Liverpool and Man U approach meltdown

Clubs can have financial problems.  Clubs can have people problems.  Club can have squad problems.  And clubs can have supporters who have fallen out of love with the board.

We see it all the time.  And I mean all the time, because at the moment on the Making the Arsenal blog ( I’m covering Arsenal’s own financial catastrophe.  Fortunately for us all it was 100 years ago, and we learned the lessons.

But now it seems Liverpool and Man U are approaching their biggest challenges of all.

Let’s take Liverpool first.

The current crisis came about as it emerged that it was true that the manager would not only have to sell players, he would also then only get a small percentage of the money he raised in the sales, for new purchases.  10% seems to be the amount being talked about.  The rest goes to the banks.

For Liverpool this is a disaster.  The club has no strategy for success other than paying big money for players, in that they don’t have Arsenal’s world-wide scouting and world-wide reputation for developing young players, and they don’t have the Man City or Chelsea strategy of using the fortune of a billionaire.

The Liverpool manager has raised £6.4m so far, selling Voronin and Dossena.   Babel is next up.

But that’s not all.  Hicks Jr (a board member) has been sending obscene emails to fans who question the Liverpool approach.    Spirit of Shankly got hold of the story (and they are no angels themselves, allowing a stand up comedian to do the Munich song at their end of year festivities last summer) and they demanded Hicks Jnr should resign.  He has done so.

Just for the record, what Hicks Jnr said was, “Blow me fuck face. Go to hell. I’m sick of you.”  Of course I can sympathise with his views, but then I am not a director of Liverpool.

Meanwhile just along the road Manchester United have released their end of year figures, and what interesting reading they make.

They made a profit of £48.2m.   But that included the sale of Ronaldo.  Without that they would have a lost of £31.8m

What is so interesting is that this is exactly the position of Everton.  They made a pre-tax profit in the year of the Rooney sale, as I pointed out the other day.  The rest of the time they make a loss – exactly like Man U.

Interest for the year was £41.9m – a sum that you could buy several players with.  But, oh dear, they don’t have the money, because it has all gone in  interest payments.  (And that’s apart from the PIK loans where the interest is rolled over into the loan, and not paid).

And to be  clear, Arsenal are spending a similar amount of money on interest – but they are using it to buy a new ground.  Man U are using it to pay for the owners buying the club.

What’s also amusing is that the club has now said that the new bond issue will be used to pay off the bank debt – not the PIK debt – but it is the PIK debt at 14.5% that is destroying the club.

Sir Alex spoke about the situation thus:

“I don’t have any concerns about the financial situation.  There is absolutely no issue at all. I am really confident about that.

“Concerns of the supporters are down to the fact that I haven’t moved in the transfer market. But that is nothing to do with the Glazers or with David Gill. It is simply because I am not going to pay £50million for a striker who is not worth it.”

That’s ok then.

The fact is that the bond scheme just moves the debt from one place to another – it doesn’t get rid of the debt.   It’s actually not looking very bright for either club.

Main Sources: Guardian, Telegraph,, Wikipedia, Making the Arsenal.

65 Replies to “Liverpool and Man U approach meltdown”

  1. Hi Tony, I’m not sure I understand how exactly the bond scheme works?

    I think I am right in saying that if the value of the bond decreases the investor gets a better deal. Does the value of the bond go down if the company does particularly well and vice versa?

    Also, the stake one pays is returned at maturation – is the club able to determine the maturation date as it wishes?

    Grateful for any elucidation you can provide on how bonds actually work…

  2. Tony, todays financial results for Manchester insolvency surely justify you in sitting back with a cigar and a brandy (or whatever it is clever people do these days) and uttering the magic words. “Told you so.”
    Enjoying other peoples misfortunes might seem a trifle mean, and I do genuinely have sympathy for real Man U and Liverpool fans that their club has allowed itself to get into such financial straits without any input or protest from themselves being allowed to truly register. I can only imagine the feeling of angry impotence if something similar were to happen to Arsenal. But still, so many of them have lauded it over Arsenal as “poor cousins”, unable to compete financially with the big boys, that its hard not to allow a small smile to appear on the face!
    Having to sell a Ronaldo every season just to keep their heads above water (despite having the most succesful season for a long time!) doesnt suggest a good outlook!

