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Detailed Explanation Of Today’s News Of Losses

At the start of the year, Abhay Bhaniramka wrote an article for RoM to clear up a few misconceptions about the debt and explain it a bit more detail.

Following the news of a our losses over the past financial year, he’s allowed us to pick his brain again.

Apparently some people are happy that we have posted a £83.4 million loss! (albeit with a few one-offs and non-cash items which I will explain later in the post)

There are of two types of exceptional losses, recurring and non-recurring.

1) The loss on the cancellation of swap is around £40m which is a one-time non recurring expense. So yes, even though it will not be here, it is still a CASH loss for this year, which would not be there if the Glazers had not put us in debt in the first place. This has not all been paid off. Only £12.7m has been paid yet and hence out of the £163m in the club’s bank account, £28m you can count out because that will go eventually to pay this balance.

2) The amortisation of goodwill is on the consolidated income statement, not on the income statement of United and hence will not save the club on tax either now or in the future. It may save tax for the Glazers, not the club (but even if it saves the Glazers some money, that’s a good thing because it means they potentially take less money from the clubs coffers in the future).

3) Amortisation of debt issue costs and discounts is a recurring item and will save the club taxes, but the cash hit on it was already taken when issuing the bonds. In fact, if I remember correctly, the amount of issue costs was around £40m which is being amortized over 6 years as around £6.7m every year. The cash hit has already been taken i.e when issuing bonds for £504m we only got cash worth £464m. That’s a straight £40m CASH LOSS (which would not have been there if not for the debt).

You can’t see these adjustments because the Glazers have not released the Cash flow statement.

4) Forex losses – although these are not cash losses today, they may become potential CASH losses in the future if the exchange rates do not turn favourable for United. As for saving tax, they may well do depending on the taxation rules of the UK. I’ll look at the taxation rules of UK in detail and clarify it later.

5) The amortization of player registrations saves the club on tax, but this has nothing to do with the Glazers. This item is there on every clubs books and will always be there. In fact, one of the ways big-spending clubs recoup their cash is by this item. Suppose Real Madrid buy Ronaldo for £80m on a five year contract, they can save on taxes worth £40m over a period of 5 years, assuming the tax rate to be 50%! So almost half the players worth is recouped by saving on tax itself in this way.

6) The way that the operating costs of the club have been brought down is indeed commendable. This shows an incredibly well run business in this respect. However, we must remember it came at what cost. The free snacks and food for non-playing staff were removed when that had been going on for many years, staff wages were frozen (only this year have they given a 6.5% raise to compensate) and so on. This has an effect on the morale of the staff at the club. Nevertheless, in financial terms, it is commendable without doubt.

7) The commercial turnover has risen, no doubt as a result of the Glazers efforts for which they must be lauded.

However, wouldn’t it be fair to assume that United by itself, without the Glazers, would have made some progress in increasing the commercial income? With Peter Kenyon before and David Gill now, it’s not as if the Glazers were necessary for these improved commercial deals to be made.

8 ) The debt can be serviced if we continue doing what we’re doing. But the income stream at the top is highly dependent on United continuing to be successful in winning leagues, going to latter stages of Champions League and winning trophies every year! What if we can’t sustain the success for a couple of years? With the massive amount of financial leverage, can you imagine the effect on the earnings if we don’t do well for a couple of seasons?

9) The interest on the PIK continues to roll up at 16.25% interest. Please tell me a risk-free investment that gives annual return of >16.25% in the world out there at this point of time. I guess the the financial money managers of the world would have figured it out by now if there was. Risky investments might give you such returns but what if those risky investments fail, and what kind of risky investments will continue to give >16.25% pa compounded for the next 6 years continuously? Not even the equity markets can give you that sort of return continuously for 5-6 years.

On a positive note, let me point out that we are NOT SKINT as the ABU media/MUST would have you believe. We still have funds for player purchases.

The fundamental point being that the debt was not productive debt. The £500m pounds wasn’t used to buy new productive assets (players), was not used to build a new stadium (as in the case of Arsenal and the Emirates) but merely to gain control of United and unproductive debt is obviously a bad thing.

Edited and altered in places by Scott.

Reclaim our club

About Scott

Scott is the editor of Red Matters - 50 Years of Supporting Manchester United and an author of Play Like Fergie's Boys and Not Nineteen Forever. He writes for ESPN, The Metro and Bleacher Report. Follow @R_o_M on Twitter.

