There is plenty of talk about our debt issues at the moment, where just like in 2005, the less than satisfying performances have come at a time of more doom and gloom about the Glazers.
I received an e-mail this morning from a poster on the blog asking me to share some of his analysis with the readers. He works in a financial planning department, is a qualified Chartered Accountant, and has Masters in Economics and a Masters in Finance. In summary, a pretty smart cookie.
I’ve edited his analysis and hopefully this should give us all some more understanding of what is going on at our club at the moment. This is not sugar coating the issue, rather weighing up the negatives, as well as the positives, thanks to a situation we’ve been forced in to because of the Glazer takeover.
First, let’s try to clear up some common misrepresentations:-
- There is a difference between Profit and Cash Flow. Profit made on player sales represents the difference between the sale value of the player minus the written down value of the player in the books of the company. So to say that the entire amount of £80.7m mentioned in the accounts as profit made on Cristiano Ronaldo is wrong as Cristiano was bought for around £12.8m and after accounting for accumulated depreciation/amortisation (which would be a small amount in his case as he was a very young player when bought and his remaining ‘estimated economic life’ would be long) I would say the figure related to Ronaldo is closer to £70m. The remaining £10m is down to sales of other players and youth team/ reserve team players that we have moved on, which is likely to continue in the future as well because United have recently sold on the youth players we think are not good enough to make it at Old Trafford.
- Similarly I read some comments on the lines of “If we had purchased Carlos Tevez for £25m, our profits would have been lower by £25m.” Again not correct. Players are the operating assets of a football club and any purchase made will reflect in the cash-flow statement and not in the Profit and loss statement. So if had in fact purchased Tevez for 25 million, our profits would have been almost unaffected except for the annual depreciation on him, which would have worked out to £2m pounds assuming an estimated working life of 10 years (he is 25 now, so him playing until 35 is a justified assumption)
- Financially, the GLAZERS and THE CLUB are now virtually one and the same, whether we like it or not. Underneath all the corporate veil and the mesh of companies (holding companies, subsidiaries, etc) the sad truth of de-listing is that the company and the Glazers are now one, whether we like it or not. The Glazers debt is virtually our debt, so we can safely say that the secured debt mentioned in the accounts is bollocks and the real debt is closer to £710m pounds after including the PIK loans of around £200m on the Glazers personal Balance sheet. There is nothing the club can do to stop siphoning off of funds from the club to the Glazers and that is sadly a fact for all of us.
The published accounts are as follows:
Match day Revenue is more or less maxed out and shouldn’t exceed £110-112m next year as almost all Old Trafford games were already at full capacity this year, and so no substantial further rise can be foreseen. Unless you consider we are due another yearly rise in ticket prices. There is also the future potential of increasing capacity in the South Stand.
Media Revenue can be expected to rise further to an estimated £105-110m as the payments from the Premier League on media engagements continue to rise. Media revenue is also dependent on United reaching the last stages of the UEFA Champions league and cup games.
Commercial Revenue is again expected to rise next year to around £80-82m as the new shirt sponsorship deal and deals with Airtel and other commercial partners kick-in in full next year. This year figures reflect only a small part of those as they were struck in the middle of the year. The full benefit of those will be realised in 2010 with commercial revenues likely to be significantly higher next year.
Based on the above estimates, the picture for next year should be as follows:
The EBITDA is the key figure that we must focus on, because it represents the cash available for us to repay the debt and interest as well as finance the player purchases.
The depreciation and amortisation figures are just book entries and do not involve cash outlays, which is the key thing for any leveraged acquisition. (Believe me I know what I’m talking about as I work in the Financial Planning department for a company called Tata Steel which itself was involved in $12 bn leveraged buy-out of Corus Steel in the UK, which many of you might know about as it has been in the news lately with Gordon Brown involved in some discussions with the company). As you know, we cannot depend on profit on player sales as they are a one-time ‘extra-ordinary’ income and such huge windfall profits cannot be expected every year.
Also, we must keep in mind that losses on player sales might occur in the future, such as the loss on Louis Saha, Juan Sebastian Veron happened in the past, we may see the same for players such as Nani, Owen Hargreaves, etc. if they are moved on for less than their written down value.
The original Glazer line of giving Sir Alex £25m a year seems to be partly covered, as out of the approx EBITDA of £90-95m every year, £25m could go to player purchases (plus any profit from player sales could be safely re-invested after paying off the tax on capital profits – yes, profit on sale of players do attract taxes!) leaving around £60-65m cash for payment of interest and repayment of debt.
However the real spanner in the works has been thrown in on account of the financial markets going into free-fall. This meant that the Glazers could not refinance the extremely high interest bearing PIK loans (14.25%) and this led to extremely high total interest payments over the last few years (£41.9m and £45.5m is just the interest on Secured bank loans part – add the PIK part as well and the total is closer to £68-70m every year). Also, the cash saved by the club over the last few years from not using up the £25m a year transfer fund (the club has a net spend of £32m over the last few years I think as pointed out by Scott when comparing Sir Alex Ferguson’s spending with Rafa Benitez) has all been lost on fruitless expenses such as derivative fees, fees to financial institutions, hedge losses, etc.
Also, these PIK loans are lowest in the hierarchy of repayments; any repayment would first have to go towards the bank secured “Senior” loans of around £510m remaining on the balance sheet.
You could easily ask why not pay-off these extremely high interest loans first to get rid of them – the answer is that it would not be allowed by the “Senior” bank lenders as these PIK loans are ‘Junior’ loans which can be repaid only after senior debt is repaid.
Also other restrictive covenants based on profits/losses, EBITDA multiples, etc. would be imposed leading to restricting our movements in the transfer markets.
This is where this BOND issue of almost £500m comes in. If it is successful, then the senior loans of the bank could be paid off. This means that the hierarchy of loans is gone. The bonds are planned to be secured on the clubs assets and if you read one of the articles where it says the Glazers can then use the remaining cash at the moment to pay dividend to themselves whereby they can use £70m or so to pay off the PIK loans or use it as they deem fit.
This is where I think, this bond issue is going to help us. It removes the restrictive covenants that the bank loans have put on the club, enabling us to pay off the crippling PIK loans quickly, as well as have greater freedom in financial matters such as further raising of funds.
The Revolving credit of £75m that the club seems to have signed is basically a short term measure or a working capital loan – it should NOT be used to buy players because in principle, short-term funds should only be used for short term assets (and long term owned funds for long term assets) as otherwise there will be ‘asset-liability mismatch’ in financial jargon leading to other issues and expenses such as the hedging loss suffered by the club to match the interest rates, exchange rates etc.
Conclusion: Despite all of Sir Alex’s protestations to the contrary, he does not have all of the £80m from Cristiano Ronaldo’s sale. In theory, yes he does still have that amount of money in the bank account/cash flow, but if the above bond issue does go through as planned, and the Glazers do indeed take away around £70m of the remaining cash, then Sir Alex might just have to restrict his spending. Coming from a working class Scottish background and will put financial prudence and long term financial safety of the club first over immediate success.
Positives: All is not lost, if the PIK loans are taken care of, then in the long term the rest of the bonds and loans can be re-financed, plenty of takers should be available considering that the business model remains essentially healthy and sound. Young players coming through this club are exciting and very large reinforcements are not needed anyway, just a few decent players here or there should help us tide through. EBITDA levels are expected to remain competitive.
Negatives: The club must continue to build on its success. A drop outside the top four could be financially disastrous. We simply cannot afford to finish outside the top four as it would involve a straight loss of almost £40m a year (£25m from UEFA plus all the matchday revenue and commercial revenue brought by it.) Our days of break the bank signings seem to be over. Even if we do make any marquee signings, it will be out of borrowed funds (the revolving credit facilities) and would put us under great pressure to succeed to balance the books in the long run, making the situation even more precarious. Sir Alex knows this and hence the constant assertions of there being “no value in the market.”
The Glazers have taken the club for a ride and needless expenses on financial institutions could been avoided. However, we must also keep in mind that all this was in some ways necessary to move away from being a PLC which was also holding us back as was highlighted by Sir Alex himself at the time of the takeover. Some of these expenses were a necessary evil, but the financial downturn came at the wrong time which has made the situation even worse then it had to be. This answers the question as to why David Gill later approved the takeover in the first place (at the second time of asking the offer from the Glazers was improved upon over the first offer).
We cannot just wish away the Glazers, so the sad truth is we must stick with them and hope people such as David Gill are able to steer it away from all the complications and that the players under Sir Alex are able to continue their success.
The analysis has been restricted to the amount of publicly available information as the club is now no longer a PLC and hence information is not freely available about the goings on inside the club.
A big thanks to Abhay (Red Devil) for sharing this perspective.
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We want the Glazers out on Facebook
Man Utd News 24/7
Looks like united are heading for really big shit. And for the forseeable future, there is no sign of the glazers loosening their grip. I’ve heard in recent days about a fund-raiser, whereby all man utd’s fans across the globe team together and donate £5 each for the good of the club. This would go a long way toward paying off our debt and mean Manchester United would be in a hugely more stable condition. Now i do understand that many fans would be bitter about donating, because the Glazers would effectively have obtained the club for free, but we are the best fans in the world and I believe many would look at it as saving our club at all costs. With little repayments we would be making huge profits an be a genuine contender in the transfer market again. The only other way out is the glazers selling, and finding a buyer would be extremely difficult, plus they wont walk away until they know for sure that their investment cannot be rewarded. By then it could be too late. What do people think about this?
Nice. Cheers for that, very informative and has (partially) relieved me somewhat. Just hope that everything goes as smoothly as mentioned here!
Nice to see the facebook group link up on the blog!….
Good analysis. Well done Abhay & Scott. Its seems we will have to do an Arsenal on it and restrict our spending for a few season and bring young players through until we get our finances in order and pay off the PIK loans.
HUGE thanks to Red Devil. And credit to Scott for posting it.
We Will Never Die.
