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For Manchester United Supporters, Glazer Era Must End Soon

glazer For Manchester United Supporters, Glazer Era Must End Soon

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?

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25 Responses to For Manchester United Supporters, Glazer Era Must End Soon

  1. Tom says:

    “I would love it” if both ManU and Liverpool missed out on the Champions League next season. Both clubs could be sold at fire-sale prices (like a Florida house), sell players, get new owners etc… Then they discover their roots again, develop players, have affordable ticket prices, and over a few years re-emerge.

  2. YourMom says:

    Really? Using Togo as a clever little quip? Really?

  3. Kate says:

    So crystal ball time, are we saying that in a decade or so, if fiscal irresponsibility leads to ManU’s (throwing in Liverpool as well) decline, we could be looking at an EPL table topped by the likes of Tottenham, Man C, Arsenal and Villa? Seriously? And yet, as a Man U fan I’m not quivering in my boots.

  4. Roy says:

    Maybe if the supporters stop going to the games, and spending money overall… and the Glazers see a drop in revenue, will they sell the club for a loss (to China). I hope so. Then we can start to rebuild without those dreaded Glazers sucking every penny out of the club. Something drastic is needed. United have a swag of players retiring very soon, and upcomers not making the grade. The future looks very very gloomy. It’s time the supporters did something about it!

  5. Roy says:

    A 42% increase in gate prices since 2005 is just about bearable when you are WINNING and have a team worth watching. But this year they have been spluttering all over the place. United may have to drop their prices by 42% over the next 4 years if Fergie claims they will be in a re-building stage. Can’t see it happen though (???)

  6. The Gaffer says:

    Check this out when you get a chance: http://bit.ly/7Str8B

    It’s a flowchart showing the complex financial and corporate structure of Manchester United. This is a perfect example of how what began as a simple football team has emerged into a complex business structure.

    Cheers,
    The Gaffer

  7. Marc says:

    This is the reason 2 years ago I started supporting & really following FC United of Manchester. I’m really enjoying following the lower leagues of the English league pyramid.

  8. Andrei says:

    “… 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.”

    Hmm…. I assume then that when you buy a house you pay cash.

    “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…”

    So if United decide to buy few quality players after all and get back to winning everything will become sunny again? Regardless of the financial situation? To become a financially stable as you eluded to means that Manchester United need to realize that they simply cannot afford any big signing and start making sound business decisions. With or without Glazers. Getting Ronaldo for pennies, grooming him into one of the best ever footballers and finally selling him for ridiculous price was a world class business. Buying likes of Berbatov for 40mil or any other “big player” in the current inflated market is not.

    And btw not signing Tevez had little do with the money or Glazers. Carlos preferred City because at United he had to compete for starting place with Park Ji-Sung…

    • Jesse says:

      Andrei,

      Thanks for the commet. I was hoping someone would bring up the comparison of purchasing a home. In that instance, you apply for a mortage based on your personal income and not the potential of how much your property is, or could be worth.

      If I don’t make $100,000 a year, I’m not able to buy a home worth 2 or 3 times that in order to pay it off with a 30 year mortgage. In the case of the Glazer family purchasing Manchester United, to my knowledge, they split the financing between the family and the club. Putting somewhere aroung 256 million on the club itself. They essenatially leveraged the debt against the club, and not their own personal fortunes as a business/family.

      As far as the Tevez affair is concerned: As a Manchester United supporter, I have no recollection seeing Tevez compete at all for a spot with Park. In all honesty it would more likely have been Berbatov. However it was widely known that Ferguson didn’t think Tevez was worth the asking price that his holders were wanting – something like 20+ million. In this case I have to disagree. It was most certainly about money. Tevez scored goals for United, was a full international and proved he could partner Wayne Rooney up front.

      In this case, United didn’t have the additional funds to secure his services. He’s in great form at City right now, but will also have to stay sharp and compete for a starting spot. City is loaded and they were 1 of the few clubs that could afford Tevez when they purchased him.

      • Andrei says:

        Jesse,

        Though I agree that a home purchase is not exactly the same as buying a business but the difference is not that big. In both cases, how much property or business is worth is definitely taken into account. As you may recall how much home is worth and could be worth in few years was recently the main consideration in taking/granting the mortgage. With business it is well established practice and very few purchases are actually made in cash. And it doesn’t matter if Glazer leveraged the against the club and not their personal fortunes. Like it or not the club is their asset and part of their fortune. We may continue arguing the point but imo it is not that important. At the time of the purchase Manchenster United were (and still are!) a world class organization with tremendous revenue and growth potential. Therefore, Glazer’s actions from the business point view were very sound. What hit them and the club are two things – credit crunch and inflation in the player’s market. Now United have to compete with the likes of Chelsea, City or Real Madrid. They simply don’t have the financial resources to do that nor can they adopt the business model that is not economically sustainable. As you mentioned United maybe forced to be overachievers like Arsenal – trying to stay somewhat competitive and financially stable at the same time.

        As for Tevez situation there was a lot of speculation around it including SAF claiming that Tevez was not worth asking price and Carlos at some stating that he didn’t feel like a good fit in the MU system. Yes, it would be most natural for Tevez to compete with Berbatov but it didn’t work this way. In 08/09 season Berbatov was an automatic starter and Ferguson rotated Tevez with Park (just look at the match reports to see how many times Park was substituted by Tevez in the second half). Only at the end of the season Tevez started to see more playing time. Regarldess, I agree with you that Tevez situation was mismanaged by United but I fail to blame Glazer for it.