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  1. Red Devil says:

    I had a look at the redcafe website…but there’s so many threads on the home-page…which one are you talking about?
    Also it seems that you need to be a member of the site to be able to post to the forums….

  2. james21 says:

    @Red Devil
    1The Ground was not completely full last season . Where I sat there was row after row of empty seats also looking at tier 3 that was also a mass of empty seats so I’m not quite sure where you are coming from here.

    2 Fair comment there but I was thinking more along the lines of the 100+ million shitty lost also I did say that most posters on here have explained things well.

    I didn’t think I said anything about Scare mongering but anyway
    its possible that we might not qualify for the champions league but isn’t it also possible we won’t win anything this season or next. Isn’t it possible Rooney might say ah fuck it I’m off.
    If you live your life on isn’t it possible you wouldn’t have a house, car or anything on HP.

  3. Red Devil says:


    All right, maybe I was a bit aggressive, but that doesn’t detract from the simple fact that the risks to the future of the club is too large….

    Are you prepared to gamble on the future of the club… make a very good point…

    but isn’t it also possible we won’t win anything this season or next’.—–exactly the point mate…what if we dont win anything on the trot for two years….the massive prize money that comes from winning stuff dissapears from the club’s accounts and then what do you do?

    The bond-holders wont say that “okay, you havent had a good two years so we’ll forego the interest on the bonds and delay the principal by a few years” doesn’t happen hat way does it….

    “If you live your life on isn’t it possible you wouldn’t have a house, car or anything on HP.”
    Which is why so many people have lost their cars and houses and mortgages during this recession because they went out of a job…these things were repossesed by the lenders..

    Except in the clubs case, the lenders will drag the club to the courts for default and carrington might be taken over (remember that was pledged to the lenders at the time of issuing the bonds) a scenario that is unfolding in front of our very eyes in the case of liverpool…..look what has happened to their over-leveraged business model because they didn’t perform for a couple of years…

  4. Red Devil says:

    Except that we are bigger than liverpool so we might be able to sustain for a couple more years of non-performance….

  5. james21 says:

    I didn’t think you were being agressive, If you were then it went over my head so don’t worry. I can fully understand your anger I love Utd as you are proving you do and the most frustrating thing is Utd is a profit making club yet we are loosing money season after season. I can’t see anyone buying us outright though even the Red Knights would have borrowed money.
    I can’t sit here worrying about what might happen in the future or I’ll be dead at 40.
    By the end of the season I fully expect Utd to be Champions not because I’m arrogant in any way I just Believe and Trust in Fergie.
    I also have a mortgage (not as big as the Glazers :D ) and run my own buisness so the risk of me not getting enough work and loosing my house is large but like I said above I can’t sit here worrying.
    I’m also board, a Saturday and no Football on, very Painfull.

  6. Red Devil says:


    Bring on the football…. :) really, these international weekends are an absolute pain.
    And the fact there are no games will just allow the ABU media to go into over-drive with these financial matters…

    As for worrying about the future, thats all I do mate…Thats my job :D
    Working in a financial planning department, thats an integral part of what I do for a living and inevitably it spills over into football…
    Its not about his season or the next, its about principle and whats good for the club in the long term. The Red Knights cannot be trusted in the absence of clear information as to their intent and source of funds…if they too are raising debt, then its just a case of frying pan and fire! In fact in that case it might be better to stick with the Glazers to prevent all the problems of multiple ownership!

  7. Amar says:

    Forgive my ignorance,

    But what if Glazers die of Cancer/AIDS/food-poisoning/Any deadliest of deadliest disease u recollect OR if a Manc-soul barges into United’s office and fires ten rounds of 7.60mm Kalashnikov before cunts even have an iota of chance to fend themselves ?

    If entire Glazer family(including David Kill) is wiped off from planet Earth,who will bear the responsibility of re-financing club ?

    My take on this :
    In case if such an extra-ordinary event transpires,and MUST/IMUSA/Green and gold supporters join hands supplemented by EBITDA(Earnings before Interest,Taxation,Depreciation and Amortisation) and are entrusted with job of financing club-debt, then it is time we hire contract-killers,Win-win situation..

    My knowledge on club-inheritance is zilch but I have always made an attempt to theorize and re-flash the debt situation and this was easiest solution I could think off,Fucking kill the lot..