‘business model remains essentially healthy and sound’ are you havin a laf!!!!!
thank you scott and abhay. a very balanced and informative article.
but what irritates me is fans that are completely oblivious to this whole thing and continue to live in denial. I read comments the other day on a forum saying ‘oh the fans who moan about the glazers aren’t real fans, they just want us to go in to meltdown to be proved right’ and ‘we are fine’ and ‘nothing bad has happened so far i.e. nothing obviously bad so the glazers must be doing an ok job’. one person on another forum even today was going on about how they want fergie to sign ribery, villa and silva in the summer. another said ‘so what if the ronaldo money went on the debt, is that such a bad thing?’, well yes because people want the money re-invested in the squad and the fact the the glazers had to take such a large sum to use on the debts shows how bad it is. people just don’t get it.
thank you for helping me understand it a bit easier , but a couple of things im not sure about , if we (the club) did not have this debt before they came along , why is it not on them but on the club now ? , and i know its a long time away but when is the club expected to be free of this debt ?
Barney – read the whole sentence you goon.
“If the PIK loans are taken care of, then in the long term the rest of the bonds and loans can be re-financed, plenty of takers should be available considering that the business model remains essentially healthy and sound.”
It is reliant on the PIK loans being sorted out. Nobody is saying the model we have at the moment is a healthy one.
@Abhay
Thanks a ton mate. makes everything a lot more clear. I guess you too are from India?.where do you stay? Remember you asking me the other day.
Also few months back there was someone posting comments with the username ‘Abhay Red Devil till death’. was that you?
it sounds pretty depressing,i’d like to see a list of comparsions to other big clubs is every big club in debt or is it just utd? are we the only club with problems.
i might be proven wrong but i still think sir alex has a transfer kitty and the glaziers will do everything to make sure utd stay sucessful they have to.
1.they cannot afford to let utd slip to mantain revenue that is obviously needed.
2,if they are to sell the club utd have to maintain their strength to attract buyers,
it doesn’t make any sense but to make sure utd stay a top club
You really do need several finance degrees to understand all the mess they put us in.
GLAZERS OUT!!!!
Very intresting read – really not good times for the club.
Wish there was something the fans could do. Like it or not the Glazers are here to stay!
Maybe there is a rich emirate based investor looking to buy the glazers out – here’s hoping!!!
“if we (the club) did not have this debt before they came along , why is it not on them but on the club now ?”
PADDYSJUMPER – Because the politicians and football authorities stood by and waved whilst a hundred year old community asset – the then-most profitable sports club on the face of the planet – was put into grave jeopardy by a hostile overseas takeover employing a form of financial madness called a leveraged buy-out.
It should never have been allowed to happen, neither for that matter should the comparable Yankee rape of Cesspool FC.
Player registrations (transfer costs) are straight-line amortised over the period of their contract, not the period of their estimated playing careers.
So Cristiano Ronaldo joined in Aug 2003, on a 5 year contract. His player registration would have been amortised at a rate of £2.45m (£12.24m/5) per year to the P&L.
He signed a new 5 year deal in April 2007. At this time, his player registration would have had a residual net book value of roughly £3.25m. This figure would have been then further amortised over the length of his new 5 year contract, at £0.65m (£3.25m/5). By the time we sold him in June 2009, his registration would have had a net book value of barely £2m.
So by my reckoning we would have recognised a profit on disposal of roughly £78m.
This is an enormous bond issue. A lot of firms are going out and raising debt at the moment b/c interest rates are expected to go up. Article in the FT said we lost $35m on interest rate hedging last year. If we were to do a bond issue now would be the time.
Law firms on the bond issue:
Allen & Overy – Kevin Muzilla (formerly of Milbank) is advising us.
Latham & Watkins – advising the banks.
Banks:
Deutsche Bank, Goldman Sachs, JP Morgan, Merrill Lynch and RBS. Think KKR (private equity) is advising as well. It’s going to be all about how these guys price it (because of the size) and timing.
I have feeling these would probably be High-Yield Bonds (ie. Junk Bonds) because there aren’t clear valuations on us. It’ll be interesting to see what the bond rating is. The interest is going to have to be somewhere around 9.5% at least.
Plus the Glazer’s have been taking out 10 million per year since 2006 for themselves – brilliant that’s 40 million extra for putting the club into so much debt?
I won’t accept the doom and gloom – as long as we have Gill in charge and Sir Alex running the team- it’s a non issue.
The other point is that the business of loans is based on the assumption that people out there are willing to invest lower for the sake of the football team to over ride this debt – this is not a forgone conclusion – so we all have to keep our fingers crossed that the daft Yanks can pull this off.
Fuck me so the best part of 300 million that the club has generated has fucked off to non Manchester United personnel.
Unacceptable – and a disgrace and no Scott although we have no choice this is pure and simple evil regardless that it was a given scenario after coming private from a PLC. They (the daft Yanks) should have used more personnel equity to buy this club – which should be a pre-requisite under the terms of this Government – The FA – and the totally inept and fucking useless fit and proper persons test.
All these people – these fucking parasites have done no favours for Manchester United – we have made all these idiots money because of there support for Glazer taking over the club. I hope in time we all get an opportunity to kick their fucking asses – very very very disgusted at how this club has been treated – like I said they better pull this Bonds bollocks off.
On a lighter noter after letting all that steam off:
JT reckons JT Drogba and Lampard run Chelsea and are bigger than any manager will be.
Fuck me – comment away to your hearts content – what a load of bollocks
Brilliant. This was really needed.
The amount of United fans who act like they’ve got this guy’s financial acumen but actually talk crap is unbelievable. Let’s have more from this guy in the future please.
Bang on FusilliJerry my bro,
I don’t see the gimp’s letting go of our beloved club,why should they? they own the worlds most valuable sporting institution and have paid for it by forking out the amount that it would cost you to buy Aston Villa…fuck me..i’d have done it..we all would of had..so they saw the opportunity and have done nothing less than rape our club.I don’t see the financial situation getting any better unless..
a.we increase the capacity of Old Trafford..which would mean no investment in the squad for a season due to the cost of it.
b.the club is allowed to negotiate its own tv deal…free of the premier league…which is unlikely.
Then i can see sky coming in and buying United,because there would be no conflict of interest..until then i think we should all let the gimps know that they are marked fucking men until they sort this shit out..
Thanks Red Devil and Scott.
I was one of those that said that buying Tevez would have trimmed our profit down. Thanks for clarifying.
A very nice read. Finally i can understand what all those figures and stats mean. But wish there’s really something we can do to force them out. No one turn up on a home game as someone suggested on facebook is really not a good idea!!
Anyone explain what PIK loans mean plz?… I’m just an idiot on these financial things..
@Abhay
Thank you for your view on the debt.
My understanding is that right now we are paying some 60-70 million in interest yearly
Whats is your estimate of yearly pmts if we do manage re-finance?
Best regards
Riisboll
@jezz09: Good idea – how much do you think we could put up donating GBP 5 (or ten)? 5 mil? 10 mil? No idea honestly, but dont think it would help, really would it?
MG – Where did you read that comment?
The best comment I heard today was Torres saying ‘The best is yet to come’ – No shit! Don’t think they could get any worse.
@Briggsy
On JT?
Everywhere – just been on soccernet
Boy for an England Captain and captain of his team – he’s a bit of a dumbo!
Just to change the topic slightly, I see that Joe Cole’s contract expires in the summer
Do any of you guys feel that he’s worth a punt. I say we should offer him a contract knowing he’ll cost us nothing (which is a bonus considering our finances) and can play on the left
Jeet, it is estimated that one fifth of the world’s population are Man U “supporters”. But, obviously, some of these will not be in the position to donate or will not donate. But, one fifth of the world’s population, even a fraction of this, would pay the debt.
Couple of clarifications needed:
1) Players’ values are written down over the length of their contracts not playing career. Tevez at 25m on a four-year contract is worth 12.5m after two years and nothing in four in the books. The club must re-sign players in order to realise their full book value.
2) The Glazers prospectus actually says they paying down 400m of the senior debt and 70m of 116.6m cash United has in the bank will be used for Red Football Joint Venue (essentially to pay down the PIK debt). There’s a 75m overdraft being applied for (not guaranteed I might add) and your analyst is right to say this cannot be spent on players so ignore the Goal.com/Daily Mail articles today.
3) Interest on the bond will equate to around 42.5 million annually. The PIK debt is not being wiped out by this but again your analyst is right to say they can now prioritise it.
4) The bond matures in 2017, United cannot just roll up the interest on this one as they have been doing with the PIK loan.
5) Key issue here is that about 100% of United’s cash is accounted for in debt payment / interest / operations / wages. Cash for players looks almost zero and any spending will come from revolving credit and player sales.
6) If GOD FORBID United drop out of the Champions League player sales would be absolutely necessary or cash flow would dry up.
7) There are more than 20 pages of attached risk warnings in the prospectus and it is described as “high risk” – that’s in the Glazers own document.
@ sayyid
i can see your point but NO…..cole is a fucking show pony, always has been, always will be.
how much you do think it would take for the Glazers to accept a bid to sell? And would a middle eastern oil prince be any better for the club?
just a thought
interesting reading. anybody have any status updates on the bond issue?
How does the new shirt sponsorship factor into the 2010 estimate? Have we already received the money from that deal, or does it come in a lump sum beginning next season, or pay out in installments over the life of the sponsorship?
@ Berbatovs’ love life
it’d be no different mate……..just ask any Portsmouth fan. sad times.
What I’m about to type will disgust many of you. But at the risk of sounding like Peter Kenyon, I’ll say it anyway. You see I find the fact that our club is wilting under the weight of £700m of debt even more disgusting. We’re in desperate straits. So here goes.
Seen as how our club doesn’t have a pot to piss in, I would not oppose the following controversial measures to help alleviate the debt:
1. Breaking the collective TV rights agreement and negotiating our own deal.
Not sure why people think this would be so shameful. Do you think Barcelona and Real Madrid are wrought with guilt as they sign expensive superstar players like Ibrahimovic, Kaka and Ronaldo? Do you think their hearts pang for the likes of Sporting Gijon and Xeres being left behind? Of course not. Football is a dog-eat-dog world, every man for himself. Do I give a shit that Stoke City wouldn’t be able to compete with United if we didn’t share the TV pot? Surprisingly enough, as I listened to their scumbag fans sing Munich songs at us earlier this season, I really don’t! United are the most attractive team to broadcasters BY FAR. The money we recieve from them should reflect this, not this Communist system where we barely get much more money than the likes of Fulham and Bolton.
