It seems the sky has fallen at Old Trafford as of late, supporters are beginning to wonder where the goals will come from as their beloved surge down the stretch in second place with teams on either side of them each having a game in hand. Every new day brings sour news of financial woes as an oddly bearded old man smiles reluctantly with his offspring. The hopes of shoring up the Manchester United front line during the January transfer window are now as certain as the Togo international team winning the most recent installment of the African Cup of Nations.
- What Do We Know?
A financial wizard I am not so I’ll attempt to explain the Glazers actions in simple terms. It doesn’t take a wall street expert to realize that borrowing money to pay for something based on how much that thing you’re buying is worth, and could be worth in the future, thus leveraging that debt against the thing you’re purchasing, isn’t necessarily a smart idea. The Glazers did exactly that in 2005. How they were ever able to get away with it in the first place is beyond financial common sense and probably over my head. In total, the Glazers have loaded over £700 million in debt to the club they “own”. Bottom line is that the takeover saddled the club with a huge debt but also a large sum of interest payments that comes along with that debt. During the Glazer family reign, the club have become responsible for over £260 million in just interest payments. Of course in recent years ticket prices have increased substantially. Since the takeover in 2005, ticket prices have increased by 42% to help service the interest and day to day running of the club.
- What’s Going Right at Manchester United?
The team itself led by Sir Alex Ferguson and Chief Executive David Gill was easily the msot successful Premier League club of the last decade winning six Premier League titles, one European Cup, one FA Cup, two League Cups, three FA Community Shields and one FIFA Club World Cup, all temporarily shifting focus from the Glazers shoddy business practises and mounting debt assigned to the club itself.
Also, the day to day business of United make it the most profitable club in the world. In 2009 alone, Manchester United could have turned over a £91.3 million profit but only reported £48.2 million in profit because of payments to surface the debt accrued by United when the Glazers completed their takeover.
- What Does This Have To Do With Football?
Everything. Manchester United will increasingly find their hands tied behind their backs when it comes to buying new players to stay competitive domestically and in Europe. What became of the £80 million received from Real Madrid for the sale of the word’s best player? Fergie insists that it’s his to spend if he sees fit, but most see it going to service the ever-increasing debt and more specifically the interest accrued from the debt just to stay afloat.
Where would United be this year without Wayne Rooney? What happens if he succumbs to injury? The evergreen Ryan Giggs surely is approaching his last few years and as good of form as he’s been on for United recently, his appearances remain limited. Carlos Tevez, who United passed on, continues to bang in goals for cross town rivals Manchester City. Not to be forgotten, Ferguson and United had the chance to secure his services last season before letting him go to Eastlands. Why did United not spend on a proven goal scorer? My point is that United will have to buy players, if not this year, then soon. Especially if fringe players like Nani, Darren Gibson, Danny Welbeck, Federico Macheda and a whole host of others don’t make good on their potential. Will the funds be available when needed?
- Recent Transactions
It’s been recently reported that over the past few years, the Glazers have borrowed over £20 million from the club itself for “management and administration fees”. These convenient persoanl loans do not have to be repaid for five years. The club also recently announced they plan to raise £500 million by issuing a bond note that will be due for repayment in 2017 at a rate of 8.5%. This could mean United edge that much closer to financial freedom, but it’ll be some years before supporters know for sure.
When Manchester United continue to win trophies year after year, most anti-Glazer groups remain notably silent. But if Manchester United are to remain competitive in multiple competitions over the next decade, they’ve got to begin the long, hard process of becoming financially stable. Clubs like Arsenal and seven time French champions Olympique Lyonnais have proven it’s possible in this day in age to target success responsibly. Manchester United just have to figure out how?