  3. Well at the beginning of the season I had an argument with a MU fan from my country in a newspaper. With the articles I read over here I told him in answer for his “you haven’t won anything for X years-mantra” that they would have to sell Ronaldo every year to keep their head above water. Unfortunatly, for them, there is only one Ronaldo to be sold and the deal was already done and that they would struggle to survive.
    He laughed at me and asked me what I knew about it… well it looks like I knew a little bit more than he had imagined.

    Great article Tony.

  4. The bonds will yield a certain % for an investor, and in exchange, United will recieve up front capital, with which they can pay down their debt. The idea is to pay off the expensive debt (which averages 10% interest) and swap it for bonds, which will have a lower % pay out. So at the end of the day, United’s interest bills falls.

    Assuming of course, people buy these bonds! With the government finding that their bond sales aren’t going as well as hoped (yet britain still holding the best national credit rating AAA) how will United’s bond sales go? Will they raise £700million? We will see.

  5. Man U and Liverpool are always going to be able to find someone to bail them out if they do get into real trouble because they are high profile clubs.

  6. ChristianJimmy. A bit of schadenfreude now that their chickens are coming home to roost is good for the gooner ego!

  7. Phil – you hit the nail on the head. There are two huge factors regarding Utd’s plan to head to the markets to issue new debt:

    1. People have to be willing to buy the debt. That is directly tied up with the second factor, which is…
    2. People have to be sure that in 2017, when the bonds are due, that Utd will be able to pay them back.

    Arsenal were a profitable entity when we went to the markets for our debt, and our break even point is very low (47,000 average crowds and one CL appearance in 4 years if rumours are true). Utd are effectively going to be saying “trust us, reeeeeaaaaallllllllly” when they go the markets and the markets are going to say “hmmmm, let’s see, you lose 30million if you dont sell a Ronaldo, so in 8 years when these bonds are due, that could mean another 240million in losses, not including the losses incurred by the holding company, and that is on the back of three consecutive championship seasons and two consecutive appearances in the CL Final. Hmmmmm, what happens if Utd have a poor season? What happens if they dont make the CL?”

    If I was an investor, I’d laugh and say “no, thank you” to that one.

  8. Brookesy: I agree with in regard to United, because they are a massive entity. That sort of brand name is incredibly valuable.

    But Liverpool? I’m not so sure. Commercially I don’t think so. They sacked Parry not long ago if I remember rightly due to poor performance in this respect. Plus the ground is small, and they are struggling to redevelop it.

    Liverpool may find that they cna only live on past glories so long. If they don’t sort it out on the pitch soon, how long will it take until the “glory supporter” or child supporter element move on? Don’t underestimate the latter – I’d love to see a figure that kids who get new shirts every year bring in. These two groups in particular are fickle – they only support the team who wins a lot, and if Liverpool drop out of the Champions League…

  9. Some probably boring stuff about bonds…

    A bond is usually a fixed term investment. If the original buyer keeps it to the end of its term they (usually) get the same amount back but along the way they earn something, usually a guaranteed interest rate which may be paid annually or may be paid at the end of the term. There may be other sweeteners though and with football clubs it’s often the right to buy a season ticket.

    Lets’s look at Arsenal. In the early 90s Arsenal issued bonds to raise funds to rebuild the North Bank at Highbury and with those bonds came not just a season ticket but a seat with your name on it. By 2006 the original North Bank Bonds were re-selling at up to 10 times the face value because of the guaranteed access to tickets. It’s this re-sale market where the value can go up and down but the original bond retains the same value. The length of the term and the type of return varies enormously though, depending on what the issuing company wants to achieve and who they are targeting to buy the issue.

    Again with Arsenal, in 2003 when they needed to kick-start the process of raising money for the new stadium they issued debentures (similar enough to bonds) which were quite highly priced (£3000 and £5000 I think) with a 25 year term and a minimal return payable at the end but again with the right to buy a season ticket at both Highbury and the new stadium. Arsenal needed to raise a relatively small amount of initial capital and they were fairly confident that supporters would buy them, given the huge waiting list for season tickets. The ultimate cost to Arsenal was tiny. There are no annual costs (i.e. interest) to pay and the debentures will not have to be re-paid till 2028. In fact, many may never be re-paid unless Arsenal do the decent thing and allow the holders to keep the right-to-buy.