2. Sell the naming rights to Old Trafford, Carrington and anything else that could bring us in some much-needed money.
I don’t know why people get so up in arms about this. Chelsea and Spurs have announced plans to do it. We could bring in a huge amount of money by having Old Trafford re-branded “Nike Old Trafford Stadium” or “Coca-Cola Old Trafford Stadium” or something. All fans would still call it Old Trafford, except for rival fans of course but would anyone give a shit? I don’t care if it is re-branded “The Nike Coca-Cola Tesco Mars BMW Microsoft Stadium” if it helps get rid of this crippling debt so we can compete for the best players again. It is Old Trafford and will always be Old Trafford. If some sucker wants to pay us £200m to get their name on it, why stand in the way?
Thoughts?
how long before we can be debt free? i have heard no estimates for this…
we can’t be eternally paying vast sums of interest every year? can we?
when do the Glazers expect to have payed back the debt? maybe they just plan to sell the club and it’s debt on to some other fucker…
viva barca
First, a big thanks to Scott for actually posting it.
Am glad to be of help to fellow reds.
@ SloppyG
Fair point mate. But thats more a point of accounting and taxation rules and regulations applicable in the country in which the company is registered. If the cost of player purchases are written down over the initial contract period only, then we would get the tax-shield on extra amortization in the initial years, but it would require revaluation of the players at fair market value on renegotiation of the contracts and all, which is not an easy business. But that could be the case in the UK so point taken.
@Riisboll
If the bond finance does go through and the glazers do indeed pre-pay part of the PIK loans then the overall interest bill (inclusive of the part payable by glazers on these loans) will come down. As of now, the interest rates on these bonds being talked about is 8.5% and so 8.5% of 500 works out to 42.5 million, plus the portion of PIk interest (which should be lower than previous years as the principal part will be reduced because of the pre-payment) However, we will have to incur pre-payment penalties because generally PIK loans are not repayable before maturity (unless provided for in the terms of the loan)
The sad part is that these loans were taken when interest rates were at their peak before the financial meltdown and 14.25% is prohibitive by any standards when current rates on bank loans are closer to 5-6%
For greater detail of PIk loan you can refer to http://en.wikipedia.org/wiki/PIK_loan
although I doubt the average fan can make much out of it with all the financial jargons used in it !!
@ AIG Alex is God
Yes, I am currently working in the Calcutta office of Tata Steel in India and indeed that was my earlier username, it was a bit flash so I decided to ditch it. I know I am Red till death, (as I hope all the others here are) no need to push the point I thought!
Well since this article has now established the fact that Fergie infact,does not have money to spend,we should expect Fergie to be focussing more and more on the younger talents breaking through.
There’s also this challenge that we’ll still have to be competitive and if we don’t,things are going to become worse financially.
This is indeed a testing time for Manchester United FC.But if there’s anyone who can keep the club afloat without the shit hitting the fan,it’s Sir Alex Ferguson.
He simply has got to be here even 3-4 years from now,ensuring that he keeps us competitive by nurturing the boys who are on the verge of breaking into the first team.
envy barca. the only way a club should be run
when is it going to end? does anyone even know when we can expect the debt to be repaid? a hundred years? anyone?
cheers glazers you fat american twats.
I read the article slowly and carefully, and understood nothing except for a few lines.
But then, I’m 15, these things are too “grown up” for me.
@ boogeyman
I wouldn’t worry about it, i’m 32 and could only just follow it. the only thing you need to know and understand mate is that WE are UNITED, and WE will NEVER die.
and on and on and on and on…….
I also work in finance though I am in the early stages of my career and don’t have nearly the same experience/knowledge that Abhay does. This is definitely the best summation of what’s going on that I’ve read and sums up our current state very well.
Nitamar : PIK = payment-in-kind. This loan was taken at a high interest rate (14.25%) by the the holding company of MUFC. This holding company is owned by the Glazers, effectively making it a personal loan to the family. And like the post says, Glazer debt now does equal MUFC debt, unfortunately. The PIK nature of the loan means that the interest gets tacked onto the principal and then interest is charged on this new amount. It’s a very unfriendly form of debt for the borrower and the Glazers assumed it could have been refinanced earlier but then…well AIG/Lehman/Bear Sterns all happened. Almost comical how our own shirt sponsor played a role in this…
Ultimately, this bond issuance could help but the situation is the result of a combination of poor planning and the unexpected global credit crunch. The combination has resulted in basically putting us in a position that could hamper the club’s ability to compete via the transfer market. So no, we will not be making any splashes a la Real, City, or Chelsea anytime soon. But we are also not broke. The operating model is still sound (as noted) and the brand should continue to generate cash over the near term ASSUMING the team continues to perform well. Falling out of CL qualifications or losing early in the competition could have disastrous long-term consequences. Because of this, I can’t see the Glazers allowing the team to fall out of competitive position. They will not restrict SAF to the point where we can only buy if we sell. But if Real come forward with a Godfather type offer for Nemanja, do not be surprised to see him off to La Liga.
Re: the increasing debt reports. The PIK will NOT rise to £500MM+ unless the Glazers are absolutely financially stupid. That is an absolute worst case scenario and, based on the plans to take out up to £70MM of cash to repay existing debt (aka the PIK), will not happen. Should they reduce the £200MM PIK by that £70MM amount, this debt, after interest this year, will be about £150MM at year-end. Improved, though still not good. Paying this debt off, and the ability to pay the debt off (which, at the moment, we currently cannot due) is paramount though. And it’s fortunate that we can at least begin accomplishing this task if this bond issuance goes through (early indications are that it will).
The Glazers have screwed over the fans, that much is certain. It will be up to Gill and SAF to minimize the damage going forward.
Hate to piss on your chips, BUT:
Seems that the new bond issue the Glazers have planned is being met with a certain ammount of scepticism in the city.
http://www.bloomberg.com/apps/news?pid=20601102&sid=aAWZj7e0FDnw
Jan. 12 (Bloomberg) — Manchester United Plc may struggle to sell 500 million pounds ($806 million) of junk bonds because it isn’t rated and investors have other options, said Jonathan Moore, high-yield analyst at Evolution Securities Ltd.
The 18-time English soccer champions plan to issue seven-year bonds in pounds and dollars. Management is meeting potential investors in Asia and Europe this week, and in the U.S. next, in an effort to interest the widest possible circle of buyers, said Tatjana Greil Castro, who manages about $1 billion of high yield debt at Muzinich & Co. Ltd. in London.
“Most traditional high-yield investors won’t touch this,” said London-based Moore. “It’s unrated, so some investors can’t take it, and there’s a very busy new-issue calendar so there are plenty of alternatives. Most people just won’t focus on something with far too much leverage, limited free cash flow and lumpy earnings.”
A spokesman for the U.S.-based Glazer family, which owns the club, declined to comment.
Manchester United is seeking to woo investors as high- yield borrowers attempt to raise as much as 45 billion euros in Europe this year, according to Barclays Capital. Fresenius Medical Care AG & Co. KgaA is seeking to sell 250 million euros of junk bonds and Virgin Media Inc. is offering 500 million pounds of notes denominated in pounds, euros and dollars.
‘Skeptical’
Red Football Ltd., the Glazer’s holding company, still has debt of about 608 million pounds stemming from the family’s 2005 buyout of the club, and interest payments have caused losses.
“This will be a difficult sale,” said Greil Castro. “My first reaction is that I’m skeptical. It’s a sector thing, all based on how well they’re doing on the pitch and other things they can’t fully control.”
Red Football had net income of 25.6 million pounds for the year ending June 30, 2009, after the club sold star player Cristiano Ronaldo to Real Madrid for 80 million pounds, according to the offer document. The club also got an advance payment from Aon Corp., the insurer that puts its name on players’ shirts, of 35.9 million pounds.
The club “seems to assume” it will pay about 9.25 percent interest on its new bonds, based on so-called pro forma figures in the offer document that outline what its finances would look like if it currently had the bonds, said Moore. These show pro forma gross indebtedness of 512 million pounds and an interest bill of 46.3 million pounds a year, or 9.04 percent.
European borrowers with comparable debt profiles are in the B category, according to Moore. Investors currently demand yields of more than 9.5 percent to buy their debt, Merrill Lynch’s Euro High Yield, B Rated Index shows.
Manchester United Finance, the company selling the bonds, hired Bank of America-Merrill Lynch, Deutsche Bank AG, Goldman Sachs Group Inc., JPMorgan Chase & Co., KKR & Co. and Royal Bank of Scotland Group Plc for the deal.
Why dont the Glazers just pay off the debt with THEIR OWN money
I’m fed up of all these rich people around the world building up their empires using other people’s money. It’s a complete disgrace
This sort of economics should be banned worldwide. People should only purchase what they can afford. As a result, society would be more equitable and more affordable for everyone.
The Glazers are a disgrace…sitting on a billion dollars of wealth yet put our club in so much debt
can someone just give me one simple answer are we fucked or can we get rid of this debt?
@Anonymous
On the tv rights deal – with you there – If we had that kind of deal we’d be bettering the deals that Real and Barca have – no doubt since we have a better following.
But
Sorry you have to be out of your mind to call OT anything but OT – no matter what anyone says that it would be okay naming it. Fuck Chelsea for one moment and Arsenal and Newcastle etc. This is Manchester United. The ground is sacred – it must remain a part of the homage to the value of United – it must never be sold out for any reason whatsoever.
Let me aslo point out clearly
the team has generated 300 million pounds since the Glazer’s takeover and that has fucked off to non United associates. The question on whether the club will be asset stripped is ridiculous and scare mongering now that the papers a few days later have got onto the point of selling Rooney – what a load of bollocks. I guarantee you Rooney will be the last one out of the OT door – so help me God if he isn’t.
