Why Man Utd Asian float could backfire on Glazers

The Glazers borrowed at horrific interest rates just like Hicks and Gillett did to buy Liverpool.

The debt is not sustainable as it is - if they don't get this cash input there will be a player sell off or a loan default.

That's off the field - on the field, City seem to be preparing to dominate for the next 5 years or so.

Seriously, the author of this article needs to be sent to a finance 101 class. Or told not comment on things beyond his understanding!

1. "the share price will be subject to the whims and forces ofnthe market" - how is this a bad thing per se? In your socialist mind perhaps all stock markets should be closed and prices be set by the government.

2. "shareholders could acquire a large stake and create an awkward challenge to authority. Simple primary school stuff: if the Glazers own 70% , they control everything. They don't need to be distracted by anything other than minority interest protection which is negligible anyway

3. Disclosure requirements: so greater disclosure is a problem?! A) it is not an issue and b) they have already been disclosing detailed financials since issuing the two bonds.

The BBC needs to exercise some due diligence before letting people write these articles. Gives proper educated journalists a bad name

@dogeared
Sure, I mean they beat a newly promoted club at home what more evidence do we need, right?
Challenge yes, dominate? Not on Fergies shift.

@3

If a player Fire Sale has to happen to offset debts, I'm sure United could still finish top ten with their youth squad.

As it is, I can see Abramovich getting board in the future and Chelsea would be in real trouble. Liverpool are doing well because they have owners who are financially smart.

And of course, my club (Arsenal) are probably the best placed in terms of finances (Except for Man City)

Oh, and Man City aren't stable at all. Oil will run out at some point. Before that, Oil will become so expensive that normal people can't afford to use it. At some point in the future, City will collapse, worse than Leeds ever did.

Who in their right sense would purchase at that price? We all know that the shareholders are not expected to make an income. Then the only legitimate reason to buy is your loyalty to Man U. However with only less than 25% of the shares on flotation, even if you purchased all the shares, you would have 0 voting rights on any issues made within the club. I.e. 400 million pounds for a worthless paper.

"The debt is not sustainable as it is - if they don't get this cash input there will be a player sell off or a loan default." - too right

Who cares? If Man Utd are forced to sell their star players to clear their debts, maybe then all the other clubs will start acting more responsibly. And maybe pigs will fly.

I think they should form a separate billionaire's league, composed of clubs that can afford to pay people millions of pounds a day or whatever, and they can just leave everyone else alone.

This comment was removed because the moderators found it broke the house rules. Explain.

@alphacya,
1)Yes, 'the share price will be subject to the whims and forces of the market', but I don't think the article solely suggested that was a negative, like you have implied. It suggested it would be a risk, yes, but it did not say it was doomed to failure..... 2)Anyone with, for example, 10% of shares in something has some power you can't deny it, although if the Glaziers can chose who the shares go to, I doubt hugely they will let a 'significant' amount go to the same person/organisation.
3) Not having to disclose imformation can have its advantages, although I have to say, I believe transparency is a very good thing in this case.

The Glazers cant choose who buys the shares. Its a market sale.

@5

English people wont buy them hence why they are aiming for the asian market aka obsessive fans in a booming economy.

@9:
1. "but I don't think the article solely suggested that was a negative, like you have implied. It suggested it would be a risk, yes, but it did not say it was doomed to failure"
it's just that the article gives the negative effects of floating on the stock Market but not the positive side (a clubs value rising)

2. Hypothetically yes they have an influence, but when it comes down to it they have NO influence over decision making process (as the Glazers would still control the majority)

@dogeared
clearly you know nothing about Man United's finances. The debt is easily sustainable, unless United fail to qualify for the Champions League for several seasons in a row. Even then they would probably be OK as long as attendance figures didn't drop too much.

By the way there are tax advantages to debt financing. Debt interest is paid out of pre-tax profits but dividends are paid out after tax. So converting this debt to equity might not change much.

6.At 23:46 17th Aug 2011, AliTurega wrote:
"The debt is not sustainable as it is - if they don't get this cash input there will be a player sell off or a loan default." - too right

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That's the usual uninformed nonsense you get in discussions like this. A 45m debt servicing charge may be large but when your operating profits are >100m it is certianly manageable as we have already seen. There is no question of a player sell-off being required.

Utd's debt just keeps them closer to their rivals in terms of spending power. If the Glazers do find a way to remove it then the rest should worry as Utd will be way ahead of the pack in terms of sustainable spending power.

Man Utd's financial position is largely portrayed in the media as if the club were on the verge of financial ruin. This is a misconception. The club are on a sound financial footing.

If we assume that this IPO goes through at expected levels, the equity value of Man Utd would be about £1.8bn. Assuming the Glazers leave debt at current levels, the equity value would have to fall about 70% before debt > equity.

For equity to fall this much, future revenues would have to fall dramatically. For this to happen the following would have to occur; television money drys up, attendances
at matches fall, prizemoney falls. The new financial fair play rules in Europe insulate United further as Sugerdaddys will not be able to come in and pour money into clubs thereby overtaking Man Utd.

From a business point of view the Glazers have performed extraordinarily well. I'm speculating but say the Glazers put £200mn of equity in when taking over the club. They have turned this into £1.8bn, a multiple of 9. It is a classic LBO deal.

The Glazers run the club as a business. Is this any different to the way John Henry is running Liverpool. Its amazing how the media distorts peoples perspective of what goes on around us.

5.At 23:40 17th Aug 2011, waddle wrote:
"Who in their right sense would purchase at that price? We all know that the shareholders are not expected to make an income. Then the only legitimate reason to buy is your loyalty to Man U. However with only less than 25% of the shares on flotation, even if you purchased all the shares, you would have 0 voting rights on any issues made within the club. I.e. 400 million pounds for a worthless paper."
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So why then do millions of people buy and sell shares world wide on a daily basis? Certainly not to gain some sort of control over the company who's shares they buy.

