Putting United’s debt and bond issue into perspective

Every Manchester United fan I’ve spoken to in the last week has said one of two things:

  • United are in deep, deep trouble. No money, players leaving, etc etc.
  • The press have an agenda against United and have found a golden opportunity to stick their boot in.

Like the sensationalist propaganda that’s passed for journalism in the English press this week, there’s some truth to the two points of view, but mostly it’s hyperbole, a lot of IFs and an acute failure to see both sides of the story.

The Debt

It’s true that United’s debt, higher than that of Arsenal or Liverpool and not backed by a billionaire like Chelsea or Manchester City, is a cause of concern and the interest payments represent an undesirable negative cashflow.

It’s also true that Manchester United were bought by the Glazers in May 2005, not December 2009, and none of this brouhaha about the debt is new.

Just as Liverpool successfully refinanced their 350m debt, Manchester United will be able to successfully refinance their debt through this 500m bond issue. The guarantee of success on the pitch from United is far higher than that of the likes of Portsmouth or West Ham and even Liverpool.

What’s important to keep in mind is that a) the Glazers, like Hicks / Gillett, have at least a 10 year plan for Manchester United and they would have factored in the debt refinancing in their initial proposal to buy out the club. No, they couldn’t have accounted for the worldwide economic downturn, but then again they wouldn’t have accounted for the remarkable success Manchester United has achieved on the pitch in recent years.

So does it suck that the club’s earnings are used to pay ‘debt management’ fees? Yes it does. Does it suck that Carrington may be sold and leased back to ‘get a depreciating asset off the balance sheet’? Yes it does.

But is the club in danger of going under? Not by a long shot. Is the club an institution that lenders will refuse to give money to? No. If there’s one thing we’ve learned from recent events in the global economy and in football, it’s that big brands rarely have trouble in borrowing money. The bigger you are, the more money you can get. Just ask Real Madrid.

Download the Man Utd Prospectus (2.4mb, PDF).

The Credit Facility

The option of United using their 75m credit facility has been taken as a further sign of financial instability (even though United haven’t used it yet and still have a profit from last year from which they can spend if needed). It’s not too long ago (summer 2007 to be exact) that Arsenal announced that they could use a 40m credit facility (Edelman called it a ‘player trading facility’) that was available to Arsene Wenger should he need to buy a player.

At the time, Arsenal fans and the press were bullish about Arsenal’s purchasing power. Over the last couple of years Arsenal have maintained that they can spend if they want to – based primarily on this player trading facility. The criticism for Arsenal hasn’t been the lack of funds on Wenger’s refusal to spend on experienced players.

Now that United have a similar (although almost double the size) credit facility, why is this being turned into a bad thing? Simply put, United can afford to buy players if needed. The reason that they haven’t is because a) Ferguson is loyal to his players and will give them all the chances they need and b) Ferguson doesn’t want to overpay.

The Performances

It’s true that United have not performed to their usual high standards established in the previous three seasons. It’s also true that if were to take out the first choice goalkeeper and several top defenders for any team in the Premier League for an extended period of time, they would struggle to stay in the top four, let alone put themselves firmly in middle of a three-way title race.

Criticism over United’s performances last year (led by the ABUs) masked the fact that what the club have achieved from 06/07 to 08/09 – especially given the despairing performances of 04/05 – is remarkable and unlikely to be repeated. Reach back to back Champions League finals (and a semi-final the first time) plus three consecutive league titles is the sort of stuff any modern-era non-United fan can only dream about.

So if United have injuries to deal with, and haven’t excelled as they did in past seasons, it’s part and parcel of being a football club.

One of the early revelations made about Glazers’ plans for United was about what the ‘average’ level of performance was expected by the new owners by United. From memory, as long as United were finishing in the top three and reaching the quarterfinals in Europe and in domestic cups on a regular basis, it was the baseline progress accepted of the club.

I think United have exceeded expectations, an injury-fueled half-season where they are still favourites to finish in the top three (cup competitions are a different story) should be more around the baseline but financially, this was already forecasted.