    However, as far as I remember, the maximum Arsenal could have raised in 2003 was £15,000,000 (3,000 debentures at £5,000 and/or £3,000) and the target market was Arsenal fans, not corporate investors. When you’re trying to replace bank/hedge-fund loans of hundreds of millions the right to buy a season ticket and the promise of a fixed 5% bonus in 25 years just won’t do it! Man U need to attract serious investors who want a decent return so they’ll have a to pay a decent rate of interest. They’ll still owe a huge amount of money and they’ll still be paying interest.

  10. Arsenal had a profit before tax of 45.5 million pounds and that did not include the sale of Ade and Toure, because it was for the year ended 31 May 2009. Add plus 40 to that then

  11. To spend £50m to win a trophy worth £1(spurs) is the biggest joke!
    Arsene for prime-minister!

  12. Great insight Kevin, thanks for that. So not only do United have an issue in terms of “do we trust you enough to buy your bonds” as I mentioned, in order to make them attractive, they’ll have to have a fairly high interest rate, which limits the actual saving they’ll make assuming they issue all the bonds.

    So assuming they sell ALL the bonds, what sort of rate seems likely for them? I can’t see it being more than 6-7% otherwise their net saving would only be a few million a year. Better than nothing, but not exactly going to change thing substantially and make them profitmaking.

  13. We just need Chelsea and Man City Billionaires to walk away and maybe Wenger’s economics expertise will actually pay off in terms of trophies!(Assuming the lesser teams allow us to play pretty football!)

  14. Interestingly, the tabloids have finally caught up with what Tony and some of us over at ACLF have been saying for months; the debts at ManUSA and Pool are unsustainable and will eventually weaken, if not bankrupt, these clubs. Amidst the clamor by the doomers and gloomers, we warned against a policy of slashing-the-cash and that that Arsene’s self-sustaining model was the way forward. However waking up to reality does not prevent the tabloid press from trying to defend a bankrupt model. According to Paul Little of Murdoch’s football365, we should all grieve for ManUSA because there’s the model to follow. It is the greed of the owners and not the decisions of the manager that put the club in this hole. If memory serves me right, when the Glazers were about to takeover the club 5 years ago, didn’t Ferguson sing the praises of the new owners on the grounds that he would have more money to spend (to compete with Chelsea), contrary to the massive protest of supporters opposed to the sale. History has seen a policy by the recent owners of the club of spending big on players, to win trophies and therefore enhance the sell-on value of the club. Didn’t the prior majority owners J.P. McManus and John Magnier, make out like bandits when the Glazers came along?

    The crocodile tears of Little and his publishers have nothing to do with educating the public as to inevitable doom for football clubs and football leagues if they pursue this neo-liberal model of rampant greed by corporate raiders treating clubs like chips in a casino rather than the social institutions to be managed as a public trust.

  15. The rate which Utd will be able to set will depend on the yield curve for bonds at that time, which is set by the market. At the moment the issuance of bonds is very difficult because we are in a low interest rate environment. Investors want a return for their money, and the price of bonds moves inversely to interest rates. Interest rates are only going to go up in the future. Arsenal fixed their bonds at a time of higher rates when the long term yield curve was negative. That meant we fixed our rates at a great long-term figure. Now the outlook for rates is to go up, way up, and so investors will be asking for much higher rates of interest to make them attractive. That goes against the reason why companies (and football clubs) would issue bonds in the first place, which is to tie down long-term debt at good rates of interest. Now is not the time to issue debt. Now is the time to issue equity, but of course the Glaziers do not want to do that at any cost since their ownership would be diluted and they would stand to lose even more money personally (though Utd, as a club, would make money from it).
    And of course we havent even began to talk about the fees that the Investment Banks will charge for their services on such a bond issuance. The banks will charge fees of between 3-10% depending on risk and ease of underwriting. In the current climate the fees will probably be closer to 10% than 3% so add another 35-50million to the debt of Utd just in fees for a 500million bond issuance.

  16. Thanks for you all for makings some points clear to me.
    If I understand right it means a delay in payement but the main debt remains but in other hands.

  17. Mid way my post there is an incomplete sentence. It should read:
    “According to Little, it is the greed of the owners, and not the decisions of the manager, that put the club in this hole.