Twp reasons:
1.Dividens, which represent an annual income return on the investment. However, this tends to be the lesser reason and many companies do no pay dividens.

2. The most common reason-----capital appreciation. You hold the shares for a period of time and then sell them at a profit. That's dependent on the performance of the company and economic and other factors that influence share markets.

Utd's valuation has doubled in the Glazer era. While we have no initial share price to benchmark against it's a given that had Utd had a public listing over the last 6 years then their share price would have risen considerably as strong growth in revenues and profits (which are the drivers of that valuation appreciation) was reflected in the share price.

With revenue and profits still growing strongly and the continued exploitation of the 'emerging' football markets, the expectation is for that growth to continue making shares an attractive investment proposition.

And that's why people would buy the shares, or as you erroneously suggest 'worthless paper'.

1.At 22:51 17th Aug 2011, dogeared wrote:
"That's off the field - on the field, City seem to be preparing to dominate for the next 5 years or so."
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Interesting point that. What would be more interesting from Mr Bond wouild be an in depth article on the UEFA Fair Play rules. Right now City have no chance of making the cut and will end-up out of European football. We await with interest City's annual results (due in September) to see how much the losses are this year (121m last year, which included a wage bill that in itself was greater than total revenue.)

UEFA have already flagged their intention to look at dodgy sponsorship deals and City's recent announment doesn't comply with fair market value but, even more interesting, is the fact that even with the 40m/annum income from this deal and an extra 50m from CL participation, higher PL finish and other revenue growth, City will still fall well short and will have to sell players to balance the books.

At the very least City have to curtil spending from here on in and so their days of paying silly transfer fees and even sillier wages are at an end. Something on this from Mr. Bond would be far more interesting.

If you are looking for a much more in depth analysis of football finances etc I would recommend googling an independent blogger who goes by the name "The Swiss Ramble". He covers different a lot of this sort of stuff and has done a good few articles on Financial Fair Play. The actual workings of business and financial fair play are a lot more complex that headline debt figures etc you see lazily banded about and then misinterpreted by fans.
The constant idea that Man United are in some sort of financial peril is incorrect and a misinterpretation of facts. If you want to see real financial difficulty look at my team Everton, they have debts of "only" about £36 Million but are in real terms a lot worse off.

@18.At 02:57 18th Aug 2011, Duffy1980

I've read The Swiss Ramble and it provides excellent analysis. I've also spent some time studying the FFP rules and City's financial situation. That's why I suggest that the main stream media (e.g. Mr Bond) start to educate the masses on the subject, as most fans (understandably) struggle with this and the number of ill informed comments we see on blogs like this just underwrites that fact.

People will always argue about debt, especially when it isn't their own.

The FA and the PL should have acted years ago to ban ALL loans to clubs by their 'owners' and directors, and they should have also banned any buyouts which use loans too.
Introduce the system they have in Germany, owners can GIVE whatever they want to a club, but they can't lend them anything

As someone who has taught and practiced finance for more than 40 years, I am horrified that the BBC would allow an employee with (apparently) no knowledge of finance write to this type of article. There simply is no excuse for this sort of ill thought out tripe.

@Chrisw27

Then why are they considering this floatation? Please, go ahead and give us your amazing insight.

All this user's posts have been removed.Why?

I am sure Fergie would like stronger links with the Asian business community.

The Glazers bought the club on tick knowing it to be a profitable vehicle. This is a way to use the United name to raise money to help clear their own debt payments.

22.At 06:59 18th авг. 2011, dogeared wrote:
@Chrisw27

Then why are they considering this floatation? Please, go ahead and give us your amazing insight.

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It could be as simple as needing to free up capital to reinvest or service unrelated debt.

This blog should never have been published.

"Oh, and Man City aren't stable at all. Oil will run out at some point. Before that, Oil will become so expensive that normal people can't afford to use it. At some point in the future, City will collapse, worse than Leeds ever did."

The best bit of bitterness ever witnessed on the internet. So when is the oil running out? Noticed any developments going on around Eastlands? we will be self sufficient in the coming years. This is not the fly by night owner seen elsewhere. Get used it.

United better hope Uncle Malc pays off his debts with the IPO

So let's consider this analysis....

The share price could plummet - Glazers win - borrowing money is much cheaper now than when they arranged the original finance. They would simply borrow money and buy back the shares at a much reduced price. Of course, to make this all work, the shares really would have to 'plummet'.....the further the better!!

There could be another significant investor (or two) - last time I looked 75% always beat 12.5 or even 25%. Of course the company's own articles would dictate appropriate governance, which could give the 25% more power, but then I guess the articles will be 'written' before the float to prevent this - which might then deter single big investors.....oh wait, so where's the problem?

Third and final point...disclosure. Got me there; Having to tell people what is going on is a pain in the @ss. especially when you can be absolutely certain (as in "death and taxes") that the press will spin anything they can find to create a crisis and adopt any and all tactics to 'bring a success down'. While you'll never stop that, you might as well not load the gun for them.

So you could be right, they'd definitely be handing bullets to the press, but the have to put up with the grief anyway....so what's the difference...unless they really have something to hide.

Looks like a no brainer to me.....if they've nothing to hide they'll do it.

"It could be as simple as needing to free up capital to reinvest or service unrelated debt."

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Reinvest 4-600 million in what exactly? What's this other mystery 4-600 million debt?

Yawn more stupid fan comments here proclaiming "the debt is killing us" and "we'll have to sell". the debt has been there for years now and has been steadily decreasing. Despite selling Ronaldo United are still the best team in England and likely second best in Europe.

