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
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