    Love United,Hate Glazers..

  8. Red Devil says:

    My my…what do we have here!
    What are you smoking mate? It sure ain’t healthy for the brain..

  9. utd4life says:

    I’m not a financial expert so I won’t bother going into the details..But what’s the probability that the people who take over after glazers are better than them??I mean, there’s a good chance that they might be as bad or even worse..The 1′s who will replace the glazers will most likely be another family or a conglomerate because there are only a couple of guys who can singlehandedly own Utd and I’m afraid those guys aren’t interested in football or Utd..And in any family every person has his/her own agenda which may or may not be good for the family..So the best case scenario for us is to get an owner who genuinely cares about the club and its fans instead of using it like some cash cow..

    As for money being available to SAF to spend on players..If you think about it logically, our financial situation depends a lot on our on-field performances and the glazers know this so funds will be made available to SAF to purchase players..If our on-field performance starts deteriorating then so will our financial position and gradually we will become like..touchwood..pool..

  10. Amar says:

    @ Red devil
    Was watching blood-diamond,heard a gun-shot and instinct kicked in. [:P]

    Glazers epitomize everything that is wrong with the modern game and deserve to be punished..

  11. Red Devil says:


    Lets not get personal mate…..I have no issues with the Glazers on a personal level, its just that I love and care about United so much.

    And I wouldn’t go so far as saying that Glazers epitomize everything that is wrong with the modern game….
    No, dirty tackling, cheating and diving, painful refereeing errors and inconsistencies are bigger issues for the sport. Boardroom wrangling and financial matters should not be allowed to over-shadow on-field events….
    In fact the way Glazers have brought the costs under control and their way of increasing commercial revenue has been very positive…however its just that the costs and expenses far outweigh the positives from a financial point of view


    Your concern over the other potential owners are very well-founded mate….they may be better or worse and we must be very careful about it..
    As for funds being available to Sir Alex, I think there will be…but the only question is how much more could have been available to him if not for the years of huge interest expenses and one-off costs

  12. james21 says:

    Wow contract killing now. The rounds would all miss the Glazers because they’d be in the US.

    ‘Glazers epitomize everything that is wrong with the modern game and deserve to be punished.’

    Tell me, what have the Glazers done wrong that all buisnessmen and owners of buisnesses havn’t done.

    My sentiments, I don’t think any new owners would improve the situation unless we were bought outright. Theres not many Billionaires out there that would.

  13. parryheid says:

    Red Devil.

    All issues relating to Bond issue and its up to page 121.You do have to register to comment but that applies to all sites,however you can still read the posts.

  14. hooligankicker says:

    @Red Devil 12:31 (and most of your other posts defending your article)

    Mate – you’ve just demonstrated you know nothing about financial markets and are desperately trying to defend your scaremongering by talking even more bollocks. I really can’t be bothered to correct you again on every point but talking about a 20m mark to market loss on a swap as being bad management is simply ridiculous. I really don’t like people trying to talk knowledgably about something they don’t really understand in the hope that no one will challenge them on it.

    In fact fuck it, here goes (apologies to those who don’t care about this stuff but I don’t like ignorant fuckers suggesting I’m talking shit when I’m on a topic I know quite a bit about):

    In reference to your points:

    1. It’s a currency swap which is put in place to cancel completely the currency risk. United’s income is largely in £ and they have borrowed in $ to fund it. The swap negates this risk. Although the mark to market is currently £20m in loss, this will be cancelled by the fact that the currency has moved in their favour so effectively paying back the debt is currently £20million cheaper. The mark to market is completely irrelevant.

    2. Why can I not compare the business models of Boots and HMV to MUFC? Yes it is a big risk if we don’t get into the champions league – every company in the world has big risks and plans accordingly – every heard of a SWAT analysis?

    The 16% reference was just pointing out that you throwing the number around to scare people about the PIKs is just silly – you need to fully understand the details of the financial instrument to work out if it is too much to be paying or not. Given the inherent risk of a PIK note to the investor they simply have to offer a high coupon – every PIK ever issued has come with a huge coupon – this is standard practice.

    Any by the way, the fact that governments print money is irrelevant – the money is worthless if they can’t back it up with assets – if a government is about to go bust who wants their money anyway?