Face facts for once, the Glazers ownership has not lost United a single trophy to this point, it has not caused them to default, it has not caused a fire-sale and Fergie has been given funds to buy whenever he has asked for them.

This comment was removed because the moderators found it broke the house rules. Explain.

Interest payments of 45 million, income of 300 million.... how is this unsustainable ?

If they retain 70% they will have no problems with other minority shareholders.

If the value falls due to market conditions the Glazers will no doubt buy up more shares at a lower price then they sold them for. This is what they have already done with the bond issue. Great business !!

Some people will always want to write dooms day stories about United but funnily enough they have always been wrong !

Poor article really.

WordsofWisdom, you're so sure of yourself, you should become a football club owner. I must confess, I haven't read the Financial "Fair" Play rules, but I'd imagine somewhere along the line in Sheikh Mansour's empire somebody who is at least as well qualified as you has.

The crux appears to hinge on what is 'fair market value', and the people telling us what it is really is the giveaway what this masquerade is all about. The Manchester Uniteds and Barcelonas of this world proudly announce world record sponsorship deals that blow the deals of their competitors out of the water, and they dictate these deals are the benchmarks. They are "fair value". So if anyone else wins a deal in excess of what they get, it's automatically unfair value.

So after David's done his blog on Manchester City and Financial Fair Play, he might follow that up with a blog on who the drivers of FFP are, and why they only became concerned when the self-perpetuating stranglehold of the old elite's grip on Sky and CL spin-offs became threatened. I'll wager these new rules are designed to entrench the status quo of the same old European teams winning trophies and qualifying for Europe. i.e. they will continue to hoard the lion's share of spoils.

After that, David might check out Ian Ayre's accusation that nepotism needs to be investigated, e.g. Michel Platini's influence on the winning France Euro 2016 host bid.

To conclude, he might pose the moral question, "What kind of world do we live in where we do all in our power to protect a moneygrabbing family that gives nothing back to its community, while doing our utmost to bring the fantastic regeneration that's been initiated in East Manchester to a grinding halt?"

Getting back to your more immediate points. Gary Cook himself has said that City's current spending is unsustainable. However, some of that took place before the period that UEFA will consider for FFP begins. And while a big loss will be announced next month, you downplay a little matter of an estimated 400m that will kick in presumably from next year, alongside other, possibly 'lucrative', deals. Also, a lot of the initial investment was initial outlay, and won't be required again. For example, I would suggest the squad building is nearing completion, and from hereon in, it will only need tinkering with. City will return to being a selling and buying club, rather just a buying club. Not to mention that players like Adebayor, Bellamy, etc, will probably come off the payroll imminently.

And to underline yo

OK, I dont pretend to know a lot about finances but surely the debt is the owner's, not the clubs? Yes it's in the clubs name but if it came down to payments being unsustainable it would be the owners in trouble, not the club...

So unless the Glazers think they could sell off a chunk of the players and live to tell the tale (which given their already huge popularity with United fans I would seriously doubt!) then they would simply just have to sell some/all of their debt in the form of shares (just like the previous Liverpool owners were forced to).

Please tell me if i'm wrong with any of this, because as I see it; whilst United have their hands tied when it comes to spending, when it comes down to it it's the Glazers that carry the debt and only them that will suffer if their plans go tits up!

The Glazier debt has meant that ManU no longer have the purchasing power of the really big clubs like Barsa and Madrid - both, curiously enough, real "clubs" and not privately owned - and this is reflected in their inability to attract the world's biggest stars. In the not too distant future this will mean they will lose their predominance in the Premier as the have already lost punching power in Europe.

New owners without any debt obligations would halt this decline, but I can't see it coming any day soon.

Who's a little grumpypants Hackerjack?

With the club so deep in debt, why would they be inclined to remove 4-600 million of it's alleged equity to invest in a different project?

I mean, that makes a whole lot of sense doesn't it, I'm sure the Man Utd fans would be very pleased that their club was being asset stripped in such a manner.

34 (continued)...

And to underline your likely nonsense, if, as expected, Sami Nasri signs today, that is a clear indication that the spending is far from over. In fact, I've a feeling there might be 1 or 2 further transfer surprises before the end of the month. Lovely job!

In worst case scenarios, bearing in mind that the Etihad deal is a 10 year one, if we are precluded from entering the CL, we will still have the day by day more superb state of the art infrastructure and playing staff. A Leeds scenario would be further down the road, and to be honest wouldn't be that far off from where we were just over 10 years ago. I'll handle that if it materialises, but for the moment I'm going to enjoy the meantime, and I've got a feeling it's going to be quite a long one.

fabregas beat madrid by himself by the way did you know he played in the premier league, now he is at barca and beating madrid by himself because he was premier league not too long ago. premier league and even more premier league fabregas and more fabregas fabregas fabregas in spain but was premier league. he touched the ball.

oh, and again christina nowhere to be seen and the flea proving once again.

Mr Bond, your article is a poor one to say the least! Of course, with any business deal there is an element of risk involved but from the numbers I've studied and the Glazers business plan it seems a bit far fetched to try and portray Man United all of sudden as a club in peril. The deal seems pretty standard to me.

I am a United fan who would rather see the club in the hands of the fans, but I must admit that during the Glazers reign we have had nothing but success on the field. Yes, the debt levels were shocking, but we are able to service them and if the stock float goes as it should, the debt will be even easier to manage. I still don't like the Glazers ownership, but my negativety towards them has weakened in the last two years or so...

"we will be self sufficient in the coming years"

Yeh ok! You (Man City) might have to stop paying average plays 200k a week though

if a club is valued at 1.7b but has 500mill debt, is it not then worth 1.2b? or am i being stupid.

most prob stupid.

hey dont call me that, that's not nice.

I think it is quite obvious that the money generated by the floating will go to pay off debts, though I am not sure it is the club's debts or Glazers' own debts!!

