should be kicked out of the premiership.
YCNMIU
FAFTBH. :)
Ron
"ScoopeX" <sco...@scoopex.co.uk> wrote in message
news:72vfpdF...@mid.individual.net...
> United's massive debts now at mercy of the market
> Hopes for greater financial transparency in football take another hit as
> the champions' loans are traded around the City
> by David Conn
>
>
> How are we to make sense of the news that Manchester United's enormous
> funds and private equity speculators, all wrestling with the economy's
> general collapse, are, according to the financial data company Markit,
> flogging off United's steepling loans at 70% of their value.
>
> One well-informed City source said that is the price only of United's
> "senior" debt, the £425m secured on Old Trafford, the Carrington training
> ground, the gilded players, season tickets, commercial contracts, on the
> lock, stock and corporate barrel of English football's most glittering
> club. A further £90m of loans, which are not secured, are being sold for
> debt, loaned originally by hedge funds at a swingeing 14.25% interest - is
>
> Yet stark as it looks, this does not, apparently, mean United are in
> trouble, struggling to bear the massive borrowings taken out by the Glazer
> family to buy the club in 2005, then loaded on to United to pay off. Given
> United's level of success, the TV fortunes made from winning last season's
> Premier and Champions Leagues, the 75,000 bums on Old Trafford seats, and
Yes Scoopex Liverpool and Manchester United
Are in debt up to their eyeballs.
FAFTBH :)
ScoopeX
An everton fan from Liverpool looking for fa cup semi final tickets.
http://www.toffeeweb.com/site/classifieds/bulletinitem.asp?submissionID=11248
FAFTBH. :)
Ron
Well we are the peoples club
;)
ScoopeX
> ;)
>
>
FAFTBH. :)
Diablos Rojos
> Basically they are in the deepshit do do big time and personally the
> fuckers should be kicked out of the premiership.
>
> YCNMIU
>
> FAFTBH. :)
Basically all that you cut and pasted whooshed right over your pigthick
fucking head and the only thing you could think of was the thick as shit
unintelligible remark above.
You posted the same last week, it means nothing, got nobody any more worried
then and I doubt it has now.
You obsessed little weirdo
Pope Pompous XVIII
> YCNMIU
> FAFTBH. :)
LMFAO!!
<+|80))
--
+ His Holiness Pope Pompous XVIII
"Shakespeare is possessed through and through with the feeling which is
the first and finest idea of Catholicism that truth exists whether we
like it or not, and that it is for us to accommodate ourselves to it
... " - G. K . Chesterton
ScoopeX
;)
Pope Pompous XVIII
> Basically they are in the deepshit do do big time and personally the
> fuckers should be kicked out of the premiership.
> YCNMIU
> FAFTBH. :)
ROFL!!
<+|80)))
--
+ His Holiness Pope Pompous XVIII
"Since God has given Us the papacy, let Us enjoy it" - His Holiness of
Happy Renown Pope Leo X, 1521