Further
Get real: Ronaldo wanted to fuck off and have a dream – and yet they forget that when they print United have to sell to balance the books. They never wrote that when the virus was off – they always wrote that he was going to the bigger club – to the better weather – to better himself – which is more bollocks anyway.
As for Tevez – no matter what anyone tells you he was told to stay – he got aped by City into more wages and more rights – yet what did City offer Tevez that say Arsenal couldn’t or Chelsea or any other top European club couldn’t? Yep Money money money and more money.
When they say we lost the virus and Tevez they write with contempt – they wanted to go. All this talk is overpowering a lot of United fans simply because we have had a very bad month on the pitch – first and second choice defenders out – add to Berbatov not scoring – a lot of fans are rightly or wrongly upset that the club has maybe not invested 30 million pounds wisely – especially when it looks as if no money is available or that SAF is telling the truth when he believes that no players are available to his liking – we’ll see.
It is extremely difficult – as mentioned we are hoping that Bonds issue pulls off – if not the Glazer’s should just fuck off and give it to someone who’s going to nurture the club – I couldn’t care less if he/ she made money as long as that United weren’t getting fucked in the process.
At the moment what a testament to the club that it continues to generate money – but what a folly that the Glazer’s have let 300 million get away from them – fucking ridiculous
@ come off it mate…
First of all, you should really come off the “viva barca” thing.
If you really think Barcelona are the team to support, then why be on about the debt and on a man united blog in the first place.
As for the how long before we are debt free… that is not an easy question to answer especially given the lack of transparency and how little financial information is actually given out by the club since the takeover.
Being completely debt free is also not good business in the long run, as the interest paid on the debt is a tax-deductible expense and helps us to reduce the tax bill. A manageable debt-equity ratio is what the club should strive for.
The key to managing the scenario is how we negotiate the treacherous PIK loans as already pointed out earlier. I expect similar re-financing deals almost every year until these are shipped out of the collective Glazer/Man United balance sheet as the Operating cash flows generated by the club are not enough to repay these loans by themselves.
Also it must be kept in mind that pre-payment of these PIK loans usually attracts heavy pre-payment penalties….
God damn you Glazers….couldn’t you find any other avenue to raise the funds.. I hope the young players coming through can take us through this mess…which clearly brings into focus all the recent comments by Sir Alex about our young players.
He’s constantly trying to big them up, protecting them from criticism, blasting the media that criticize them….he knows that he has to depend on them coming good.
And contrary to reports in Goal.com and Daily Mail about Sir Alex having funds from the revolving credit facilities to buy players….it wouldn’t make very good financial sense as I have already pointed out in the article although cash is available in the strict sense of the term.
However, we are not completely skint as well and if our scouting system can come up with a few more Vidic & Evra kind of signings, good players for medium prices, we can definitle afford them with our operating cash.
Got to plead ignorance in understand very little of that!
In other news, The Mirror claims that the Gayzers are putting 75 million pounds available for SAF for the Transfer Market.
http://www.mirrorfootball.co.uk/news/Manchester-United-will-hand-Sir-Alex-Ferguson-a-75million-transfer-kitty-to-buy-big-names-and-boost-bond-sale-scheme-article284949.html
Apparently, the most hated family (or gang) on England, think that a wining and strong team is a great way to attract new investors. And the trip to Qatar having a game at saturday could be a great way to impress oil chiefs and middle east investors for the bond issue.
Now, can we for once trust The Mirror?
If yes, we could use Di Maria, Hamsik, Dzeko, Ozil, Silva and/or Villa. There are many options, but who could combine price and value?
@fifthcolumnblue
Yep but to counter that – that piece is true to a point – however it’s more or likely that someone who detests United have written the worst possible outcome. And aren’t their many out there who are ridiculing us?
You don’t see a counter argument do you – therefore it’s just scaremongering again.
In simple terms as I have explained the Yanks have to find people who have money who share an enthusiasm in Manchester United.
There aren’t many companies in the world that can offer high interest rates of return let alone any return – so if we can offer something – as long as it means that we don’t get fleeced – people will open to that. Alternatively the Glazer’s could have gone with Equity Bonds but then that would have meant that other’s could have come in to eventually buy United – something they still refuse at the moment – dicks. I wish they could point out a long term business plan – the short term one has been nothing short of fucking ridiculous.
Still confused!
@ Joe_mufc
I wish life were so simple mate…you see things are not just black or white, there are a million shades of grey in between. I hope it answers your “are we fucked or can we get rid of the debt”
Of course we can, we just need things to fall in place for us.
@MG
what would you rather have, the club going bankrupt in the long term or have Old Trafford renamed as “XYZ Old Trafford”
I myself would stand dead against any renaming of Old Trafford, in fact it was what the Glazer bastards promised at the time of takeover that it would not be renamed. I would still prefer to hold out for other avenues until all other possible options are exhausted…TV rights is one but I dont see United going down that road.
But at the same time we cannot let the situation go out of hand to such an extent that it becomes unsaveable….I just hope David Gill can hammer out some more commercial deals and tie-ups!
@Dani
Fuck the mirror – they had an orgy fest on Sunday writing SAF is letting half of the team go.
As far as that 75 million is concerned – because it is apparent that it is a loan as well – no thanks – the club needs to spend the money it has rightly generated – not another fucking loan that we’ll have to pay back in interest.
How about the Glazer’s stop taking loans from there own club (I’m sorry I wrote that – unfortunately I can’t say it another way) at favourable rates and give it to SA?
Them lot are fucking terrible.
@MG
You will see there are at least three different people quoted in that article, and Bloomberg is a highly respected source of Financial journalism.
So did their reporter go out of his/her way to find 3 red-haters to interview, or is there a genuine consensus amongst fiancial analysts that your debt is just too risky?
Think you are hiding your head in the sand on this one
More about the televison deal:
“Florentino Perez goes on to clarify that “Real Madrid takes about 400 million euros a year, the fruit of three sources of income – a third from ticket sales, a third from television rights and a third from merchandising.” In 2006 Real signed a seven-year individual television deal with Mediapro worth roughly 1.1 billion euros.”
http://www.just-football.com/2009/06/real-madrid-revolution-galacticos.html
A quick Google calculates that 1.1 billion Euros = 986.864932 million British pounds! If we got a TV deal like Real’s we could fuck that debt off for good! And we wouldn’t even have to re-brand Old Trafford at all.
From a Guardian article: “In Spain, by contrast, the top clubs sell their TV rights individually, which means Barcelona and Real Madrid make hugely more than others in the same league. Here United will earn just 1.7 times the Premier League TV income of West Brom, while in Spain it has been estimated that Barça make 14 times the money of the bottom club.”
You read that? United, the champions, the best and most well-known team worldwide make just 1.7 times as much as the worst piece of shit in the League from the current deal. That’s ludicrous whichever way you slice it. Barca make 14 times as much as the Spanish equivalent of Hull or whoever, which is how it should be.
We should fucking go for it.
@ fifth column blue
I could easily find you articles from equally respected sources that say the bond issue could go through. In fact since the roadshow for the issue began, there have been reports that the lead “bookrunners” (agents in commonspeak) for the bond issue have been pleasantly surprised by the response in South-East Asia..
So I’m sorry to break your illusions of our impending demise.
@RedDevil
Do not even go there. I know we are all angry and this is all passion talking but come on – like you or anyone else that is bound to United I would never want ill of my club under any circumstances let alone that the club falls.
Let’s talk principle – already the Yanks have held the debt against the asset of the ground – fucking ridiculous. We cannot let them carry out an injustice just for the sake of them making more money to give on to the banks or hedge funds etc.
Remember – as I have mentioned – the club thankfully is generating enough money – it’s just that it’s not coming back inside but going out to idiots who must be enjoying the Glazer ownership of MUFC
Know this – if they continue to sell the name of the club off – many different companies or people will hold a part of us which would make it easier to asset strip. The club must stay as a whole and together through this shit which is going down. We answer to nobody – nobody has any rights over us. We are a football club with history and tradition – we alone are making this money because of the very nature of the club that can sell itself.
You do know that if it got to that point of selling off OT’s rights we would be seriously fucked. What would we then have left if the debt was still there?
So yes believe that Gill can stay two steps ahead of the Yanks.
Well it higlights my point that this is what you get when we have total idiots who run the FA and premier league they have no backbone. There is the prat who is the chief executive of the premier league richard scumdamore, who is willing to sell the very soul of our game to the yanks and asians by having the 39th game.
It gets even better, then there is the idiot who runs the FA brian barwick who said on the record on talksport radio 5 live this is what he said (we will have to wait and see if the glazers are good owners) hmm interesting so he is willing to play russian rullet with our game. It was their job to protect football clubs from money leaches like the glazer and gillet and hicks who buy institutions like united and liverpool they cant afford, so they borrow heavily. And basically strip off all the assets sell the club for a profit and leave the club in worser state than before.
It is a total joke how this glazer family from the hills have eyes were even allowed to get hold of a football club when they clearly could not afford to buy united. In their time they have never really funded fergie the cash, we relied on experienced players our defence and the brilliance of rooney and ronaldo while they have had the freedom to do what ever they like because we wre succesful. They have given nothing in return other than crippled united financially from competing for the best players, but instead our profits are being drained by the vampire family for their debt.
We have had enough now of these pocketless owners who take us fans for a ride, it is time us united and liverpool fans came together has one and protest against these bastards who need to be held accountable for theiir willingness to put us into the finanical abyss, they are willing to destroy the hard work these clubs have done so these heartless bastards can make a profit by any means, even if it ment bankrupting the clubs. If rooney gerrard are sold in the summer it has to be the straw that breaks the camels back.
well i guess its better to be a business than someone’s real life football manager
@thevondrew
We get £35mill next season with the remainder being split over the 3 subsequent year
I can’t help but think that cunty michel platini would be allowing this to happen to Barca or Real Madrid. Fifa would never have sanctioned any such deal for any big club outside England, and if somehow a deal had passed, that horrible cunt would be offering them some way out of it!