What I am worried about is that if (when) Fergie eventually retired it will have a massive impact on the team and share price. Should the new manager failed to bring in the same level of success on the field the share price will slump even further.

One good thing ti Utd fan is that we should all know Man City won't last long - they may not even pass the Uefa financial fair play thing and the money will dry up pretty soon

36. At 09:28 18th Aug 2011, tommythetank wrote:
The Glazier debt has meant that ManU no longer have the purchasing power of the really big clubs like Barsa and Madrid - both, curiously enough, real "clubs" and not privately owned - and this is reflected in their inability to attract the world's biggest stars. In the not too distant future this will mean they will lose their predominance in the Premier as the have already lost punching power in Europe.

New owners without any debt obligations would halt this decline, but I can't see it coming any day soon.
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Those "real" clubs are no better than United in terms of either debt or dodgy ownership/managership issues.

37. At 09:29 18th Aug 2011, dogeared wrote:
Who's a little grumpypants Hackerjack?

With the club so deep in debt, why would they be inclined to remove 4-600 million of it's alleged equity to invest in a different project?

I mean, that makes a whole lot of sense doesn't it, I'm sure the Man Utd fans would be very pleased that their club was being asset stripped in such a manner.
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Because as any businessperson knows, debt is not the be all and end all.

If you can take out a loan for £400m and incur £50m a year interest charges but can use that money to make £70m a year profit by investing it elsewhere then it's a pretty sensible decision.

It is NOT asset stripping (that would be selling off the assets to get the cash, not borrowing against them) and it has nothing to do with the fans. Ultimately if it was United that needed the investment then Glazer would borrow against his other assets to do so, it actually means more stability for United, not less. It's exactly the same as a conglomerate leveraging several f it's businesses together.

What a mess, following on from Channel $'s Dispatches programme.

Thank god for Arsen's values.

"if a club is valued at 1.7b but has 500mill debt, is it not then worth 1.2b? or am i being stupid."

That's assuming someone didn't value it at 2.2bn then deduct the debts ;o)

"Thank god for Arsen's values."

Whilst his philosophy can be admired, his transfer policies and strategies have seem to have imploded unfortunately. Arsenal's debt also stands at £139m too I believe.

i'll stick to the colouring in books ;)

the club gained nothing from being lumbered with glazer debt. it was a risk (not to them). it is currently sustainable, but it still uses funds that could improve the squad, facilities (or keep ticket prices down). the ipo money need not pay off the debt, it can go staight to the glazers. they're laughing; no one else is. the lack of midfield has cost united trophies. success is despite the parsimonious glazers. qatar's oil and gas will last beyond your lifetime.

41. At 09:44 18th Aug 2011, Ichi_1 wrote:
"we will be self sufficient in the coming years"

Yeh ok! You (Man City) might have to stop paying average plays 200k a week though
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And they will. Overpaying for players is a well worn as tested way of getting players in above your station in order to progress the club to a level where you can attract those kind of players for more sensible wages. It's how clubs like Newcastle and Fulham got back into the top flight after several years away.

Whilst I’m not a Glazer fan and was and still am against how the takeover went ahead we have to deal in facts. We’ve been as successfully with them as any other period in our history. Yes there are concerns but if you look at turnover etc they are running a steady ship. Selling 25% of the club would mean they would be able to purchase back the bonds they issued and more or less wipe out the debts. That is using a assumption that the money they would receive from any floatation would stay with the Man UTD arm of the business.

People have often moaned that we can’t complete for top players, but who really wants to pay £25M+ for Lescott, Adebayor, Carroll etc…. Yes we may have missed out on certain players but I firmly believe this is down to wages opposed to transfer fee. That comes down to the fact these players want £200k net per week and with your tax laws we just wont break our structure. Footballers are footballers and have massive egos, if one is on £200k week the rest would be knocking on the door wanting a £30-£40k pay rise.

Based on the assumption above and the Money stay in United, we would be debt free, completed world class training ground, completed world class stadium, world class young squad and making money for fun. This would enable Fergie to spend £80M a season if he wanted or the South stand could be completed without requiring any loans.

Compare that to any club apart from Arsenal and we’re in a better position than any. Yes L’Pool have been spending but that’s on average players and it’s purpose is a PR stunt by Henry, after all they need to find £400M to build a new stadium!!

As I say not Glazers biggest fan and I dread to think what would have happened without Sir Alex but if the press stop always looking at the negative we’re in a better position than most.

Yeh ok! You (Man City) might have to stop paying average plays 200k a week though

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We don't though do we? don't believe everything you read in The Sun...

Whenever I read articles that mention the finances in football, the air of caution always seems to suggest that football and money will soon part company.

However, it's my belief that football is the most popular sport in the world and until we're all watch games live on a smartphone sat up a tree, then football is nowhere near saturation point and in gradually breaching the gap between where we are and that point there will be a lot of money changing hands.

I just don't see that there will be any bubble bursting anytime soon and therefore these big clubs and big sums will probably be sustained for quite some time.

I don't know anywhere near enough to comment on the financial stuff - but I think the Glazers do. So I'd be ok with them doing what they need to do if I was a manc. Arsenal are being brought up as a 'sensible' club by some - but they haven't won anything for years, their best players are leaving and as has been pointed out, they are in debt as well.

@ MrBlueBurns I pretty much agree, Football is ever expanding with more and more people around the world taking an interest in the game, therefore increasing greatly the amount of money available to the top clubs. The only challenge I can see to this is the emergence of better foreign leagues such as America, Brazil and China. However. these are many many years away from being able to compete, so as you said it will be a long time before the bubble bursts.

Also a side note, Financial Fair Play will help to sustain these top clubs even longer as it gives them a reason to limit wage rises, thus expanding profit and reducing debts.