    3. I was not debating that amortizing player registrations has been in place for years – I was pointing out that you were blaming the Glazers for any losses and giving them no credit for gains – this is not giving an objective view.

    4. Yes wouldn’t it be wonderful “if there were no debts there in the first place”, but there are, and wishing there weren’t is simply childish. Give me a realistic scenario of how MUFC will have no debts at any point in the next 20years? Stuck for words? That’s because there isn’t one.

    Stop talking bollocks. Stop scaremongering. Stop suggesting people on this forum don’t know what they’re talking about when they clearly know a lot more about financial markets than you do.

  15. Red Devil says:


    This discussion was being conducted in quite a civilized manner, but instead you just need to start calling names and spout bullshit…

    What do you do for a living—-write the script for fucked up laughter shows—because I cant believe that you would be very good in any financial job with that kind of attitude and analytical ability.

    1) Mark to market is irrelevant —-Go back and take up your books– for the moment it may be irrelevant , but if the currency doesn’t move back in favour of United, it will end up being a cash loss. All hedges come at a cost and this hedge is currently costing United 20m at todays rates—why is it so difficult for you to get in your brain—oh right coz you dont have one or are either too busy throwing childish insults to be using it…

    2) You can compare the business models of different industries, but if you prescribe the same treatment, same capital structure, same solutions for all companies, you are being extremely stupid or naive— you think a football business and a retail business have the same operating and Financial risks? lmao

    3) “Given the inherent risk of a PIK note to the investor they simply have to offer a high coupon – every PIK ever issued has come with a huge coupon ” —-So you agree that the business model as it stands is indeed very risky, SO RISKY in fact that it necessitates paying 16.25% even when money market rates and bond yields in the US at this point of time are at one of their lowest in history—–just goes to show the level of knowledge you have about financial markets.

    4) you said the UK govt issued PIK’s—taking that statement to be correct prima facie, (i havent checked whether they issued or not becoz its none of my business) I was just pointing out that Governments can issue whatever instrument they want because they have infinite sources of cash to pay up on them. Value of currency is secondary-if the UK govt owed you 220 mn in PIK’s they could easily print 220 mn in Pounds and give i to you to settle the debt tomorrow–United cant–get it? So united issuing PIK and UK Govt issuing PIK isn’t one and the same as you were trying to make out!

    5) you are obviously blinkered enough to not read that I have indeed given credit to Glazers for cutting down costs as well as increasing commercial income, both in the post as well as comments—as for blaming them for the losses–that is fact—if not for the one-off costs, interests, bond issue costs, we would not have posted a loss

    6) United were a debt-free company—there would have been no debt but for the takeover and it continues to rise till today—–why is it so difficult for you to get facts into your thick skull?

    I dont usually like to talk this way to fellow United supporters but you left me no choice…Have a good day kicking hooligans or whatever…coz you certainly shouldn’t be giving financial advice to anyone…

    Btw I’m still looking for a relatively low-risk investment that offers >16.25% compounded return for 5 years, please tell me if you find one…maybe we can all invest there and soon we might make enough cash to rid the club of its debt….


  16. hooligankicker says:

    Red Devil

    You are quite ridiculous. For the record I’ve spent the last 15 years working for the largest investment bank in the world, but you probably won’t believe that anyway…..

    This is the last time I’m going to bother going through this… you can have the last word big guy and maybe some people will think you know what you are talking about.

    1. A currency swap works as follows. Let’s say I borrow $100m pounds but my earnings are all in £. I don’t want to worry about exchange risk so I put on a swap that means I effectively pay the interest and the capital at today’s exchange rate irrespective of what the exchange rate does. Now let’s say the exchange rate moves heavily in my favour ie £ now worth more $ than it was before. I happily now pay less money in £ terms to pay off the interest (which seems to look good for me) but the swap then moves into a mark to market loss to counteract this move. Likewise, if the currency moves heavily against me, my mark to market on the swap moves into profit. Both are irrelevant to me because I have locked in my interest rate when I put the swap on and (this is the important bit) have based all my projections for my business plan on that currency exchange rate so am very happy no matter what the rate does. Therefore in this case, the mark to market profit or less IS irrelevant.

    2. Of course they don’t have THE SAME risks but they each have significant risks that they are aware of and have contingency plans for. A company with a lot of debt can still be run very efficiently which is the original point I was making.