@ MG
I respect your passion for the club mate…at no point am I ever questioning it at all. I was just responding to an earlier post from someone pointing out the possibility of selling naming rights to OT. As i have said myself, that would be the absolute last possible step to save the club. But I doubt things will go that bad.
BELIEVE….We’re Man United, we’ll never die!
@fifthcolumnblue
Bullshit
Even in the world of power and business there are sides.
They all refer to the same thing that I have been saying for days – they assume that United can’t pull it off because the return would be unfavourable.
Bollocks.
The banks know it’s an investment – if the club goes to pot they will loose out too – much more than the Glazer’s. It’s imperative for them to know that in today’s recession fuelled world that they too have a guarantee that they will get there money back – thus the Bonds come into play – it too offers them a reassurance that they will be paid back and it wouldn’t make sense for them in today’s financial climate that they refuse such an offer – hence that is why they are on board with the Bond issue – even though if it means they loose out on a certain percentage – but I have pointed out that the banks are prepared to forsake that extra interest if it means that the investment they made in loans eventually pays them back.
I couldn’t give a fuck about what seasoned financial reporters say – any argument has a counter argument – every discussion has a for and and an against with a balanced equation.
The Glazer’s have no choice because they will loose – the banks have no choice to accept the Bonds proposal – which they might have even initiated – because they will loose if they don’t change track with the way United is run – it’s all about the numbers. 300 million has made them rich. That can’t continue if they keep on eating into the club. Everyone looses if United loose.
United will always generate money – that is a given fact. But it can’t be held to ransom by it’s owners or it’s banks no more – so at the end all be it still to our disgust – everyone wins if it means the debt is addressed.
Sorry to rock your boat
@RedDevil
With all you all the way mate – For Manchester United.
I really hopethe old bastardhas another stroke, join this group.
http://www.facebook.com/#/group.php?gid=237878324590&ref=mf
I would hate to see us go the Newcastle way. I mean something_lame@Old Trafford? Seriously.
I just hope the team does well and long may our power continue. And with all the stupid things that some Arab owners are doing at the various football clubs, I personally will rather we stick to a lesser evil. Heck, I would hate to see us do a Newcastle or a Leeds. But we have got to face it up to the possibility and we must continue to support Man Utd in the most adverse of scenarios.
And same goes to the dippers. I might incur some wrath by saying this but seriously, I will hate to see them go down all the way like Leeds did. In fact, I will want them to continue to suffer being second best, and what better way than to play them at least twice a season? And yes, I will want Leeds up too, and we get to play them twice a season. No point winning when all your enemies are just dead in the water of their own doing.
Long Live Manchester United.
Thanks to RedDevil for taking the trouble to explain all this financial stuff, which all of us who support United need to get a grasp of. It’s complex, not easy to fathom out if you’re not used to these kinds of accounting issues, so I’m really grateful for the explanation of the key issues. I guess I’m like many others, football is an escape from ‘the real world’ (although that doesn’t make it unreal), where you can try to forget financial problems and economic crises, but this shows you really need to get across it. I would urge everyone to join MUSA as soon as possible as having a well-organised and well-informed pressure group ready to analyse what’s going on and comment quickly is vital. Their mere existence helps keep the pressure up on Gill and the board. Ultimately it cannot be in the rational interests of the Glazers to let the team fail in the long term, or they just lose even more money.
on the tv deal idea:
it’s a nice theory, but 3 problems:
> the spanish league has 2 big teams in reality (i know that valencia, villareal, Atlético Madrid and sevilla are good teams but realistically they are the spanish versions of aston villa, tottenham and man city) so in theory the combined real madrid/barcelona kitty of what – 2 billion? would need to get divided 4 ways equally 500m a piece
> what makes our premier league unique and in my opinion the best in the world is that the whole league works together as a unit so all 20 parties should get enough money to function successfully in the league in theory so potentially any team can beat any team, no matter what their position on the table – making the pl unpredictable and therefore exciting to follow. The la liga on the other hand may at times be more aesthetically pleasing to watch at times compared to the pl but in terms of following the league it’s a bore as the end of season results (for probably the next half decade at least) are a 90% full gone conclusion! – barcalona and madrid will finish a country mile ahead of everyone else (well, at least a 10pt gap) and i don’t think spain cares about/enjoys the relegation as much as in england, so chances are they don’t have a ‘carrera hacia la liga’ either like our ‘race to the premiership’ as their is no big windfall (or not in the same way) as the big boys are taking more than their fair share. the irony is that if madrid wasn’t getting that 1.1b euros over 7yrs (£141m a yr approx) they’d be below us (and prob quite a few of the pl teams) in annual income (before tax and loan repayments of course). call me old fashioned but i believe that money being funneled in to a league as a whole should be shared out (the top finishers getting slightly more and the bottom slightly less) not given to a few individuals and this may be something that both the spanish and italian leagues may have to address in the coming years to survive as a unit and not just individuals – esp if this recession doesn’t re-right itself fully in the next few years (sorry – slightly off topic)
> the majority of utd fans hate madrid (and probably aren’t overly fond of barca either after the cl final) why on earth would we want to swallow the bitter pill and follow the example of our enemy, surely we have more pride and respect than that then to potentially rob money that should belong to other clubs – this is our issue so why should other clubs unwilling have to get us out of it!
There is no overnight fix to this whatever happens and who says that if the glazers went our new owner wouldn’t also put us in debt. But i do think that the debt does need to get cleared within the next 4yrs before it impacts so heavily on the club that it is never able to fully recover, and even though the bonds could turn out to be a step in the right direction it may be a little too little a little too late, but i am a little bit puzzled why the bond’s weren’t suggested a bit earlier than now before the club had paid so much interest and i hope that these bonds are just stage one of a bigger plan to clear our debts in the next few years.
Let’s all chip in a fiver and get a world class assassin to kill these cunts. This is OUR club
Thanks, guys, for the info.
My head is spinning as I try to fathom out all the analyses. And I appreciate this latest breakdown, on this site, which seems to be quite objective in its presentation of the situation. It is both reassuring and ominous in equal measure.
What we must remember is that there is a sizeable wedge of ABUs out there (particularly on Fleet St), and not only are they enjoying every minute of our discomfort, they are spinning things in a way to make things seem worse than they really are. And, take it from me, a lot of these so-called journalist experts don’t completely understand what they are talking about – think about it: their mathematical acumen is generally limited to working out goal difference or the relative merits of 4-4-2 v 4-3-3 v 4-5-1. Then, suddenly, they become financial sages who can instantly understand and explain the intricacies of a corporate balance sheet? And ask half-a-dozen City journos to examine the united situation and you’ll get half-a-dozen different answers.
Ironically, it was Ladyman of the Chelsea Fanzine (sorry, Daily Mail) today who crystalised the situation as it pertains for United. The Glazers seized United but are too small-time for the biggest club in the world. They are so far out of their depth they arrived wearing water wings. The fans, who detest the Glazers, have seen from the start just what was going on but, in truth, were totally powerless to stop it. And, as others have pointed out, the authorities (both football and government) could and should have stopped all this if they had done their job properly in the first place. But, again, the ABU factor kicks in, and those clouds the judgment of those who are not United fans.
What I found particularly galling about all the guff today was the quote from the non-swearing Hicks who, clearly proud of Anfield’s astute financial management, brags that at least they didn’t have to sell their best player to balance the books.
It’s the maintaining top 4 and late stages of the champions league that are going to be the tough parts of the model to maintain. This balance sheet also fails to account for the capital we’ll have to allocate to a new manager when Sir Alex retires (especially if Mourinho is the one we want). Ty for the analysis though it sounds like we’re pretty fubared.
MKRed – exactly the FA the premier league in perticuler are totaly to blame for allowing pocketless leaches buy our club. if you have not got the money you dont get the club. we hear rooney may have to be sold to keep the glazers incharge of our club. And they are taking money united made out of the club so they could pay for luxerys for themselves like pools cars etc
having a party when glazer dies
“What I found particularly galling about all the guff today was the quote from the non-swearing Hicks who, clearly proud of Anfield’s astute financial management, brags that at least they didn’t have to sell their best player to balance the books.”
if LFC fail to make the champions league next season, I fully expect them to explore selling Torres and possibly Stevie Me. At the moment, financially, LFC look to be in a more precarious position considering the team’s current performance. Hicks does not have a particularly strong leg to stand on in this situation
…yet.
Sorry i meant they don’t have to sell their best player yet
Just a comment on some points mentioned:
The distribution of domestic TV monies in Spain will eventually come to an end. EUFA were instrumental in finishing off the old system in Italy, it will happen in Spain one day.
If UTD tried to go-it-alone on domestic TV revenue, I’m sure they’d be kicked out of the EPL.
However, there’s one point that never seems to get discussed, either on fans forums or in the press – What has the FA done to ensure a situation like this never happens again?
The financial side of football is fascinating. Sincerely sorry that the Glazer LBO has so significantly impacted financially Manchester United. I suspect that there is no much value to the club that there will always be someone around to buy it or an interest in it to bail out the Greedy Glazers if the shit really hits the fan.
It’s really shocking that more of the profits (or what should have been profits) over the last decade of unparallelled success hasn’t been used to retire more (indeed any) of the debt. I suppose they were used for player acquisition and interest payments…
In any event, the shirt sponsorship and prepayment of same is interesting. It’s reported that some 36MM of the sponsorship deal has been prepaid. I assume that it’s included in the commercial revenue for year ended June, 2009. Isn’t this borrowing from Peter to pay Paul (ie. 2010 numbers will be negatively affected by the prepayment of revenue that would otherwise have been accounted for then)?
Guessing that Sir Alex has been told he can have the cash from player sales to re-invest in the squad. Ronaldo’s payment, it’s been reported, has been staggered over four years. Meaning that Sir Alex got 20MM to spend in year ending June, 2010 (spent on Valencia and Obertan) and will get 20MM to spend next year plus whatever cash he gets from sales this summer, etc.?
Sounds like the Arsenal model has arrived at Old Trafford…
i was on the facebook site and someone said that tufty YES remember him? he was on SEF licking the glazers arse…tufty ur still a cunt!!!!