#56 Swollennoodle

Your talk of national leagues in America (the worlds no.1 economy), China (the worlds no.2 economy) and Brazil (the worlds no.7 economy, one of the fastest growing economies and a country that is a hotbed of football) is interesting.

You're right to mention them and I think they will bring competition with them.

With the increasing corporate interest in football (for example companies sponsoring stadiums and long term sponsorship deals) I wonder when a 'big' club will have the name of it's sponsor in it's name? (And I'm aware of TNS and Airbus UK but I think we'll put them to one side for minute).

From there, well, have you seen Rollerball where corporate and national reputations ride on the result of a game? (Mentioning Rollerball also gives me a chance to mention Speedball 2 as well; 'ice cream, ice cream'.)

I find the somewhat hubristic comments made by some posters criticising David Bond's credentials in the area of finance undignified and unecessary.
He's the BBC Sports Editor (he's not Robert Peston) and his piece endeavours to raise some valid points about Man Utd's initiative to raise Capital via a partial Flotation in Asia.
He doesn't claim to be the lead journalist at the The Economist or FT so it is extremely unfair to see these comments which aim to denegrate him this way.
Whilst I think there are some aspects of his article which are perhaps a little naive his audience are (mainly) the great unwashed Sports Fans who perhaps find this level of comment of some value.
It his opinion after all said and done and that's how the majority of us views these BLOGs.
For another perspective on this issue this was published in yesterday's Independent (albeit written by a Football Correspondent!):

https://www.independent.co.uk/sport/football/premier-league/glazers-plan-asian-sale-of-600m-united-stake-2338669.html

I have to say the comments that minority stake holders have no say in major decisions and no control over the club by some commentors on here is a bit off the mark .
Was it not two minority stake holders(JP McManus & John Magnier less than 30%) in Manchester United that began the sale to the Glazers and a report on the PLC and club behavour from the London Stock Exchange ?

Don´t really see what the fuss is about here. Generally speaking this blog and the protests against the debt based funding of the the purchase of the club reveal a lack of understanding about the difference between debt and equity funding. A share offer will raise additional capital, but all investors are likely to require a higher return on their investment than the interest rate paid to the banks (equity funding tends to be more expensive as the investors do not have the same securities as the banks in the event of default, and divedend payments are optional rather than obligatory). All this appears to be is a restructuring programme so that the funding is more diversified ....and has absolutely nothing to do with football. As a by-note for the green and gold clan - your club has the second highest revenue stream in world football so there is litle risk of not fulfilling any liability payments, hence one of the biggest threats to Man U is your own lack of understanding (and loyalty) to your football club. You should maybe dismount the rather lanky horse you are sat on and apologise to the board - unless you have a few hundred million quid lying around.

#60 Barnsey77

I wonder if Ferguson will ever spill the beans on what he really thinks of the Glazers, if indeed he does think anything about them that he has not already stated publicly.

Anyway, should there ever be a default on the funding attached to the ownership of the club, I'm pretty sure there would be another billionaire happy to take it over, at what I would imagine would be a discount in the event of a default as well.

Meantime, the football team seem to be doing pretty well and the fans seem happy with their performances so what's there to moan about really.

right, blueburns, and the arab springers should have been happy with free electricity. barnsey, the g&g brigade have their hearts in the right place. there is nothing good about the glazers. nothing. if only they'd been better led from the start, but (as usual) those with a platform were clueless.

#62 jem

Yes, because clearly the situation with fans and the ownership of 'their' club is comparable to the almost dictator like standard of living in certain countries isn't it!

@ 2. alphacyan

It's comical that you are berating him for lack of finance knowledge when unfortunately you seem to lack a large amount yourself.

1. As David said correctly, by floating some equity on the stock market you give a more factual basis of value. That 25% of equity could be valued at market value then quadrupled to get the overall value of the firm. That is in stark contrast to now where they make their own valuation. Why does this matter? For a number of reasons, but the obvious two being how cheaply they can borrow and how much the Glazier family own themselves. Why wipe out 500 million debt if you lose a billion in valuation off your assets?

2. It doesn't quite work like that. Yes they would be the majority shareholders, but minority shareholders still have rights of their own even if they could not outvote the Glazers.

3. A) How is it not an issue???? It's an IPO - initial price offering, issuing shares to be floated on the market for the first time. B) Very simple, you have to declare more if you have other equity holders than if you have bond holders due to their increased status as shareholders.

Get your finance right before criticizing others.

"1. At 22:51 17th Aug 2011, dogeared wrote:
The Glazers borrowed at horrific interest rates just like Hicks and Gillett did to buy Liverpool.

The debt is not sustainable as it is - if they don't get this cash input there will be a player sell off or a loan default.

That's off the field - on the field, City seem to be preparing to dominate for the next 5 years or so."

Yeah - like that was evident in the charity shield.

To the blog, Ferguson is the key to success. While he is bringing it in, the debt is easily serviceable, however distasteful it might be for the club. However, this depends on the continued economic success of the premiership, heavily dependent on the state of the economy, and our continued success - heavily dependent I suspect on Ferguson's health.

At the moment running costs are healthily contained but it could easily change. That said there is leeway - Arsenal have shown how lack of silverware hasn't impacted their business to a destabilising degree at least while they qualify for the Champions League. Fans might not like it but it shows there is a degree of sustainability.

The challenge comes after Ferguson when a new manager will require substantial investment for new signings and a period of transition that will inevitably lead to a dip in results. The other problem with being dependent on a manager for so many years is that so much of the running of the club depend on one man, not just the coaching. To replace that figurehead will be well nigh impossible. This was shown after Matt Busby left. How deep that dip will be will depend on the amount of cash we have to dig ourselves out the hole.

