United fans are often befuddled by the lack of clarity on the current financial situation of the club. While they worry themselves to death about how a certain Malcolm Glazer is yanking away the life support away from their club, they find themselves mere spectators to a carnival of financial rust.

Of prime importance in this unfolding saga, are the answers to four questions.

Well, at least they do!


What is the animosity against Glazer about, and just what has he done to the club to deserve it?

Malcolm Glazer is a US based businessman who bought 100% of Manchester United PLC and delisted United from the London Stock Exchange in 2005, through a holding company called Red Football. He did this by buying United shares worth about A?800m. However, he didna��t have the cash to buy it on his own in the first place. He borrowed this money from the market in two ways:

  1. Taking a loan of A?660m from various banks, with an annual interest of aboutA� A?60m.
  2. Taking a PIK loan (a loan where you pay the lump-sum amount of interest + principal at the end of the maturity period, nothing in between) of A?135m, with an annual interest of 14.25%.

Some part of the loan amount is against assets of the club like the Old Trafford Stadium and the Carrington training grounds among other things. This means that if a situation arises that Red Football isna��t able to pay the money back on time (Feb, 2017), the stadium would no longer belong to the club.

Financial wise-men working on the payrolls of Glazer devised a three step plan to prevent such a thing from happening:

  1. They refinanced the loan deal by selling bonds worth A?500m in January 2010 at interest rates between 8-9%. This simply means United now have a slightly better redesigned loan deal.
  2. They sold off the PIK loans to three hedge funds in the US in November 2010, meaning Manchester United is not viable to them anymore. The exact details of this fishy deal are not known.
  3. They plan to launch an IPO in the Singapore Stock Index in September 2011. The BBC predicts valuations anywhere between A?400 m to A?600m, for about 1/3 equity stake in the company. If the money made here is invested back into the club the club can be significantly debt free very soon! But there is no guarantee that will happen, as the Glazers need the money for some of their other businesses as well.


How much money does Manchester United make and are they doing ok?

Manchester United is without doubt one of the richest clubs in world sport, let alone football. Revenues come in from mainly three sources:

  1. Match-day Income (money made from home games through ticket sales and other match-day activities)
  2. Broadcasting Rights
  3. Commercial Tie-ups (sponsorships, etc)

The figures below (source: Deloitte, SBG) are for 2010. As per a study done by Deloitte, United are the third richest club in the world, behind Real Madrid and FC Barcelona.


With match-day ticket prices having doubled since Glazer took over, United make a bulk of their earning through ticket sales, unlike Madrid and Barcelona who do it through broadcasting rights. But that basically arises from the difference in approach to selling broadcasting rights in Spain and England. While in England the FA collectively sells TV rights for the Premiership, in Spain clubs directly sell the broadcasting rights to TV channels. This means better individual deals for the club and little or no revenue sharing for TV rights with other clubs. Both approaches have their pros and cons, but at present Spanish giants are definitely raking in the moolah this way.

United have also significantly improved their Commercial revenue, through improved sponsorship deals with AON and NIKE. Also the whopping A?10m/yr training kit deal with DHL given that the AON deal for the jersey itself is A?20m/yr.

Sadly, despite United being in a very healthy revenue earning position, they continue to report losses year on year. Thata��s because large parts of the revenue go into paying debts that the Glazers have brought with them. This means that the money earned is not always invested back into the club.


What could possibly happen in the future?

Like all businessmen, Glazers are at United to make money. At the end of the day, they hope to make more money than they have invested. The performance of the Singapore IPO will give a good insight into what the market valuation of United is after 5 years of the Glazer rule. Three things can happen in the future:

  1. United get a poor valuation (anything below A?400m for a 1/3 stake), and the Glazers put a significant amount of money made to pay off the debts and get the books in order. But continue with a poor financial situation at the club in an increasingly competitive space.
  2. United get a good valuation (anything above A?500m for a 1/3 stake), and everyone is happy. Glazers gain confidence, pay off some debts, while siphoning off some money to their other businesses in the US.
  3. Irrespective of the valuation, anti-Glazer groups like MUST (Manchester United Supporter Groups) begin their initiative to buy back United.


Fine with being left alone


Can United fans do anything about it?

This depends on which side of the fence they are.

While there has always been negative press about the Glazers, Sir Alex Ferguson has been a staunch supporter of the Glazers. He has repeatedly said that the Glazers have never intervened with the football side of United unlike Roman Abramovich who has changed 7 managers since his arrival in 2004.A� Ferguson has also said that he has never been denied transfer money whenever he wanted a player. Berbatov, Hernandez, Smalling, Hargreaves, Young, De Gea and Phil Jones are clear examples.

The good news is that the financial health of a football club is hugely dependant on the performance on the pitch. The past 5 years for United have been stunning.A� Much of that credit goes to Sir Alex, while the contribution of the Glazers can be debatable.

Two things will decide the future of the Glazers. Sir Alexa��s pending retirement and the performance of the IPO in the Singapore stock exchange. And you can be positive that by the end of this season both will become clearer.

Anti-Glazer groups like MUST have been plotting to unite all the different anti-Glazer factions and launch an audacious bid to buy back the club and give it back to the supporters.

All said and done, the biggest contribution of the Glazers has been the non-interference in all matters related to core football. The simple decision of choosing to continue with Sir Alex and Chief Executive David Gill after their arrival, could be the key to everyone getting away happily at the end of this reign.

– Ateesh Kropha

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3 Responses to “Manchester United: The Perfect Financial Storm”

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  1. mohamed says:

    long live Manchester we want a store in Egypt

  2. mohamed says:

    i love Manchester united