  18. Spot on Walter. They are still in debt, just to all the different bondholders at a lower rate of interest.

    Good point Paul, I meant to raise that but forgot in my previous post. I was unaware of the high level of the fees involved though, that in itself is equivalent to a years worth of interest payments, too. A real pickle for United.

  19. Brookesy and Phil, can you explain to me what you mean by ManU (the only one standing after your deration of the prospects of Liverpool) is, to quote Brookesy: “always going to find someone to bail it out…because they are a high profile club”? This, to me have been the hope of several “high profile companies” through the ages for which, in the end, their white knights never came through. Is the optimism for ManU based on something different and special about the ManU brand or an unwillingness to contemplate the possibility that ManU can, indeed, go the way of Leeds United?

  20. Fem Dee – the big difference between the two clubs is that Man Utd are an attractive enough proposition for investors. But for the fact they were bought through leveraged debt, they would have been able to compete financially with most clubs. Their stadium size, global brand and support is second to no other team in the premiership. If we remove the Glazer’s from the picture, and the debt they have piled on the club, it is clear with the right management they could be run at a profit. One can only wonder (with a shudder) what Wenger would have made of Man Utd had he brought his expertise there.

    As for Liverpool, with a starting point of nearly £400Mill debt, even if they were successfully bought out, you would then need to invest a further extraordinary amount of money and time – building a new stadium, a better youth project and millions more on new players just to stay near the top. What investor would even dream of seeing the £7-900Mill of expenditure back and on what time scale, at Liverpool?

  21. Jonny sums it up perfectly. A billionaire with enough money would just pay off the debts at United and voila, they are profitable. Said Billionaire wouldn’t have to be like Abramovich, indeed he could probably make a profit from the venture by skimming away whatever profits are there after transfers

  22. Although Man Poo sold ronaldo for £80m, they bought:
    Obertan – £3m (undisclosed)
    Valencia $14-$18m (undisclosed)
    Owen – free
    (also see berbatov! below)
    And also sold:
    Manucho – undisclosed.
    F Campbell – £3.5m

    Not sure what financial period is covered in these financials.I believe Berbatov’s transfer which happened in the summer of 2008 could be included. If this is the case then i am afraid Man United have more or less broken even.

    In addition, what you will find is that the debt restructure may be beneficial to man poo as they will effectively reduce the ludicrously expensive hedge fund debt. Overall, while they have tons of debt (which may be converted) they are still the top 2 richest clubs in the world.

    Alex ferguson is not concerned because the club is able to service its debts. The main reason he is not buying seems to be more about the fact that player prices are so hyper inflated thanks to the man cities and real madrids of this world. That is also partly why Wenger doesnt seem to be buying, because there is no value for money.

    The only value for money transfer was the silvestre transfer for £750k (or some other modest amount)!!!
    Although wenger has shot himself in the foot by publicly talking about signing chamakh on a free, now all the vultures will be swooping with higher salaries.

    Still, i absolutely what Wenger and the board have achieved at arsenal , we are definitely top 6, or even top3 in terms of most valuable clubs in the world. We have a fantastic football academy and are paying off our debt quicker than necessary. I have nothing but praise for le boss.

    However, lets not be too hasty to think Man united are in calamity, they might just be ok financially.

    Liverpool on the other hand seems to be in more trouble.

    I havent done much research, i read the bbc article and realised they must be missing vital details eg berbatov and valencia transfers in their article. As usual, the doom mongers are out for fresh blood, better Man Pu that arsenal for once!

  23. ok, for something more definitive, exclude obtertan and valencia as they were bought in July 2009, but include Berbatov as he was bought towards end of august/1st september 2008. Still, Man U almost broke even if you take out the ronaldo sale AND the berbatov purchase.

  24. I’ve just come into some information, apparently United got part of their sponsorship deal paid up-front. This means they get less nett cash: so why do that? because they NEEDED the money up front in the short term, which is very worrying. I remember Newcastle did this too – get sponsorship up front for more cash in the short term, but much less in the long run. I’ll post a source when I can verify it.

  25. AndyP, not following what you’r reasoning is there. United aren’t servicing their debt, as it keeps rising, and has done ever since the Glazers took over. Interest isn’t paid, and becomes debt, which increases the interest etc. The increase in their debt is by far, far more than their net spend on players, so that can be discounted.

