Exactly how bankrupt is Man IOU?

In legal terms that is a meaningless question – the company is either trading or it runs out of the ability to borrow money and stops paying its bills.

No one has presented a winding up order on the club yet but hardly a week passes without the feeling growing that we are getting ever closer to that point.

We all know that the club is not paying off its debts, despite the insanely high interest rates it is paying.  We also know that the club is not paying the interest on its debts but rolling it over into more debt on which it pays more interest.

This is not the activity of a company with access to any money – if you had anything spare anywhere in the kitty the first thing you would do would be to reduce those debts rather than grow them.

Imagine if you had a £50,000 mortage running at 15% interest.  If you could find some dosh somewhere (behind the cushion, from your gran, anything) you would pay off part or all of that debt even if doing so incurred a penalty.   The fact you don’t signifies only one thing: you ain’t got a penny.

The markets of course are not blind to this situation.   If you have a mind to you can buy debt in Man IOU – at a discount.   You buy (say) £100k debt for £60k.  Man IOU pay the interest to you – which is great except that they don’t.   They say “oh, terribly sorry, but I know we owe £15k interest this year, but we don’t have it – so let’s just say we owe you £115k.  OK?”

And the market feels fairly sure that this money is never going to turn up – which is why the people who are owed the money are trying to off-load it to another mug (sorry, investor).

So, now we look beyond this.  What about the Glaziers who own the club?  What are they up to?

First, I can’t see any reason why they bought the club other than to sell it to someone – and that’s a problem because no one is buying.  If you really want to buy a top 4 club, the bargain basement team is Liverpool, where the owners are desparate to sell.   If you want to spend less you buy Everton and invest in some players.  No one wants Manchester.

On that basis the Glaziers are stuck with the club.  And it is therefore instructive to look at how they have done in the US with their American franchise.  The Guardian did a piece on this, and while it is full of American football stats which I don’t understand, one piece of news I had never seen about their American football club before really knocked me out.  I quote from the Guardian directly…

“The team had a 145,000 waiting list for season tickets in 2007. That list has disappeared and the Bucs now say anyone who wants a season ticket can buy one.”

Now that is quite an achievement – and it is interesting that there have been reports of much greater availability of Man IOU tickets – even season tickets – this year.  And in the States, “There is even talk that Tampa games will not sell out, something that has not happened for years.”

So, if there are problems with the two clubs (unpaid interest, falling spectator interest, no one to sell to), the one question left is, how secure are the Glaziers?

The Glaziers own shopping centres – which is not the best thing to be involved in at the moment, and they invest in firms – but that business (again according to the Guardian) “went south in late 2008 and have continued in that direction. The company reported a fourth-quarter 2008 loss of $456,000.”

So what do they do?

They can’t sell the club, because no one wants to buy.  They can’t pay the interest on their debts as they have no cash.  They can’t borrow new money because people in the city don’t believe they can ever repay the money they have already borrowed.

They are, to use the technical financial term, stuffed.  Anyone buying the club (and you could probably buy it for £1 at the moment) would immediately take on the guarantees of some of the debt – debt which can never be repaid by the club.  You would need to trim the club’s expenses while putting the prices right up (and as a result would need a permanent 10 man bodyguard if you chose to visit a location that has a lot of Manchester IOU supporters – like Cornwall, or Kent, or the Outer Hebrides).

There must be something else you can buy for £1.  And besides who wants to spend months in court sorting out a winding up order?

(c) Tony Attwood 2009

7 Replies to “Exactly how bankrupt is Man IOU?”

  1. There have been rumours around all year that the Ronaldo deal to Real madrid is alread don for somewhere between 75- 90 mil.

    I’m not so convince of this figure but there is an 80% chance that Ronaldo will be at the bernabeu next season. They would need to take all this money and add it to the Champions league purse which would be between 40-50 million and use it to pay off as much of that unsecured high interest debt that is spiraling expenentially out of control.

    This would give them a fighting chance and it is looking like they will not be spending much or the Tevez deal would already be done. Tevez their hardest working player who is only 25 and a proven performer. Yet they are slowly freezing him out and this speaks volumes.

    I hope that they have to call the recievers in, although given the current climate, Gordon Brown would probably bail them out with public money, citing ‘heritage; and expect tax payers who support other clubs to foot the bill.

    Lets see how they do when they can’t blow 30 million on any player that takes their fancy.

  2. i hope they dont go bust for a while yet. when our team makes good this year or the next, i dont want people to be able to say ‘ well its cos manu were fucked’

    i want to see our team crush this manu, not a financially modified manu.

  3. Sorry about all the spelling and typing errors in the above comment.
    I would like to plead a rare day of completely blue skies 25 degrees C and an equally rare 2 for 1 offer on ‘Corona'(TM) at the local off-liscence 😉

  4. Arshavin has been here five minutes and already he is baffled by Arsene Wenger. Well, let me tell you Mr Arshavin you are not the only one baffled by Arsene Wenger my friend!

    Wenger aint called the ‘mad professor’ for nothing!

    I’ll be honest here, does anyone really believe Arshavin would say that he is baffled by Wenger and blast Arsenal already? He’s just walked through the door.

    I get the impression that Arshavin loves it at Arsenal and I love him at Arsenal. I love Arshavin like a brother.

    And I know he didn’t say he was baffled because I saw the interview and I can speak fluent Russian. Sort of. I did a two-week course but I Russianed it………….I’ll get me coat!

    The only thing that baffles me is that the English media do not employ a proper translator who can actually speak the lingo in that country! I heard the Sun sent a Spanish man to translate Russian to English!

    No wonder the articles are always bent!

    Anyway, even if Arshavin is ‘baffled’ by playing down the left, he is one of the lucky ones. Ask poor old Alex Song who was told he is a defender only to find himself in the holding midfield role or Johan Djourou, a natural holding player who under Wenger’s guidance finds himself in defence!

    I also heard a rumour that Manuel Almunia was a striker until Wenger converted him into an Eminem lookalike goalkeeper.

    To be honest I cannot wait to see Arshavin next season. He has taken to the Premiership like I took to alcohol and I fancy a little shout at him being named Premiership player of the season after ‘baffling’ defences himself this time next year.

  5. V. funny Terence, especially as you went on to misspell license! Must have been good Corona.

    ;0)

    Tony I don’t know that things are as bad as you make out at Man Utd – true it does look as though storm clouds are gathering financially but I still think they are an attractive proposition – due to their endless success and monstrous turnover.

    The trading in debts is not as indicative as it sounds – the people who hold debts, and are willing to sell them on at a reduced rate, are most likely suffering from severe cash-flow problems themselves and so have effectively had their arm forced.

    It is difficult to see how long the club can operate in the bullish spending fashion that it has but there are signs of youngsters coming through and of them quieting down in the transfer market.

    A real indicator would be if they sold Ronaldo and bought no replacement at all. If they go out and buy Ribery I think we can assume that they are confident of riding the storm for a while longer yet…

    If they do go bust I wouldn’t worry about Man Utd fans saying “its cos manu were fucked” the truth is they only managed to get to the top artificially, by spending themselves into the ground, rather than running a sustainable model like The Arsenal.

Leave a Reply

Your email address will not be published. Required fields are marked *