How often have the Glazers interfered in the club’s playing matters? The only time I remember the Glazers even being mentioned in the same sentence as ‘team affairs’ is when Real Madrid first made a move for Cristiano Ronaldo, prompting Ferguson to state that the Glazers were willing to let Ronaldo sit in the stands till the end of his contract.

In other words, 100% unequivocal backing of the manager.

And this backing has manifested itself in the transfer market as well – the arrival of Carrick, purchase of Nani and Anderson, the 2-year loan of Tevez, the expensive Berbatov and the overpriced Valencia have all come under the time of the Glazers. Yes, United would have been able to buy them if the Glazers hadn’t been there too, but the point is that when the manager has asked, the Glazers, despite the 70m / year interest payments, have backed the manager with the money.

Penny-pinching? Maybe everywhere else but not on the pitch, which the Glazers know is key to their long-term financial success.

Transfer Market

It’s been said that United have effectively earned a profit in player trading over the last three seasons. Whereas this would be seen as a good thing (considering the titles won during that period of time), this fact has been twisted into another ‘weakness’ for United. Take out Ronaldo’s sale and you have considerable spending for each summer.

At the time of Ronaldo’s sale it was widely accepted by all parties that ‘the player wanted to go’ and United had received a fantastic price for him considering that he was not willing to renew his contract. That sale was not a necessity, it was a matter of choice.

Whether United ‘must’ spend in the next two weeks is a different issue – what’s certain is that if Ferguson is sure about a player that he needs, he will go after him and will have the money to buy him. If Douglas Costa does not arrive at United and goes to Shakhtar instead for 6m, it’s probably because United rate Gibson / Anderson higher and are more interested in investing in the players already available. If United didn’t buy Adem Ljajic, it’s the Gaffer’s decision and we must accept that it’s based on footballing reasons.

Sure, United can stock up on players – but that hasn’t helped Chelsea win the title in three years, has it? You win titles by building teams, and United have arguably the best manager backed by sufficient funds to get the job done.

You can’t ask for more.

Sold Trafford / Firesale

Almost two years ago I joked about United selling off the whole squad and stadium to finance their debt.

It’s nice to see the press come around to making the same cracks, although unfortunately they seem to have jumped the gun and made them three months too early.

Selling Old Trafford? In your dreams. Not owning the stadium will harm Glazers’ chances of profiting from United’s eventual sale, it’s a major no-no. What’s more likely is that the Glazers will, after the debt has been refinanced, look at expanding Old Trafford in the coming years. It might even happen before Stanley Park gets built.

Selling Wayne Rooney? Not unless he wants to go, and he’s repeated said that he’s a United man. Notice the LACK of transfer speculation surrounding Rooney, to the extent that we’ve heard that ‘United may sell Rooney’, not that Rooney wants to go. If you analyse the Rooney situation with some sense of perspective, he doesn’t want to go and United don’t need to sell him, not to finance the interest payments nor to buy players.

Vidic? He doesn’t want to go, although Madrid are definitely interested. A summer deal is unlikely, but come summer 2011 and then United might look at it again. There are no obvious successors to partner Evans (and Brown is older than Vidic) so expect Nemanja to stay put.

Nani? Injured at the moment, so unlikely to move till the summer (when he could fetch more money anyway). If it happens, it’s a shame but we might as well move on. Berbatov? That’s a whole different debate.

Comparisons with Liverpool

Given their current problems on and off the pitch, it’s natural to draw a comparison between the financial health of the two clubs. Liverpool have a weaker playing squad than United, will hurt badly from not playing in the Champions League knockout stages and are struggling to qualify for the competition for next season.

But the icing on the cake (for United fans) is this – Liverpool’s future plans call for a 350m to 400m loan deal to build Stanley Park. Add that to the current 350m debt imposed on the club, and you’ll see that to grow, Liverpool will have to become as indebted as United. Better off than United? Definitely not on the pitch, and looking at the numbers as well as what United are able to spend on players, not off the pitch either.


Unless United fans are going to put together a fund to buyout the Glazers, there’s very little they can do. The Glazers are there with a long-term plan to build United up and then sell – so far for them, things are on track. Dispiriting as it is, us fans have little role to play except financing this plan, and the alternative – turning your back on the club – is one that each fan is entitled to.

But money? That’s not a problem.

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