  26. Hi Phil,

    I agree with what you are saying, a substantial part of the interest is rolling into the principal amount and the debt is rising, and the rise is substantial.

    Manchester United’s problems seem more to do with the fact that the owners are looking to get the club to pay the interest on the debt, which is in itself a huge amount of interest per annum. Thats what you get when you borrow from a hedge fund! interest rates of 10-15%!

    I just thought that it is not a true reflection to just mention the ronaldo sale at £80 million when there was a transfer in of a player in the same financial year of £30m. Your net transfers are £50million, not £80 million is all I am saying, so a net loss of circa £10m (if you take out the effect of the 2 main transfers), which I agree will keep rising as the debt keeps rising and Man United cant buy more players. Who knows what will happen with the debt restructuring.

    While I agree that they are not paying all the interest on the debt, it is still getting charged to the p&l, in other words, the result for the year takes into account ALL the interest charged, including interest not paid off. Yes the Glaziers have screwed the club by buying the club with really expensive debt. Maybe this will get partially sorted with this restructuring.

    This season Fergie has been playing his young players a lot, signalling evidence of a change of strategy from buying really expensive players to developing their young players. It is quite a possibility that man u will now begin to drop off in the league like arsenal did the last few years due to a shift towards developing younger talent.

  27. The PIK (payment-in-kind) loans w/ 14.5% interest just scare me. I’m certainly no financial whiz, but the more I read about them, the more I realize that any child who has taken elementary mathematics will know how compound interest works!

    Tony is right. These are the debts that are going to kill Man U, and the 500 mill pound offering will not service them.

    Let’s hope there are rules in place preventing any potential super-leveraged buyout of Arsenal. And let’s also hope Silent Stan is paying close attention.

    The Glazers made a huge bet on the worldwide growth potential of Man U, and now they are paying for it.

  28. Sometimes it’s just best to sit back and learn! Tony you have created a website that has just about everything. I can’t remember a website where I read both the article and the responses? It’s that intelligent. PS Funny jabs to Phil!

  29. Hi Guys,
    A dumb question. What is the logic behind this buying a club and loading with debt ? I guess from the banks point of view , i think it is like mortgage. But there is something illogical here.

    “A” wants to buy “B”s house and goes to the bank and gets money showing the house. But the house is not A’s but B’s. How on earth does this thing work you basically borrow money on others house to buy the house. I do not understand the logic behind this, no wonder the world is in financial shambles.

  30. The longer the Glazers and Hicks’ dig in and try to turn around their respective debts the better it is for Arsenal. These 2 clubs will never go bankrupt as there will always be a buyer for them, however, until then it will be nice to see both teams struggle and weaken.

  31. Some Random Gunner. People buy football clubs either because they want to be in the show, or because they want to make money. We’ll take the latter case here.

    The idea was to sell on Man U as the price kept rising – a bit like a person who buys property with a mortgage, not to live in it, but to rent it out for a while and then wait for the value of the property to rise. Liverpool much the same.

    What has scuppered them is the world-wide recession.

    But there is more…

    This from the Guardian today

    The offer document [re the bonds] reveals that on 30 June last year the club entered into a £2.9m-per-year agreement with SLP Partners, a company related to the Glazers. Since 1 July 2006 a further total of £10m has been paid in “management and administration fees”.

    “During the period from 1 July 2006 to the date of this offering memorandum, management and administration fees of approximately £0.6m, £1.8m, £1.4m, £3.1m and £3.1m were paid to our affiliates,” it said.

    Under the terms of the bond issue it promises to terminate the agreement with SLP Partners but reserves the right to pay up to £6m per year to “one or more entities related to our ultimate shareholders for administration and management services”.

    So (and this is Tony not the Guardian) Glaziers have been using Man U to fund themselves by taking huge management fees out of the club while it continues to sink. That’s a good enough reason in itself

  32. I’m not a financial genius, and certainly not in the English language on those things, but could one just say in ordinary words that the Glazers just pull money out of the club for their personal needs ? To be able to keep up a rich mans life they use the clubs money ? This is what one could call a leech ?

