Thursday, April 09, 2009

Glazers' growing debts confirm United are on road to nowhere..

With Manchester United's season in danger unravelling following a run of poor performances on the pitch, comes the not so surprising news that the club's parent company Red Football, owned by the Glazer family, saw its debts rise from an eye-watering £606m to £649m.

While pre-tax turnover and profits have also increased following a hugely successful season on the pitch, fans will continue to be concerned about the future of the football club given that debts are rising sharply - this at a time when United won the Premier League title and the Champions League. It begs the question, what would happen to Red Football's finances following a poor season which would undoubtedly have a negative effect on the balance sheet?

Manchester United is more than just a football club, it is an institution and it should in part belong to the fans who have continued to give their unqualified support and hard-earned cash, many over a lifetime.

Given the plight of the club and the current ownership regime, it is hard to envisage United following the public ownership model adopted by Spanish giants Real Madrid and Barcelona - as far as all of the big English clubs are concerned, sadly that is an unrealistic vision of utopia.

Nonetheless, this latest news is likely to strengthen Michel Platini's resolve to sort out footballs' finances in a bid to ensure its future. Platini has vowed to take action if the clubs cannot act responsibly where finance is concerned. It remains to be seen how this might work in practise, if indeed it is possible and legal.

The Glazer family couldn't afford to buy United using their own money without borrowing huge sums from the banks, but following a period of continued success under Ferguson it begs the question where is it all going direction wise, because clearly no football club can continue for any length of time while being burdened with such debts. Where finance is concerned, Manchester United are on the road to nowhere under the Glazer regime, the short term has undoubtedly been good on the pitch, but off it the longer term is much harder to define.

4 comments:

  1. Before this was announced I was thinking about it and I am convinced that the Glazers will sell before anything crazy happens. First, they are in this for the money. Let us be under no illusions. I would be interested to know if anyone disputes this. Second, if the club were to default on its debt, then the amount of money that they could get for the club would be siginificantly less. Furthermore, the players and assets they would have to sell would be crippling. With those two ideas in mind, that leads me to think that the only way they can make money is if they have an exit plan. While I know this is entirely speculation, that only leaves us with the question, who will buy the club?

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  2. Hey, I might have missed it as I didn't pay much attention at the time, but can you explain the circumstances which led the Glazers to buy United by borrowing like hell and then saddling the debt onto United?

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  3. Uday,

    For once my friend you are way off beam. The Glazers borrowed massively as the story says,as a result they are now nearly £700m in hock to the banks.

    What's more, there's absolutely no evidence to suggest that they've paid off a single penny of their various loans. As I understand it they are only paying interest.

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  4. Investors have been put off buying United because of the sky-high asking price (look at the Arabs at City - they wanted a cheap publicity vehicle to promote Abu Dhabi, Abramovich looked at United but then bought Chelsea...) - and that was before the Glazer family effectively saddled the club with debts of nearly £700m - so before the Glazers took over - there were no serious would be bidders...at the time United's market cap valution was around £650m.

    So think about it. Let us assume someone came in and wanted to buy United now. The question is, what would the Glazers want ref asking price? Because whatever that figure is, the new owners would be saddled with the debts of £700m + whatever the Glazers' wanted...now if there was no serious takers at £650m and in the current economic climate then it's highly unlikely that anyone would be willing to pay whatever silly price the Glazer family wanted.

    The intruiging thing is however, if any would be buyer had the money to buy the club without going into massive debt then it is a good business (obviously). But the question remains, who would be willing to wipe out those huge debts and pay off the Glazer family?

    There is another scenario whereby the Glazers borrowing could lead to them defaulting on their loans following a downturn on the pitch. Lord knows what would happen in that scenario - selling off the players and assets would be counter productive, but most worringly of all the club needs constant funding for new players and if that source of income dried up then you really do have a doomsday scenario.

    I think the Glazer family may still be hoping that they can take advantage of fans watching live games over the internet on a PPV basis, that could be their salvation but in itself that could be another minefield due to rights issues etc etc.

    There's another scenario which could see the Glazers being forced to sell the club, this in turn could mean they get nothing which I hope comes to fruition. I do not care what happens to the Glazers.

    All I care about is the future of the club and many fans believe the Glazers have put United's future in jeopardy by saddling it with massive debts.

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