So we need to remove the debt from the club as soon as possible to help build cash reserves and this looks like a reasonable way out although we will see what the uptake is. Probably good, at the moment, given the resilience of the premiership as a business despite the recession.

blueburns, the point is that it is not about sustainability or success, but principle. but, since, you mention it.... :0)

David,

"First of all, whatever valuation the initial public offering (share offer) places on the club, once traded the share price will be subject to the forces and whims of the market. United's share price could plummet if huge numbers of shares are dumped by speculators after the float or stock markets are rocked by another round of global slumps.
That could wipe millions of pounds off the club's value undermining the Glazer's prized $2bn overall price tag for the club."

Why would this be a problem for them if it is an artificial drop caused by general stockmarket losses? It would simply lead to the club being undervalued and they would probably buy back some of the shares. Unless the club itself looses revenue due to the crashes the price on the stockmarket would be irrelevant (if they had sold a larger quantity it might as it would expose them to take over) to their operations. One person might use the opportunity to buy up the 25-30% available but then that leads to your second point. In order to actually buy the shares that the Glazers control he will have to agree a price with them and they will not sell unless it meets their valuation.


"Secondly - and although the Glazers will retain a large majority stake of between 70 and 75 per cent - by making such a large chunk of the share capital available on the open market, are the Glazers risking one or two large shareholders buying big stakes in the club which could become an awkward challenge to their authority?"

How many seats on the board will this 25-30% allow the 1 or 2 investors to have. How many seats on the board are there? With this sort of investment even if one investor got control of all the shares available he would still have very limited control/influence on the club wouldn't he?


"I am told that some of the rich investors interested in the failed Red Knights bid to raise the money for a takeover bid came from Asia. "

How is their location relevant? They could buy shares in whatever stockmarket they were floated on no matter where they live.

"Singapore-based businessman Peter Lim is thought to retain an interest and the Glazers might worry that a bloc of significant shareholders interested in building bigger stakes over time could lead to the sort of instability being witnessed at Arsenal."
Arsenal is an entirely different situation - the situation there was 2 minority share holders trying to build up to the controlling share by purchasing from several different shareholders. If I remember correctly the m

"11. At 00:49 18th Aug 2011, jonfarrugia wrote:
@5

English people wont buy them hence why they are aiming for the asian market aka obsessive fans in a booming economy."

Either that or they are trying to prevent MUST and their business associates in the City buying them up and consolidating their voice on the terraces.

Didnt United just get 53.2 million from last year's CL tho..... Thats even more then Barca got and they won it... so thats the interest taken care of for another year then plus a few million in the pot lol !

Ever since the Glazers took over fans of other clubs have been writing garbage that the club is gonna sink, but after 6 years and bundles of trophies it hasnt. Ticket prices have gone up yes, but only in line with nearly every other premier league club (in fact the price increases are less so then pre-Glazer) and despite united being the best team in the country, they are well down the list of 'most expensive' team to watch.

If the Glazers are taking money out of the club, then given the amount of success we have had under them arent they entitled to it ? The guys at MUST keep banging on about money being taken out and not explained why, but the Glazers just paid off the PIK's and also bought back a substancial amount of the bond issue. Could this money not have been used for that ?

Just cos Malcolm Glazer doesnt personally fone Duncan Dresdno (cant remember his full name) and answer all his questions, doesnt mean anything is wrong. Its a private company so he doesnt have to. In fact it would be irresponsible to disclose information which doesnt need to be disclosed (especially to someone who seems to be quite wreckless with sensitive information)

All this scare mongering yet lots of success, records profits and debt being managed easily. I am no great fan of Malcolm Glazer and at first did jump on the anti Glazer bandwagon due to all the propaganda being spouted out... But on reflection, being a united fan has been pretty good the last 6 years. We are the best team in the country, and its fair to say we are only second in europe to a team which is widely regarded as the best club side ever... If it werent for Barca being so good at this moment in time, i can confidently say we'd have another 2 CL's sitting in the cupboard.

"53. At 10:20 18th Aug 2011, Lets Ruin Football - Curried Beans Rock wrote:
Yeh ok! You (Man City) might have to stop paying average plays 200k a week though

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We don't though do we? don't believe everything you read in The Sun..."

Why not? They can presumably back it up with phone recordings;)

"if the glazers are taking money out of the club, then given the amount of success we have had under them arent they entitled to it?" er..... no. unless you think they contributed to or enabled the success. in which case, you are certifiable.

As for ticket prices and lets not forget the compulsory cup ticket purchase scam, the profitability that United have had allied to the low nett spend on transfers should have been fed back into lower ticket prices. I don't care what the trends are in other over-priced grounds.

#70 BestieknowsBest

Perhaps the Glazers owe a debt to JT's penalty taking skills as well :-(

#71 United Dreamer

:-)

#72 jem

Well, they are running the business and the business is doing well. Who is to say, for example, what the board at other businesses do to earn their money but all the while a business is growing, they (presumably) and doing something right.

@ 12 - Bond talks about the negatives of flotation is because of the recent history of the club. During the 1990s journalists mentioned the negatives of flotation could be a shareholder who decides to buy out the remaining shares with loans and saddling the club with the loan debts. Man Utd fans said that would never happen.................

The Glaziers have done a very good job and deserver the profits of any sale of the shares. Most financial analysts have been reasonable confident that the future of the club is in the Stock Exchange, and the choosing of the Singapore exchange represents not only the importance of the Asian market to Manchester United, it also demostrates a real lack of faith in European markets especially the London Stock Exchange. All of Europe's trully large clubs will eventually come to this same conclusion.

I predict that this shares will be oversubscribed and the Glazers will make a killing. They Deserve it.

#28 Seriously to all the berties, if you think that the arab investment in your club is Abramovich style ego stroking you are deluding yourself. They have a plan. And that is to replace United as the premier club in Manchester, grab their fan base and take their global business. Buying City and investing heavily was just cheaper than buying United and obtaining that position. In that sense they were Abramovich like (who indeed did consider buying United and made this very point).