    This reminds me of my old company for whom I’ve worked for over 22 years. As business went bad, the owners kept on putting money in to their own pockets. I told them that they would made the company bankrupt like that but they just said to me: “We own it, it is our money anyway, so shut up”. I left the company after 22 years with a bleeding heart in the knowledge that it would end with bankrupt and some 50 people with no more jobs. Last year in the summer it was the final curtain for what I still regard as my company. It still hurt me when I drive past the now empty buildings and knowing that with a little bit less greed the company could have survived.
    Sorry for the personal note, but still feel bad about it.

  33. Whilst I am certainly not beyond a spot of schadenfreude (especially where Liverpool & Man Utd are concerned) I think it is a disgrace that these leveraged buyouts should be allowed at all. At both clubs the ‘owners’ (I use this term in it’s loosest sense) have paid themselves money and expense fees from the clubs coffers whilst leaving their own millions sitting pretty in the US. As I have said before this would be illegal in their own countries but is inexplicably entirely allowable over here. Th governments should start protecting businesses from becoming millionaires playthings – especially when it is done with no risk to their own fortunes.

    It is nothing short of fiscal rape.

  34. Thanks for the explanation Tony. In simpler terms it is like home loan which was said to have caused this recession. God bless bankers. And a minister gives all contracts to his relatives.

  35. @Gf60 — nice link. It’s an excellent summary of the sh&* Man U is in.

    This reminds me of when I interned in a corporate law firm during college. Whenever there’s something like a bond or stock offering, there’s the prospectus (what’s circulated to potential investors). The most interesting thing was always the Disclosure section, where lawyers would invariably try to couch with big words all the sketchy and borderline illegal activities that the company was involved in. At the time, it was all kind of complicated to me, but I soon realized that “affiliates,” “holding companies,” and other “outside entities” were often code words for “personal piggy bank,” “wife’s private stash,” and “son’s new yacht.”

    @Walter — I completely agree. I feel bad for the poor Man U fans.

  36. Glazers took £20M in “management fees” from Man poo in 1 year. Rich sugardaddy’s raiding the kids piggy bank.

    “Management fees”?! Is this even legal? If I were a shareholder in MU (Glazers are sole owners) I’d be heading to court.

  37. Andy P: I see your point, however the argument is this: we can feasibly remove ronaldo’s fee from the equation as it is a one-off. But Berbatovs fee = a 30mill net spend. That is not an outlandish sum for manchester united to do over a summer + a January window.

    So, if United make zero net spend, they break even, roughly. So stop all transfers, AND the bond issue lowers interest somewhat (obviously, debatable as to its likely uptake) and United make a small profit. That’s the best possible case for them. The debt doesn’t get paid down, they have a small profit for transfers.

    Now apply that to what we see on the pitch. Vidic wants away, ferdinand has injury concerns. Scholes and Neville could (and probably should) retire at the end of the season, while Nani needs replacing, as does Tosic. The latter two will undoubtedly be sold at a loss, and Fergie is not Wenger in the market. Vidic will yield a reasonable fee, but how can anyone see them replacing those players?

    Hence, even if United can stay afloat (I’m not even mentioning the fact the bond issue needs paying back at some point, either!) they will struggle to maintain their standards on the pitch, let alone improve them. Which is all that matters to the Gunners 🙂

  38. Well it looks like the only way to solve it would be to either boot the thieves out via lawsuit for fraudulent and corrupt business practices or let them have the shell of what this club was and start over right next door either in city or somewhere nearby. Do this until the whole thing is settled.

  39. The best part of the glazers loan is that the interest on all the loans is paid by ManIOU. The BBC link exposes this fact.

    So in short we can say

    1) They took a loan against the club to raise money to pay the shareholders.

    2) The interest on all these loans is paid by the club while promoters are required to pay only the principal amount implicitly saving them the huge interest costs.(around 70 million)

    3) Apart from the normal debt repayment schedule if I remember they have to pay 75 million in 2013 and 150 million after that for every year for 4 years. I guess the PIK loans play a major part as they also mature in 2017.

    4) They paid themselves for the mismanagement in the name of management and consultancy fees and plan to take out 42 million in the next 7 years. (Thanks to Guardian article posted)

    So we see how these Americans have raped Man U in these years and were probably planning to exit before 2013 when they have to pay the huge amounts. Another link from BBC which is also useful.