    3. No the business model is not risky, the PIK note is – FOR THE INVESTORS NOT THE ISSUERS. That is the key point. It’s like an unsecured loan is riskier for the bank than a secured one – as long as the person borrowing the money gets the money they don’t care. In this case MUFC is the person who has borrowed the money and is now happy.

    4. I never said the UK govt issued a PIK note – don’t be ridiculous. Govts cannot issue any instrument they want – you see Zimbabwe borrowing a lot of cash in the international markets? No. The reason why? Because although governments can print as much currency as they want it is worthless if the government is going bankrupt -that applies to the UK and sterling as well (though for the record is pretty unlikely in the UK).

    5. You’re missing the point. Here in the real world MUFC now has lots of debt. I still haven’t read your answer for any realistic scenario in the next 20years that we won’t have debt……

    The floor is yours big guy…..leave financial markets to people who understand financial markets. I remind you and everyone else that the biggest risk to our club is performance on the pitch deteriorating and that is what we should be concerned about. For that reason, the Glazers will do the right thing in terms of transfer budgets etc because only a severe drop in silverware can endanger the structure the Glazers now have in place.

  17. Red Devil says:

    @hooligan kicker

    1) I know what a currency swap is – good to know you know about it too. Now if you will just OPEN your eyes and see page number 21 of the Red Football Accounts, the loss of 41 mn is not on a currency swap…it is on the unwinding of the INTEREST RATE SWAP on the erstwhile senior loans which were replaced by the bonds.

    Also if you read page 3 under the heading ‘currency risk’ in conjunction with page 21, you will see that United have not chosen to hedge the currency risk on the bonds and the loss of approx 19m is an actual loss at this point of time which will be realised in cash at the time of settlement in 2017.
    Of course you would have seen all this if you had stopped beating out your inflated EGO for a minute and cared to read the accounts in detail.

    2) “Of course they don’t have THE SAME risks but they each have significant risks” —-which risk has arisen only after the Glazer take-over as you cannot have default risk if you do not owe anyone anything—-UNITED were a debt-free company before being taken over—-of course a debt-laden company can be managed—-but the need to manage such risks has arisen only because of the Glazers choosing to use such high levels of high cost debt.

    3) “No the business model is not risky” — Wow i cannot believe you just said that, especially if you have been working for 15 years in an investment bank as you claim. Have you calculated a figure for financial leverage for United? or done a scenario analysis where we fail to qualify for the champions league for a couple of years… seem to have spent the last few yaers in hibernation to have missed the devastating events in the world caused by excessively leveraged financial models.

    4) You’re right you didn’t say that the UK govt issued PIK (my mistake) you said that UK got also issued debt at 16% —— the name of the debt instrument is not important–its the cost of debt and the covenants that are important— Also you seem to be completely missing the point once again—-say the UK govt has issued debt at 16% for 200 mn to you—after a few years, say the pound has become clearly worthless but still the UK govt has no cash–so it just prints 200 mn worth of notes and gives them to you and settles the debt—-thats it you cannot say the pound is worthless and the debt remains because legally the debt has been paid. So they can issue debt at any rate whatsoever—not United…for a football club to be paying 16.25% as interest in todays scenario where debt is dirt cheap is very bad business.

    5).MUFC can become debt-free by simply breaking the joint TV deal and negotiating on its own or by selling the naming rights to Old Trafford..but would you really want that to happen.

    Besides, I am yet to hear an investment avenue which yields >16.25% at low risk compounded for 5 years. I guess with all your financial acumen accumulated over 15 years, you might have an answer for me there….do us a favour and give us all on ROM some free investment advice!

  18. Jaime says:

    StatesideAussie says:

    RTNK … well, if Barcelona needed to borrow 125 million in order to keep paying their players this year, then presumably they they’ll need to borrow again next year, especially if/when their TV rights disappear up Mediapro’s bankrupted backside. We’ll see how good their system is then. Even if we ignore the TV rights debacle, their latest audit shows they need to improve their cash-flow position by at least 150 million between now and next season. Personally, I wish them the worst of luck…


    I 2nd that, Mallorca couldn’t even their player’s wages for 2 years, this is to do with relaxed way creditors are dealt with in Spain contrastly in the UK, such business would have been shut down. Consequently clubs in Spain don’t have that much cash in their bank account thus they borrow to run their Working Capital unlike especially Man Utd & Arsenal who over 100m in bank acc


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