At some point continued investment will become unprofitable and there will come a point at which they cut their losses. And that point is a moving target. If the premiership starts becoming less of the money spinner it is - that turning point will come sooner.

All that said, I will give this to Mansour. He and his consortium, unlike the Glazers, have invested in Manchester and if they build their new stadium complex, they will provide a huge boost to the local economy. They've already built a health centre. And that can only be a good thing for Manchester.

Man u. Dont have any ties with Manchester, they play in Stretford.

I have to agree, David Bond does need to take a course in finance. BBC should double check his articles before publishing them.

I am a minority shareholder in many companies. What rights do I have?

I am not a fan of the Glazers, but this is an article which lacks accuracy and based mainly guess work. Disgraceful!

"78. At 12:24 18th Aug 2011, scraper0191 wrote:
Man u. Dont have any ties with Manchester, they play in Stretford."

What does the M in M16 stand for?

#79 solar

I am a minority shareholder in many companies. What rights do I have?
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You get copies of financial information and can attend and vote at AGM's.

I'm not sure but you might also get on the board if your minority was large enough and company law in the relevant jurisdiction provided for that.

Not saying it's much but it's more than nothing.

Thank you for these informations. Glazer is a very rich man. All is possible.

You berties should just be grateful we changed our name to Manchester United, otherwise the world would never have heard of Manchester.

But they'd be flocking to Newton Heath.

#80 United Dreamer

What does the M in M16 stand for?
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Motorway?
Manchester?
Motorbike?
Military?

Ooh, I love these guessing games... :-)

34.At 09:19 18th Aug 2011, Drooper_ wrote:

"The crux appears to hinge on what is 'fair market value', and the people telling us what it is really is the giveaway what this masquerade is all about. The Manchester Uniteds and Barcelonas of this world proudly announce world record sponsorship deals that blow the deals of their competitors out of the water, and they dictate these deals are the benchmarks. They are "fair value". So if anyone else wins a deal in excess of what they get, it's automatically unfair value."
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Do you understand the concept of fair value? Clearly not. If the standard price of a pint of milk is 50p and one super-market chain decides to chagre twice that will people buy? Clearly not.

Similarly, if the amount commercial organisations are prepared to pay for stadium and shirt sponsorships are determinable by current deals, including those with the biggest brands in the industry, is it reasonable to assume that a lesser brand could achieve a far higher amount? No.

Add to that the fact that the 'arms length' criterion immediately comes under scrutiny by the fact that the owner of the sponsoring company is the brother of the owner of sponsored company, and the sponsoring company has failed to make a profit in 7 years of trading and even a budhist monk might raise an eyebrow. It's a slap in the face to UEFA's credibility in addressing a clause that they included in the rules for this express purpose and I believe that they will take it to task head-on.
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"So after David's done his blog on Manchester City and Financial Fair Play, he might follow that up with a blog on who the drivers of FFP are, and why they only became concerned when the self-perpetuating stranglehold of the old elite's grip on Sky and CL spin-offs became threatened. I'll wager these new rules are designed to entrench the status quo of the same old European teams winning trophies and qualifying for Europe. i.e. they will continue to hoard the lion's share of spoils."
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Wrong again I'm afraid. UEFA and FIFA would like nothing better than to reel in the dominant clubs but European law has led them up a cul de sac in most things they have tried. They also had their card marked by the G14 who were determined to restirct anti-competitive rulings. The fact is that you can't%

:) - Careful there! we could also extend the guessing game to what the SW in SW6 means lol

#84 MrBB - you missed out what the M means for the Glazers!

#86 United Dreamer

Briefly it was Shaun Wright. Later is was Shaun Wrong!

Any other ideas?

This is possibly the most financially illiterate article I've ever read. But it's not really a surprise, because the only rule at the BBC, for journos who make comments about Manchester United, is that they have to be remorselessly negative.

#88 MrBB Not bad :)

"Any other ideas?" None printable lol.

ok I'm a Liverpool fan so UTD are not my favourites but I was under the impression that the Glazers took the debt to buy the club and then placed it upon the club with little indemnity to themselves. the last few years figures have shown that despite massive increasing turnover (best in football) Utd where still making a loss overall (ignoring the figures which included Ronaldo transfer which no club ever does).
Now this sounds similar to what the two clowns who bought us did but Utd continuing sucess means the banks aren't as trigger happy to call in the debt. Now this floatation looks to me a way to please the creditors whilst still retaining the golden goose of old trafford. Now i admit to not being market savvy but they do seem rather volatile in recent times, including the far east, so it could be a real risk/ reward strategy.
and no i do not want utd to go under and i concur that the team i actually live closest to EFC are in much more trouble despite much lower debts.

#87 United Dreamer

Megalomania?

#88 BB OK mind out the gutter temporarily.

Socialist Workers?
Stupidly Wealthy?
Spending Wildly?

#92 You're getting Fergie and the Glazers mixed up;)

#94 United Dreamer

Nah, Fergie's dictatorial rather than megalomani-ical (is that a word!). Of course, dictatorial is a long word so I just think of him as the first syllable!

By the way, SW in my opinion would be best off as 'should wait'.

@alphacyan - before being sarcastic you should also perhaps take a Finance 101 course yourself. The share price of a quoted company is hugely important for many reasons but the principal one in United's case is that the Glazers follow the leveraged model. That is - buy, borrow the buying price, strip out costs and/or increase revenues to meet the debt servicing costs then sell at a profit. They've done everything else on the list and would have had an exit strategy for United which would involve a sale or flotation. The credit crunch put paid to that, at least temporarily, but ultimately the share price will determine the company's value and therefore their potential return from any sale and the timing.