    And thanks Tony for putting up such a great blog which refreshes and enlightens us about everything that is related with football. All the comments are beautiful.

  40. Another good article, Tony.

    “I think it is a disgrace that these leveraged buyouts should be allowed at all.”
    Agree with that 100%, Jonny.

  41. Also without sounding completely ignorant about the Glazier’s legalities vs. illegalities it sounds like the tradgedy that occurred with Adelphia cable in America in the early 2000’s (do a search on Wikipedia) Only difference being that the owners founded the company in America vs. Glazier’s saw a cash cow in UK and look like they are using it until they get the next best offer.

  42. sorry most of the information i wrote was already there. Did not go through all the comments before posting.

  43. Is it true that only in the UK can someone buy a club by using the club itself as collateral to borrow money to buy the club? If my understanding is correct this practice is not allowed in either the States or the rest of Europe. Could some legal bod confirm please?

  44. Tony Attwood for Prime Minister!! And a knighthood.

    Tony’s the first person on blogs or media to start highlighting Man poo’s slide towards financial doom, right from when it started.

    The media who cheerled it all the way are now baying like dogs, and accusing the owners of perfidy while absolving the man who, lacking integrity, put his thirst for personal glory above the medium to long term interest of the club.

    I really respect the fact that Tony highlights this issue.

  45. Tone: I too have heard something similar but despite a quick google around, I couldn’t find something to confirm it. That said, it does explain why there are so many American owners!

  46. Phil / Tone – it has been said on this site a number of times by people who clearly know a lot more than I about corporate finances. I tend to think this is right because we have had several erudite people on the blog kindly take time to give the ins and outs of this.

    So yes, I think it is true.

    What is also interesting is that whereas two years ago both Liverpool and Man U supporters were in total denial now they seem to be moving into total anger and/or panic.

    What next? Will the spend-spend-spend Arsenal supporters suddenly say, “of course we always knew that the spend-spend model was corrupt and would end in tears”?


    Thanks everyone for what must be one of the most enlightening discussions on a regular football blog ever. And not a single person writing in saying “hey I’m 35th!”

    New topic now up on the site – plus a few reviews of Making the Arsenal, in case you haven’t got your copy yet.

  47. Jonny wrote: As I have said before this would be illegal in their own countries but is inexplicably entirely allowable over here.


    Where do you get this idea from? US is pretty much were leveraged buy-outs originate and are still happening (or were until the credit crunch). Or do you mean that there might be stricter rules with sport franchises? Does not sound likely to me.

    Just a few examples of huge LBO’s from past couple of years:

    – Toystore chain Toys’R’Us, bought by a consortium in 2005 for $6.6 billion, $1.3 billion of which was invested and the rest borrowed.

    – Car rental brand The Hertz Corporation, bought from Ford Motor Company by investors at a prize about $5.6 billion and subsequently listed in New York Stock Exchange, where it’s now available under the symbol ‘HTZ’.

    – Another big buy-out was Sony’s purchase of Metro-Goldwyn-Mayer. These are just well known brands. HCA, Hospital Corporation of America, the largest private health care operator (revenues over $28bn in 2008) was originally taken private through a management buy-out in 1989 for $5.3bn and in 2006 again sold through an LBO at a hefty price of $31.6bn, the largest LBO to that date, surpassed later by a couple of others.

    Besides, the US Government sold government bonds to fund the bail out of GM and gain control, so basically borrowed to purchase a company? Quite strange that this would be illegal somehow?


    Also I believe it is a general misconception that Glazer’s borrowed the entire sum for purchasing ManU. I remember reading from somewhere that they used their own money in the original acquirement of stock (before they reached the threshold for formal takeover bid), can’t confirm this though. But basically, I don’t think one can do an LBO without putting some of their own money to it (It might be possible to borrow it using other equity as collateral). Like in the forex markets, you put in an investment of a £100 and leverage it with a loan of a £900.


    On another point, people keep repeating that someone will come and buy Pool or ManU ’cause they are so big and all. So why does it seem that Hicks&Gillett have been trying to offload the club and no-one is interested?