      • jleau says:

        “In that instance, you apply for a mortage based on your personal income and not the potential of how much your property is, or could be worth.

        If I don’t make $100,000 a year, I’m not able to buy a home worth 2 or 3 times that in order to pay it off with a 30 year mortgage. ”

        Seriously, you don’t know what you are talking about. Have you ever heard of an appraisal?

  9. jk says:

    I live in Tampa and people here are getting fed up with the Glazers too. They own the Tampa Bay Bucs of the NFL. It’s interesting b/c the Bucs just went 3-13. The Glazers have not spent all the money they can under the salary cap. Many of the people here mistakenly blame this on the Glazers spending all their money on Man U. They also were irritated that they spent none of the Ronaldo money on the Bucs. So its on both sides of the Atlantic.

  10. jleau says:

    “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.”

    Actually it is a smart idea and it’s how most things in the world are purchased. I fully agree, you’re not a financial wizard.

  11. Wall Street says:

    “… 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 irony of that statement is that many wall street and other business experts spend their day valuing the worth of a business and then figuring out how to leverage the purchase of that business. It is what wealthy business people do. Everyday.

    • Jesse says:

      Sure, but that doesn’t make it financially smart, or a proven method in how to conduct business in the long term.

      • Wall Street says:

        Actually leveraging the purchase of a business is a very proven method for conducting business in the long term when it is based on a sound overall financial plan. That is based on 20 years of business and financial consulting expertise.

        What I will concede is that it is not always financially sound. Since I have no idea what the Glazer’s overall financial plan for the repayment of the debt is I have no basis to make an informed opion about the responsibility of the Glazer’s financial plan concerning the debt that has been incurred at Manchester United. However, having read your article it appears that you also have no first hand knowledge of the inner workings at Manchester United or the Glazer’s financial plan and that you also have no real basis to make an informed opinion.

        This article is filled with your opinions, which you are certainly entitled to, but that only makes this an op ed piece. I could just as easily say that spouting one’s own opinions and popular rhetoric is not a proven method for conducting responsible journalism as you can declare that the Glazer’s are bad for Manchester United.

        To be perfectly fair you may be entirely right about the Glazer’s but is certainly appears that you have very few facts other than the extra cash out of pocket that fans have incurred to gain entrance to support your position and this piece mostly smacks of a whinging fan venting their frustration rather than an article to be taken seriously.

        Just for the edification of the EPL Talk readers here is a link to a simple definition of debt leverage. To be fair to it puts in simple terms the upside and the downside of using debt leverage to purchase assets.

        http://www.fourmilab.ch/autofile/www/subsectionstar2_73_2_2.html

        • Jesse says:

          “What I will concede is that it is not always financially sound”

          Thank you – Realistically, that is the point I’m trying to make.

          Also, I based the article on facts that are widely available to the football reading public from trusted sources such as the Guardian, BBC, ESPN Soccernet and the Manchester Evening News.

  12. jleau says:

    Jesse

    I’m well aware of Leeds and that comment is entirely irrelevant. I’m not implying that the Glazer model is good or bad. For the record, I think his use of leverage is highly risky and is not good for the club. I’m just responding to a statement that you have made that could not be more inaccurate.

    What you refer to as “not financially smart” is in fact the opposite. The only type of lending that is done any other way is done through credit cards and lines of credit. I’m guessing Malcom didn’t buy United on his Visa card.

    Maybe you are trying to imply that all debt is bad? That too would be very inaccurate.

    Just say a high level of debt is dangerous and leave it at that. Trying to go any further is clearly out of your depth.

    • Jesse says:

      No, not all debt is bad. I’m well aware of purchasing based on credit. My point is that when the debt becomes so incredibly high, it could lead to financial instability, this time, in the case of the Leeds United saga.

      Let’s pretend United finish 5th this year and miss out on the champions league money. Because of the profits United will make on the day to day running of the business going to service the debt, more specifically the interest payments, United would be unable to purchase any players over the summer and would most likely be forced to sell 1 or a few top players to make up for that lost revenue.

      It’s all quite simple.

      • jleau says:

        That is simple, but that’s not what you said in your piece. As Wall Street has said above, you’ve written an OpEd piece with several factual errors with regards to leverage and how businesses and lenders conduct purchases.

        I’m not taking issue with your stance on United ownership. Please stop explaining Leeds United to me. It is not relevant to your misunderstanding of debt.

  13. Leeboy says:

    That Togo quip – horrible. People died.

  14. Jesse says:

    For the record, the Togo comment had nothing to do with the horrible scenes/attack we all saw last week. I, like many of you were disgusted and upset by the events I saw on TV and read about. I understand it could have been taken the wrong way, if anything, it was more a slight against CAF for not allowing them to return to the event to compete like they had requested.

    Because CAF unfortunately denied their request to compete, it was obvious they had no chance of returning to possibly win the tournament.

  15. Brunomin says:

    If you stand back from the commercial complexities what you see is the most profitable football club in the world spending its profits on a debt incurred by the Glazers to buy the club. Prior to the purchase the club had no debt and could have bought using existing profits or borrowed against its income and assets to buy new players. It’s right to point out that it was a smart commercial move for the Glazers which is effectively sucking the lifeblood out of the club with the irony that despite its huge turnover could become insolvent if interest rates start to rise. If fans boycotted the club the issue would be brought to head as the value would plummett and the Glazers would have to sell at a loss. United would then have to hope someone with real wealth would buy in and pay of the debt.

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