The other key factor is, as highlighted, what they intend to so with the money. If it's to pay off personal debt or problems in their other business then United will be stuck with debt servicing costs, plus dividend payments potentially, for the foreseeable future. They've also had to deal with a significant hike in their wage bill as other senior players (about 6 of them I understand) will get parity with Rooney.

@WordsofWisdom (how ironic is that name) the truth is that City have every chance of meeting FFPR. Their accounts to 2011 will be awful but aren't relevant as they don't count towards FFP. The ones for this current financial year will be the first and with the Etihad deal, Champions League revenues and other commercial deals done by City, their revenue will probably be over £200m and a wage bill of £130m will be quite acceptable.

Plus there's other FFP provisions that you're clearly not aware of that mean City could actually show a substantial surplus for FFPR purposes in 2011/12 if they manage things properly. That will see them through licencing seasons 2013/14 and 2014/15 and after that, the wage bill should have stabilised plus the amortisation charge on the substantial spending of the last three seasons will have bottomed out, adding another £40m or so to the bottom line. City's accounts should then be looking quite healthy. There will also be revenue from income-generating leisure developments around the stadium, that are still to be announced, coming on-stream at some point in the future. Sheikh Mansour & Khalsoon al Mubarak are very astute young men.

The Etihad deal will not be a problem as it's already been discussed with UEFA in some detail. It's a complicated deal and not as easy to put a figure on as the media are suggesting. It's highly structured and payments are conditional on certain targets I believe, like many transfer deals. At any rate, £30m per annum for a shirt and stadium naming deal could not be considered excessive, based on the current market. Plus UEFA can only adjust the numbers if it's classed as a "related party transaction" and there's no certainty that it will be, whatever people might think. So while UEFA may be trying to placate other clubs that are making noises, I suspect they already have given the nod to City over this.

If there is a club that has something to worry about it's surely Chelsea, who are at the top of their revenue curve but still making large losses. They will have to trim their wage bill significantly or move to a bigger stadium to meet FFPR.

34.At 09:19 18th Aug 2011, Drooper_ wrote:
Continued...............
The fact is that you can't penalise clubs for operating to a high standard and running their clubs in the way all would aspire to. Just because that brings increased and ongoing success is not a valid reason for sanction.

Operating at huge losses while fueled by a billionaire, hugely inflating the transfer market and blowing the lid of salary levels, on the other hand, is a very valid reason for sanction. And so say all of us.....except City and Chelsea of course.
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"To conclude, he might pose the moral question, "What kind of world do we live in where we do all in our power to protect a moneygrabbing family that gives nothing back to its community, while doing our utmost to bring the fantastic regeneration that's been initiated in East Manchester to a grinding halt?"
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The sheik can do anything he chooses regarding development in east Manchester. It's called capital investment. It does not, however, impinge on the profit and loss account at City. If his altruism knows no bounds then UEFA haven't the slighest issue with that. They do however have an issue with couching capital investment in a 'sponsorship' deal which delivers 40m/annum to the P&L for 10 consecutive years.

I'm all for the sheik developing community projects.....just don't try and tell anyone that this is sponsorship revenue, because it's not. Unless of course you can point out the precedent where an arms length commercial organisation has previously invested in such projects, despite the total lack of return on investment? Enough to leave even the most languid shareholder scrathcing their head, if not baying for blood.
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"Also, a lot of the initial investment was initial outlay, and won't be required again. For example, I would suggest the squad building is nearing completion, and from hereon in, it will only need tinkering with. City will return to being a selling and buying club, rather just a buying club. Not to mention that players like Adebayor, Bellamy, etc, will probably come off the payroll imminently."
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So on this point it's clear that you understand nothing abou

#96 "At any rate, £30m per annum for a shirt and stadium naming deal could not be considered excessive, based on the current market."

We are talking City here not Barcelona! Even for Barcelona that figure would raise eyebrows.

The deal was basically to get around the fair play rules with a relatively fixed income. Even the most deluded would concede that. With regards UEFA I suspect they will let it through for now but maintain their scrutiny of it.

there are a couple of things that do need to be pointed out have read the article and a majority of the comments, firstly not sure where £515mill debt figure comes from when in March 2011 David Gill announced that this had been reduced to £395 mill, also this debt does not belong to United (if you take a mortgage on a house, you owe the money not the house) but United are paying it off for there parent company.
Secondly as for not being sustainable, at the current rate of repayment, 50% of the debt has been cleared in the last 4.5 years so logic would suggest the rest could be paid in the next 4.5 years. A player fire sale would never happen as the debt is secured against the shares owned by the Glaziers so a more likely cause of action would be JP Morgan (the bank) repossesing the shares and selling to the highest bidded (as RBS threatened Hicks/Gillet with at Liverpool).
Thirdly, I'd rather United be run this way that the way other clubs are Real Madrid have had nearly 900million euro bail out from Spanish government over the last 15 years to prevent liquidation, Barca have debt's of 500million euro and are struggling so much that appantly admin staff have been banned from buying coloured ink for the printers, then you have (so called richest club in the world) Man City, if there own cut losses and pulled out, which he could easily afford to, they would have to find a new buyer willing to loss £120million plus every year or would be out of business in 12 months. Even Arsenal will struggle finacially when all the flats at highbury square are sold, which currently equate to about 40% of the clubs entire turnover.
What this is really about is if the Glaziers can clear the debt asap, the if they decided to sell the other 75% over the next couple of years, they'd clear over £1billion profit on top of the original investment, I think thats how the became one of the richest family in America, but i could be wrong.......................

Anyway I always like to read the AndersRed blog when looking at these schemes. His take on it is that the Glazers will be pocketing the proceeds for reinvestment in other businesses.

https://andersred.blogspot.com/

Interesting take.