Perhaps this man would be good for UTD:
http://en.wikinews.org/wiki/Lakshmi_Mittal_tops_Sunday_Times_Rich_List
From 2007 to 2008 his wealth increased by £8 billion!
He’s a part-owner of QPR so he does have an interest in football. And he lives in London.
Whatever happens – Final vs Barcelona or away to burton albion…
United Till I Die!!!
@ the friendly Arsenal fan
We recieved the 80 mil quid for Ronaldo upfront. Fortunately we still have a marque forward like Rooney… but Arsenal Model indeed.
…y’think we could get that Russian of yours?
“Added together, the management fees, consultancy agreement maximum and the £10m the six family members actually borrowed from United make a total of £22.9m paid to the family and their affiliated companies in three and a half years.
No explanation was offered yesterday for these fees, or for why the Glazer family felt the need to borrow £10m from Manchester United. The Glazer family’s official spokesman, who is responsible for discussing United’s financial affairs, declined to comment.”
Full article:
http://www.guardian.co.uk/football/blog/2010/jan/12/manchester-united-glazers-debt
Parasite [par-uh-sahyt]
Noun – An animal which lives during the whole or part of its existence on or in the body of some other animal, feeding upon its food, blood, or tissues, as lice, tapeworms, etc.
FusillyJerry
I read that as well and it’s completely ridiculous. Why the fuck did the six Glazer (hell)spawn each borrow £1,66mp? Are they just milking the club for any money they can get their hands on? I don’t get it.
Scott and Abhay:
Thanks for the analysis.
One point on the PIK loans – I see your argument that these PIK loans are linked to the club because the Glazers will likely use the Club’s cash flows to service these loans. But legally, these PIK loans are not guaranteed by the Club – i.e., should there be a defualt on these loans, the Club is not liable for payment. If the Club was liable for these loans, these loans would have to be disclosed in the Bond prospectus as a financial obligation.
Instead, these PIK loans are secured against shares of the club, and I would add, a minority stake of the club. The Glazers would never have used the controlling stake of the Club to secure such a small loan (relative to the value of the Club). On page 5 of the Bond prospectus, the shareholding structure of Manchester United Ltd shows that 28% is owned by Red Football Junior Limited – I believe that the PIK loans are borrowed by this entity and thus the shares used to secure these PIK loans only represent a 28% ownership of the Club. What this means is that if these PIK loans are in default, all the lenders can do is to exchange the PIK loans for a 28% stake of the Club. With a minority stake, there is little these lenders can do except wait till the Glazers decide to sell the club. This also explains why the interest rate of 14.5% on these loans, rightly called Junior debt, are so high – because lenders are taking a high risk that these loans don’t get paid and get converted into equity instead.
Hence, we should only be looking at the 500m loans (to be refinanced by the bonds) and the potential 75m revolving credit facility as the debt outstanding. In view of this, the worst case situation is this: should the Club get into financial difficulties and default on the bonds, all the Glazers need to do is to find someone to buy the club for at least 575m (plus any interest expense due and not paid). For a club that generates annual net operating cash flows of 80-90m pounds, and owning valuable property including Old Trafford and Carrington, this is not as difficult as many people have been led to believe.
Thanks a lot, Red Devil, a great piece of analysis. I’m a recently-qualified accountant from Hong Kong and one thing on the accounts of Red Football kept bugging me – why would they amortise the goodwill over 15 years on straight like, when IFRS now requires impairment tests to be done annually, and prohibiting the old UK GAAP treatment of amortising goodwill?
As for your hypothetical example on what if we signed Tevez for 25m – I’d say the amortisation would be done based on the length of the contract signed initially – likely to be a 5 year one but less likely to be 10 – you’d then be getting a 5m amortisation each year. Say at the end of the third year both parties signed a new 4 year contract with, say, 2m signing fees paid(i.e. 6 years remaning), you’d then revise the amortisation by taking the written down value, i.e. 10m, plus the 2m signing fees capitalised, and amortising it over the remaining 6 years.
Re the comments of Anonymous,January 12th, 2010 @17:08…”Breaking the collective TV rights agreement and negotiating our own deal”
I recall reading a column in one of the financial magazines just a couple of months ago which I now wish I had saved.
It predicted precisely that, which is why investors are so keen to take control of big football clubs. The day is envisaged when a club like Manchester United can sell a £10-£20 pay per view subscription to anyone, anywhere in the world.
What sort of money can that bring in? How many viewers will be willing to pay that sort of money to watch a live telecast of any game they want? One million? two? five? ten? 15? 20?…the sky’s the limit! The bigger the game, the more millions will scramble to watch it. Multiply those numbers 25 to 30 times a year for home matches and the mind boggles at the millions of pounds which will come in to the club every season.
That’s without taking into account the selling of internet rights and additional sponsorships because of the huge number of viewers.
As the financial guru predicted in his article, we are not talking 20-30 years from now but 5 to 10 years at the most. This scenario may go a long way towards explaining why people like the Glazers, Hicks, Gillette and others are prepared to borrow funds at high interest rates and do whatever it takes to hang on to their clubs. They can see the fortunes that will be on offer in a short period of time.
cikku Said,
January 13th, 2010 @3:21
Not true – it won’t happen.
UTD will be kicked out of the EPL if they tried to go it alone.
And EUFA won’t be too happy either. After all EUFA broke the system in Italy when each club negotiated its own domestic TV revenue. Now look at the big Italian clubs – almost broke with no money to spend on new players.
The system in Spain has a limited time in existence – relative poverty awaits RM and Barca.
Just spotted this article in the Guardian on-line. Looks more and more ominous……
http://www.guardian.co.uk/football/2010/jan/13/glazers-manchester-united-training-ground
Heard that even we’d sell Carrington?
http://www.guardian.co.uk/football/2010/jan/13/glazers-manchester-united-training-ground
Further Developments
The prospectus in the bond issue apparently contains a provision that allows the Glazers the opportunity to transfer (read:sell) the Carrington training ground and Old Trafford and lease it back to United on a long term basis.
I reckon the Glazers might be planning to use the “sell and lease-back” arrangement on Carrington to transfer the bond money to the clubs books to pay off the bank loans and proceed with the rest of the plans of paying out some portion of PIK loans as already pointed out earlier.
Bloody hell, and then we’re going to have to pay an annual lease fee to the Glazers’ holding company to get these properties on lease, meaning even more funds can be siphoned off to the glazers in this manner.
Somewhere I still had some faith in these guys’ abilities to turn it around but as more and more details start to come out in the public domain, i just think the whole affair is starting to stink of pure greed.
I pray to God that I am proved wrong and that they do indeed have the best interests of the club at heart, but it is looking increasingly unlikely that is the case.
@Red Devil
Awesome work mate. Feels good to know what the whole financial bullshit actually means. I still didn’t get 100% tbh, but thats down to me more than to you.
Thanks a ton!!
Atleast i’m thankful we won’t go for another striker. The acquisition of Diouf was a very sensible move and a good gamble !!! I sincerely hope it will work out with him, unlike manucho.
Trust me. This is looking bad. If we had not enough money to spend on players, it’s difficult to maintain that success for the future when the current players all retired. If we were to buy those youngster and not one or two good players abroad, do you think those fans are still happily waiting until the debt is off? If we fail to be in the top four or consistently winning the trophies what will happen to us? If Sir Alex retire, the new manager can’t cope the team? Trust me, this is a difficult situation. If there is any problem in the future, who do we go to? Where do all these things happen? Why accept the offer in the beginning? Why can’t we get capable owners to buy the club given we are the biggest club in the world? I’m going to say goodbyes to my beloved club and can only pray everyday from now on. Not sure why the club is giving the fans so many years of worry.
Thanks Red Devil. Didn’t understand the whole thing yesterday but after reading it with clear mind this morning something have become more clear.
“We are highly dependent on members of our management, including our manager, Sir Alex Ferguson, and players,” the document reads. “Our ability to attract and retain the highest-quality players and coaching staff is critical to the first team’s success . . . and, consequently, critical to our financial performance.
“Any successor to our manager may not be as successful as he has been. A downturn in the performance of the first team may adversely affect our ability to attract and retain such coaches and players.”
http://www.tribalfootball.com/man-utd-owners-admit-worry-over-post-ferguson-era-570671
—
Is this what we wanted to hear ?
I am not donating momney to the fucking Glazers. They can give us a share of the club for our money. I think that the fc united fund set up to buy the club if the glazers go broke is the right plan.
The Glazers are leeches.
When the club goes broke then I will give a hundred? a thousand?
To pay MY debt as an owner of the club.
“The increase in competition could result in our first team finishing lower in the Premier League than we have in the past and jeopardising our qualification for or results in the Champions League.”
http://www.timesonline.co.uk/tol/sport/football/premier_league/manchester_united/article6985569.ece
In other words THERE IS a possibiliy of us not even qualifying for the CL. Maybe i don’t understand the type of document we are reading right now but this risk may be adressed to all of the other teams like Chelsea, Real etc. Maybe it is just a kind of document that requires all of this stuff to be written.
@ Red Devil,
Good work first of all. Great job on explaining things or two to all who are not from Finance background…
Now getting back to your point about the Sell and lease back theory… Actually I was writing some comment involving the same model on some other blog. I got what you are trying to say. But, I would rather have a positive mind about this model.
First of we can sell it to third party with and option to lease it back. In that case we would be able to generate cash which will make sure that club will be paying of big chunk if not all of it. We will option to go for Typicallong term OPERATIVE LEASE or even FINANCIAL LEASE if possible. If we get the long term operative lease then typical period of lease will always be higher than 7 years which will allow us the time and options to look at things may be some arrangement to replace Carrington. I know this will not go down well to lot of faithful here but the thing that I am looking at is we should remain SOLVENT in order to sustain in long term. As far as I am concerned I would like us go for second option (which will definitely be costlier than first) i.e. Financial Lease, which will make sure the title of the ASSET will be transferred back to United at the end of the lease tenure.
Now regarding the cost of leasing…..