    Why did the Abu Dhabi United Group, and they are pretty much as rich as sugar daddies get, chose instead to go for Man City? Yes, they may have spent around 400 million, but they did get quite a few players, whereas in Liverpool this would only rid them of debt and another few hundred million would be needed for transfers. With ManU, even more would be needed.

    Same with Briatore and Lakshmi Mittal, one of the richest five people in the world, going for QPR instead of some debt-ridden big PL club. And they are not pouring huge money to it, but trying to be somewhat reasonable, using loan players from Arsenal and Spurs for example. They have changed managers of course but I suppose it’s to be expected.

    Besides, too big to fall, ay? Like GM, Enron, the Lehmann Brothers? And it really is not that huge business after all, a few hundred million in revenues per annum, compare that to HCA numbers quoted above.

  48. Oh and I forgot. I accept the nomination of the knighthood but not that of Prime Minister. I am more inclined to suggest that we set up the Independent Republic of Arsenal, issue our own passports and send rude postcards to Tiny Totts.

  49. It’s basically too late for Man U and Liverpool, but it’s not too late for Arsenal. Could something please be done to make sure that things like this CAN’T happen to Arsenal? I mean I read your articles Tony about how Arsenal appear less interesting in this aspect because we have quite a huge (manageable and far sighted we must repeat) debt already on the stadium, but I’m not convinced it still won’t happen. Don’t we all see Arsenal as a certainly profitable club now and in the long run? The creditors must think so, too! The main reason for my insecurities is the sole fact that it still CAN and is still allowed to happen. I don’t know the current main share holders, no idea what they’ll do to the club. Is this really the path of the ‘neo-liberal’ economy and there’s nothing to do about it?

  50. reading one of the links in the comments here, one united fan called his club ‘man untied’

    freudian slip? possibly
    funny? certainly.

  51. Wonderinggoon…

    You have to remember the process and the benefits to the buyer. Man U was owned (I think) predominantly by one person (was it Edwards? can someone help me here?) who was offered a big profit on his shares, and so sold out to ensure luxury for him and his family for ever more.

    Further, no one had done this before in the UK – and indeed even when Liverpool was sold the new owners were forced to lie and say they were not going to do a Man U, to buy the shares.

    Arsenal have no one with over 29.9999% of shares, and so the newcomer has to convince several people to pay up, and they all have to agree.

    So if someone buys out Kronke and then buys the last 7 shares to make a bid, he then makes a bid at the higher price shares were sold at in the last year. Another 60% of shares have to change hands before the new owner can mop up the rest of the company.

    Thus there are 3 safeguards…

    1. The club is not that easy to buy
    2. The club is not a financially attractive proposition at the moment because of the high price of shares and the cost of borrowing
    3. There are at least a dozen other EPL clubs for sale into which you could do a Man City. Take Everton. Portsmouth…

    And remember, not all owners are like the Man U / Liverpool lot. I may personally dislike the tactics of Villa on the pitch but their ownership is not that bad. There is money, there is one owner, but they are not bankrupting themselves.

    There is no absolute guarantee, but we can say that a Man U style take over is unlikely.

  52. Thank you for replying and explaining, Tony. Would much prefer if there’s more guarantee on the regulation front, but those points do look quite good. Hoping for the best.

  53. Tony is absolutely right. It would cost a fortune for anyone to buy Arsenal right now. That is a safeguard by itself. For a buyer to then do an Abramovich and invest much more in players would be highly unlikely (both City and Chelsea were “cheap” to buy therefore the buyers thought that an initial 300-400million to get them up to Arsenal/Utd standards was not much to ask). A leveraged buy-out is almost unfeasible since the buyer has to have that majority acceptance and one cannot see either Kroenke or Usmanov, or Bracewell-Smith as well, agreeing to sell ANY of their shares to someone who was buying with debt. Not going to happen. Both Utd and Liverpool were cases or majority shareholders wanting to get out quickly at a big profit and not caring about who paid them or how.

  54. An interesting update .
    The security for Man U’s bond includes most of the property including Old Trafford obviously enough but not the training ground at Carrington. The bond prospectus suggests that ownership of Carrington may be transferred to a separate Glazer company then leased back to Man U. Companies don’t separate assets just for fun. There is a reason for this.

  55. Lose the Amish asap or lose Man Utd, all the protests about the Amish stopped due to success on the field, i feel a fan revolt brewing !

Leave a Reply

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