I know there is a possibility that the cost will be higher but, in case of lease kind of model what one needs to look at is not the cost of rate of lease but the life of lease and the cash flows generated out of that asset which will give us the required NPV after using the typical Present Value Annuity Calculations. I am not sure it will costlier or not but, what I am sure is we can certainly design the lease (preferably the FINANCIAL LEASE) in such a way that it will give us the positive NPV. See at the end of the day what as an Analysts one need to look at in such dire situation is whether you are able to get +ve NPV or not (at least in my capacity as a Analyst I think so).
About the point you have raised regarding Glazier Holding Company I assume what you are saying is They will be acting as Lessor. Which means they will have to first pay money from there own pocket to the CREDITORS if I am not wrong isn’t it??? If that is the case then I would be happy. Because, due to there increased investments and to make sure that they are getting there lease payment they will make sure that the club is running properly and always making positive cash flow. At the end of day it may work in our favor isn’t it???
See, I am not recommending it that we should go for this, but at least a working or two is worth a shot is all what I am saying…
@ Corea
That document is called the “prospectus” which is usually given out before any sort of issue of financial securities (bonds, shares, convertibles,etc) inviting the members of the public/financial institutions to subscribe to the securities being offered.
The prospectus, as you rightly deduce, requires the so called “Risk Factors” to be discussed. Hence all these risk factors or possibilities which could influence the club adversely must be clearly set out in this document so as to enable the investors to take an informed decision of purchasing the bonds/shares or not.
We do not need to be unduly worried about all that because the same things could happen to any team a la Real madrid, Arsenal etc such as dropping out of the top four, Arsene wenger retiring, etc etc. However the risk remains that our team fails to deliver and ends up outside the top four just as any other football team.
Its just like if you are going to buy a car, then you must be made aware of all the risks associated with the use of the car before you can make the decision of buying.
@ To all,
http://www.guardian.co.uk/football/blog/2010/jan/13/manchester-united-finances-glazer-family
Just read this link…. It has highlighted few points few risk factor from the bond issue prospectus nicely…..
@Red Devil,
Yeah, and copy of Prospectus which I have with me contains around 20 pages of RISK FACTORS…
Shit.. Look like its a very business…..
@Red Devil,
Same things may happen to other teams.. I agree but there are not many teams around which are EXPOSED to such amount of D/E situation…..
@ Onkar
An Operating lease is out of question, its good that at least that much is clear right at the beggining. We cannot even think about letting Old Trafford being sold.
In one of the lines in the prospectus, “The Carrington training ground will not be encumbered and may in due course be transferred to a holding company or affiliate of the Parent. In the latter event, we will be granted a lease in respect of the Carrington training ground,”
I was thinking that the Glazers will transfer Carrington to the holding company in lieu of the bond proceeds of 500 mn to be given to the club by MU Finance PLC to pay back the bank debt. Then the Glazers are going to lease it back to the club and demand a lease fee from the club as a way of siphoning off more funds to themselves in a legal way (which hopefully they will use to repay the PIK loans, but they are free to use in manner they please!) this would mean we are paying a annual fee to use our own damn ground!
As for Third party transfer and lease back, I have a different theory…. Even a financial lease is not devoid of risk as the asset is not transferred to the Lessee if there is a default in the lease payments (though unlikely at this juncture cannot be ruled out in future if situation worsens)
Secondly, a positive NPV for us would mean a negative NPV for the Lessee assuming the same opportunity cost of capital ( a fair assumption since the asset in question remains the same for both the parties — in fact the asset “Carrington” is even less valuable to say a financial institution and its discounting rate should be higher than us, what would a bank do with a football training complex for God’s sake!!)
In any case our bargaining power in a “Financial” Sell and lease back arrangement is lower as why would any person be interested to buy an asset and give it back on an immediate financial lease if he did not have something to gain financially from the whole transaction?? Just think about it….
@ onkar
The only problem that the entire transaction will solve is the timing of cash flows… other than that, we are bound to lose from the transaction in a strict financial sense
Red Devil – i would have to study for some months in order to fully understand your last post
But we (fans) just have to understand at least the basic formula, i think.
Sadly it is a part of the supporting the club nowadays. Maybe not for everyone.
http://www.manchestereveningnews.co.uk/sport/football/manchester_united/s/1188847_united_fears_laid_bare?
anyone read this?. It says United supremacy is under threat and future looks grim for United. Depressing article
Scott,
This is a really impressive financial analysis done by the two of you. I am impressed with the kind of analysis that has been done on the raw data.
According to me, one major point that was missing was the rate of interest on the bonds to be issued and the prevailing interest rate on the secured debt. If the rate of interest on the bonds becomes higher, then it might not be a very wise decision. One thing that I read somewhere also stated that we made hedging losses to the tune of 35 million quid. This will not happen every year. The club is actually sitting on a lot of hidden cash as nearly 82 million quid is in non-cash expenditure. I do believe that Sir Alex does have the resources to purchase players. I think more than the transfer fees, it is also a question of the sky high wages. Since from April 1, the prime tax rate will become 50%, thanks to Mr. Darling, Mr. Brown and the quagmire that is Labour, players will start demanding after tax salaries. To obtain top signings, we dont have money to burn like City, tax rate on foreign players in Spain is 25%, and the squad rotation being used by Sir Alex is also not a great attraction.
@ Corea and AIG Alex is God
The post addressed to Onkar is not meant for “non-finance” professionals so dont even bother going through it…will give you a right headache
Also dont pay too much attention to that link on guardian or manchester evening news…
As i said, it is a standard legal requirement to lay down potential risk factors to the investors in black and white.
If you think about it, we already knew all of that before….
1) Didn’t we know that there was a chance that Sir Alex’s successor might not be as successful as him
2) Didn’t we know that attracting and retaining top players is necessary for any football club to succeed….etc etc
So dont be unduly depressed by reading those articles.. Pray to the Lord and BELIEVE…
50% tax rate is a problem and i addressed the issue when it had been first mentioned. This means clubs like Madrid may be more attractive to the players. Salaries is the most important thing in football and it makes premiership vulnerable. Platini want equal possibilities for all teams in Europe and i can’t understand how the above mentioned would help the matter. On the one hand the government, on the other hand football.
In this circumstances the academy is very important but players grow and not all of them a like Paul Scholes and they will demand better salaries as they develop.
Maybe it is more of a problem for a lesser teams, i am not sure.
@Red Devil,
“a positive NPV for us would mean a negative NPV for the Lessee assuming the same opportunity cost of capital”
I may not agree with this statement in totality. because of the obvious spread factor that banks would enjoy. Secondly, for me we are talking about the piece of land for god’s sake bro… I don’t need to tell you how valuable it can be in terms of investment. And why on earth you are looking at this things as a useless business from the financier’s point of view.
He is definitely not going to see at the Carrignton as a ground or something, he is going to invest his money by looking at it as a piece of land or shall i call it as REAL ESTATE investment. And there is large probability that any speculative investor may in turn like take this opportunity, as real estate prices have not recovered fully, so he will get the good deal, to add to that any one at this point in time see that Man UTD as a club is very vulnerable situation right now so even though minimum but, there is probability of default there, which will appeal any speculator investor and I can tell in total capacity as a Market Analysts working for one of the Banker…
And given all these…. First, banker will always get his spread and still it can be a profitable business for us compared to high yielding junk bond.
Secondly, Any speculative banking experts (with some what contrarian view) would like to take this chance given that Real estate prices have not rebounded world over a lot which gives some ROOM FOR EARNINGS….
So on the contrary to what you are saying as a market analyst, I think this can prove to be a very appealing transaction for both parties, with lot to earn…… Even though its albeit SPECULATIVE kind in nature….
@Red Devil,
I have already explain in my last reply that personally I don’t that we are to loose much more (even if we do as you feel) compared what we are loosing in current situation.. Due to all the interest and finance charges that we are going to incur…
So now about…
“The only problem that the entire transaction will solve is the timing of cash flows…”
Again… I don’t know what exactly this means.. Now, as a layman (forget for a minute that I am a Market Analysts), don’t you think I would be also concern over the fact that we are making +ve cash flows in near term or not… I mean I know one thumb rule that If I am not in the best shape to survive short term forget about the long term business. I mean, what we all read in economics, in long run all cost are variable which is not the case in short term, so if you are not able recoup your all the cost in short term then you are in trouble…
And forget about all this Short run long run business, All I know what will happen if I don’t get ‘PAISA’, CASH, Liquid Cash that’s all. All this profit and everything is fine, but if CF are -ve then its of no use, I mean we are making tonnes of EBIDTA but if it is not sufficient to pay the INTEREST CHARGES then we are not going to sustain to see LONG RUN at all.
So for me what matters is what is happening with the cash. Thats all….
Red Devil
Thanks mate. Your words are very reassuring.
i did not understand much of the comment you wrote to Onkar but your explanation yesterday has made things much more clear
Hope things improve in the future and the club is in safe hands after SAF
@Red Devil,
I may not be sounding to you as a prudent investor or analysts.. But, believe me Man UTD LBO is different what you have seen in your company. I mean there you were dealing with the REAL ASSETS which we can value but not here.
I don’t need to explain you that Value of the MAN UTD as WHOLE (i.e. BRAND) is far more valuable than the Sum of its PART (i.e. SOTP).So, if unfortunately we are not going to sustain in shorter run and we see slump in the form then the Value of Real assets (i.e. OT, Carrignton etc) may not diminish but the value of MAn UTD as a BRAND will fall very fast due to the Intangible component (BRAND EQUITY) that will fall very fast… And thats why I desperately feel that even though it may not be proven prudence approach but we need take some quick step today.. OR what ever we are reading that we are valued at more than 1bn GBP, it may not remain there for long…
I think we can certainly agree on this….
@Red Devil,
On the contrary to what you are saying, Risk Factor things, even though that is mandatory requirement here, but given the amount of leveraging we have, and nature of business we are in, where the VALUE OF BUSINESS IS FAR MORE THAN THE SOTP due to BRAND EQUITY, we need to look at it very seriously.
As the value of BRAND EQUITY can diminish in no time…
Imagine you all, we had the best three years spell in recent history, still we could not pay of the single penny of the principle value, in fact it has increased by almost 20%, then what would be the case if wee have three years of bad spell….
I think you all are good enough imagine what I am saying….
BORROW another £75m?
Borrowing to help ease the debt? Genius!
See UK Economy 2008-present…
@ Onkar
Firstly, I am not trying at any point to question your credentials as a financial analyst at all. A healthy difference of opinion is and should be encouraged. I was just trying to highlight what I felt about the situation. Lets analyse your arguments one by one.
!) Carrington as real-estate – It is quite obvious that the function of a bank is to deal in funds/cash not other assets. A banker will always try to help out the borrower say by restructuring the loan or agreeing to an extension, rather than take over the secured asset. That is the norm in almost cases, especially in infrastructure. For a bank to take over Carrington and sell it on, the bank will have to undertake significant costs to make the land saleable. its not as if its a barren piece of land, there are structures in place and a lot of funds in terms of redevelopment costs and expertise will be required to make it attractive to real estate investors, add to that the current uncertain financial and real-estate sector and you can quite understand why I arrived at the conclusion I did, and somethi8ng you allude to yourself in one of your posts…it is a HUGELY SPECULATIVE transaction and Speculation=Risk=Risk Premium which means raising the cost of capital.
2) Banks earning a spread: The objective and correct way of valuing an asset is by using the Cost of Capital based on the risk characteristics of the asset, not on where you are going to source the money from to buy that asset. That is a fundamental principle of finance. Just answer the following question, Whose Cost of Capital will you use to value an acquisition target? a) the acquirer’s cost of capital OR b) the target’s cost of capital?
3) Read the article carefully…. I quote ” The EBITDA is the key figure that we must focus on, because it represents the cash available for us to repay the debt and interest as well as finance the player purchases.
The depreciation and amortisation figures are just book entries and do not involve cash outlays, which is the key thing for any leveraged acquisition.”
I have already pointed out that the EBITDA is the key as that is where we are going to repay our debt and interest and fund player transfers….so I dont understand what you are on about when you say “And forget about all this Short run long run business, All I know what will happen if I don’t get ‘PAISA’, CASH, Liquid Cash that’s all. All this profit and everything is fine, but if CF are -ve then its of no use, I mean we are making tonnes of EBIDTA but if it is not sufficient to pay the INTEREST CHARGES then we are not going to sustain to see LONG RUN at all.”
You are either repeating my point as I see it or have just lost the flow of what you are trying to say…..
Our EBITDA in the forseeable future is SUFFICIENT to pay off the interest and debt provided we can refinance the PIK loans and the bonds at the time of their maturity.
@ Onkar
About your argument on brand equity, I agree that Brand valuation is different from valuation of real assets.
However to suggest that Brand equity can diminish in no time is foolhardy.
Brand Equity and goodwill is built over a period of time, its not a short term phenomenon. That is why Manchester United is Manchester United and Chelski are Chelski or Citeh are Citeh. Brand Equity comes with trust, and history and tradition, which cannot be eroded in one day. Short term success is one thing, Building on a tradition of more than a 100 years is entirely another.
Besides value of Brand equity has got nothing to do with our outstanding increasing. Our outstanding debt ( Glazer’s PIK part) increased because the Glazer’s did not pay up the interest on the PIK part due to shortage of cash flows in their personal sphere….nothing to do with Brand value of Manchester United. In fact if you see the accounts closely, Man United’s secured bank debt has actually reduced from 2008 to 2009.
@Red Devil,
Neither I tried to put my credential forward nor I am trying to prove anything here as far as my profession goes.. I am just trying to keep matter separated from the accounting entries.. That is all….
What ever I said regarding Cash was the reply to your quote regarding the timing the CASH-FLOWS. If re read the whole thing you will come to know what I meant…
Secondly, I know what is the function of the banker as I have already in one of replies that I am a banker….
But, what we are talking about is the whole leasing part of the business.. In that transaction I had to talk about bank because you brought the banking aspect in the context… But, you don’t always need to be a banker to get in to these kind of arrangement, do you??? Secondly, we are not talking about the Banking system in India are we?? What we are talking about the is the western banking system, where banks have already found wanting due to there involvement in last real estate fall (crash), where they did lot of speculative transaction involving real estate through their Investment banking Arms. So, there for them Speculation is not a new concept is it???
And that is why pointed out couple of things which you either missed or by passed.
Firstly, even though it is speculative in nature we all know that real estate prices have not bounced back in western region countries from there lows a lot. Which gives them the opportunity to enter at right time and price which will offer them good returns…Which means even though speculative not that RISKY…..
Secondly, Banker with contrarian approach will take this opportunity…
I think I almost summed up what I meant there.. In this reply…
Though I have to agree that Banks/Any FI will have to take in to consideration development cost for sure….
@Red Devil,
See bro… All this talk of tradition and everything is fine.. But, we have to accept that there is major chunk in the asia who are just fair weather fans, which may shift there loyalties on the first instance…
Ans as far your argument about the tradition, goodwill, reputation it just hold any substance bro from the valuer’s point of view and bot from fan’s perspective… See, for valuer the thing is simple, what is the kind of mass appeal that this club is creating, what is kind of premium this club is getting in the merchandise market so on so forth…These are the questions and criteria he will check and value and it has nothing to with how old your tradition is….
He will have to answer that whether he feels this appeal will continue or not that is it…
And trust me mate it is far easier to value real assets than your intangibles.. I mean we all know what has happened in case of Satyam here in India. His value diminished to 1/20 from original in just one day… I know not comparable but can you this kind of thing happening to any Steel company even in the such circumstances. The answer is BIG NO. Because, no matter what steel company will have real assets which value will diminish to 1/20 overnight but goodwill can…
I know something like this may not happened but point here is mate that we are all banking ourselves saying that we are valued at around more than a bn GBP so if something goes wrong we are too bog to fall. But, the point we are ignoring is what is the value of real assets. I am sure if we plan to sell them all it will not be even half of what we are valued and that is the trouble for me…
Thats why I said that BRAND EQUITY is making us justify the kind of situation we are in other wise we all know what happened to LEEDS as they never any BRAND EQUITY. So as long as we are enjoying it take the measures.. cause you never no what is store for you….
@Red Devil,
Anyway buddy, had a great time chating with you on some hard core finance… It was serious fun isn’t it??? We almost turned this United blog into a Finance Blog…
But I have to say that I am in office all time and now the pending work is catching up… See ya soon… Keep up the great work like today’s article..
Cheers…..
@ Onkar
The point I was trying to make when saying the function of the banker is simply that banks are not made to be speculative entities…which is why they failed when they went for excessive speculation leading to the Financial Crisis in the first place.
Contrary to what you are implying, I was talking keeping in mind the Western banking system the entire time…. The banks in the west (USA and UK ) have been decimated by the downturn and crisis with most of them requiring significant government investment and ceding of ownership to the Govt, just to stay afloat ( I am quite sure you know that though being a banker as you take great pains to remind us!)
Also as per the Basel Accord, greater capital back-up is required for riskier investments by banks.
In light of the above, ( plus you yourself have posted that they have been found wanting in this respect in the recent past!! ) dont you think Financial institutions are going to be averse to such highly speculative transaction, given that they have just burnt their figures (that is if the banking regulators and governments allow them in the first place!)
I think a lot of what you have written in your last post contradicts yourself..just read your own post carefully.
@ Onkar
Always nice to discuss ideas and exchange views on financial topics, its my livelihood for god’s sakes!!
yeah it WAS, such a long time since I had to delve into topics like valuation and all….just got reminded of the old times and books 
Where do you hail from by the way and where are you working?
Maybe we could get in touch or catch up!
@Red Devil,
I am from Mumbai, working with in Management grade of the PSU Bank as an Credit Analysts. Where we basically deals with corporate credit…
Yeah.. I agree even for me the Finance is my livelihood and Credit is the reason for life… Yeah! we can certainly get in touch soon….
@Red Devil,
I am not a regular here.. Seems you are.. Actually, I got the link for your article from some other blog which I regularly visit….
And yeah towards the end I left wanting in my thoughts as well..Mainly due to (as I said), the pending work is catching up….
can I have your e-mail address or something to contact you…
which blog do you regularly visit….where’d you get the link?
Red Devil – you can exchange your email adresses using PM at the RoM forum, mate.
@Red Devil,
Yeah.. My Email Id is onkar_damle@indiatimes.com
I am a regular visitor on redrants.com and I got the link from there….
There we normally have some feisty affairs in term of brainstorming discussion and debates.. In all the United fans specially here that place is famous as a doom and gloom place.. But I like the nature of it.. I just hate to see everything from the from Red tinted glasses even though I am a mad United fan….
Anyway, don’t forget to drop me a test mail from your email id.. Looking forward for it….
Ooopppss I wans’t aware of that.. Scott can you just delete the lst comment where I have given my email id…
Sorry for this thing.. as i was not aware PM thing….
Onkar
Good to see another person from Bombay. By the way i too live in Bombay. Just asking, are you a maharashtrian?
@aig alex is god,
Yup… Can you just guide me on how to use this PM thing in ROM forum.. If you are aware of it….
Onkar – this was just an advice if you don’t want to show your email address to others on here.
In order to use PM in the RoM forum you just have to register there. (simultaneously with Red Devil)
By the way, i’ve heard the majority of people in India speak english ? And very well indeed.
@ Corea
Always ready to mingle with fellow Reds
its abhay.bhaniramka@gmail.com if you’d like to get in touch!
I didn’t get your joke about our English levels though
Red Devil – in fact, i was serious, mate
Many people from India here. I was just wondering.
Maybe the British government can bail out the English institution that is Manchester United like they bailed out RBS et al??? that would be hilarious.
@Muggaz
That occurred to me back in 2005, that if we went belly-up we could be “nationalised” and a portion of every ABU’s taxes would go towards paying for our players…
@ ^^^^^^^^
That would be funny indeed!!
but I dont think we can expect any such favours from the govt. I heard the Queen is an Arsenal fan as well as the PM