Will the Premiership dominate the CL?

[The Jitty Slitter]

I think this at least hinted at it.

I simply stated what the german media are saying, and stated the obvious as far as german clubs competing goes.

I don't believe it's unfair personally. I just think it's grossly irresponsible vis-a-vis the fans

I've been consistent on this point.

Arsenal made a 5m profit before tax in the same financial year after all debt repayment (and including both the companies in the group :p).

Many Arsenal fans claim that wenger should have been spending large. I've argued repeatedly that such spending would have been irresponsible given it would have pushed the club into a loss making situation, which ultimately the fans pay for.

[The Jitty Slitter]

The club isn't in debt.

Wasn't it you that once posted that where you are the only person in the world saying something it's time to take a step back :p

Let's see....

Over 500m in bank loans secured against the assets of the club?

Check.

150m in PIK junk bonds where in the event of default Wall Street begins to steps in to board positions to run the club amongst other things?

Check

No corporation tax paid by Manchester United in the last 2 years due to the enormous losses they've been making?

Check :D

Would it sway your opinion any to know that in the first year all the debt was in fact contained directly with Manchester United?

It makes no difference that after refinancing half the PIK the debt was all structured in RedFootball. The companies are so closely related they are treated as one entity or group. Red Football has no other purpose than to operate and own Man Utd. To all intents and purposes it is Manchester United.

Glazer is in debt. He just transferred his debt to the club's controlling company.

This is false, and not how an LBO works.

Why would glazer want to go 600m in hock buying a football club?

The modus operandi of the junk bond leveraged corporate raider is to locate an undervalued/over capitalised target where the acquisition costs can be lumped in as debt on arrival. The money comes from everyone else. Senior debt from the bank - secured over Man Utd, and junk stock from wall street at junk interest rates.

None of it is underwritten by glazer. All of it is owed by Manchester United. Later Glazer transferred the debt up to the controlling company - which changes nothing. Red football is just a shell.

In practice the banks risk is low, glazers is fack all, and Wall Street is high - hence the high interest rate. The losers are the fans who now have a hugely indebted club for no upside.[/QUOTE]

If they can't really afford Berbatov, it's because Glazer saddled them with his debt. It's not because they were running up bills they could pay.

Agreed. But that is where they find themselves.

If it wasn't for Glazer's debt, Utd could buy two Berbatovs and still have change. The payments to the holding company, to pay off a loan from which the club didn't gain a single benefit, actually restricts Utd's spending power. They would be far better off if Glazer hadn't bought them and they did balance the books. A club without debts and with £60 million to spend who can't go into the red, or a club with £700 million of debt who can spend £30 million a year even if they can't afford it - who has the advantage?

The 'advantage' comes not from the debt but from the aggressive stance re risk that the debt necessitates.

There is no realistic way the Glazers can now trade out of this hole. So in the end, sometime soon, they need to sell something. The usual LBO progression is to ramp up the market value, sell out, pay back everyone and be left holding the pie.... or, default on the junk bonds and fail horribly.

With that in mind, it really doesn't matter if another 30m is tossed on the fire. The downside is that same, and hopefully you increase value. This is usually called 'window dressing'.

Compare that with Arsenal which is managed along very traditional lines. Despite having almost the same turnover as Utd, Arsenal cannot afford the same players without becoming loss making (at least until the latest financial result anyway).

Chelsea and Liverpool with far less turnover than Man Utd or Arsenal, certainly cannot afford the players they are buying without external assistance - which then directly increases indebtedness.

I just can't see how you can regard Glazer's running of the club as giving them an advantage over German sides. I mean, if all English sides were bought this way, and they did have to balance the books, would you really argue that having to pay crippling interest payments to pay back their owners investment every year wasn't a disadvantage compared to clubs not purchased that way?

whether Man Utd are technically in debt or not isn't the issue. You point was that they gained an unfair advantage from it. Clubs in Germany "couldn't compete with that". I'd say that rather than being an unfair advantage, it's actually a massive hindrance.

I actually never made this argument or said it was 'unfair'.

In my view what changed everything was Chelsea.

Until that time, the prem was dominated by Man Utd by a mixture of good management and financial muscle. However other clubs could just about compete with them, but no one club all the time. e.g Arsenal recently.

Arsenal cannot now realistically compete with Chelsea season on season - at least not without running up big losses, or jacking their income up another 50m or so (which is what they are trying to do).

The Glazers made the decision to compete (what other choice did they have), which they have done, but also racked up a staggering 120m in debt increase.

You can make a similar analysis WRT the Torres acquisition. More wood on the fire.

No normal solvent business can operate in this way. The Chelsea way, or the LBO way.

AFAIK - the LBO is not possible in germany. Nor is the sugar daddy. Therefore, even an incredibly rich club like Bayern has no way to compete with Chelsea which can pay so much money as to take Bayern's very best player, and then have 3 players earning that amount.

Nor can Bayern commit over 100m euros on dodgy structured deals to Hargreaves, Tevez, Anderson, and Nani, and then another 40m to Berba. All within a year or so :D

As i said though - i don't see the situations at Utd or Liverpool as long term, especially now. Debt can't continue to spiral.

What I do think is outrageous is the impact of this on the match day fan.

[sendorange]

ManYoo aren't in debt due to transfer or salary spending to compete with Chelsea, its only debt from the Glazer's spending to buy up a controlling stake of shares. There's a big difference between that and the old Serie A and Real Madrid debts, which were from paying artificially high salaries and transfer fees to compete with each other.

ManYoo have spent a fair bit but there is nothing dodgy at all about the structured deals, this is standard practice for any club paying for a high value player and has allowed them to close those deals. Besides the players they have bought have mostly all got player values either way above the fees paid (Ronaldo, Rooney, Evra, Vidic, Anderson) or at least roughly equivalent (Carrick, Nani), that actually just counts as more profit on the books for the club. Berbatov is the only financially weak one, although coming off a Premiership and CL win the funds were there to make it.

If Glazer can't finance the debt from club income he will just sell up with a plethora of people who would dearly love to buy Manchester United. So it's not as if ManYoo as a club are threatened by it, even though they are currently paying for it, no matter how much some wish they were.

[The Jitty Slitter]

ManYoo aren't in debt due to transfer or salary spending, its only debt from the Glazer's spending to buy up a controlling stake of shares.

Not true. Please see above. The debt went up 120m AFTER acquisition.

[sendorange]

Not true. Please see above. The debt went up 120m AFTER acquisition.
Lets see the evidence for this and what the increase in debt was actually for. If you are implying it was salary or transfer dealing then you are clearly just on a troll run. Their turnover and profit pre loan repayments was dramatically increased this year. They are not being run unsustainably in the slightest, the only question is whether the Glazers can make enough profit from running the club to justify their purchase or if someone will make a more profitable offer for their shares.

[RichardL]

It makes no difference that after refinancing half the PIK the debt was all structured in RedFootball. The companies are so closely related they are treated as one entity or group. Red Football has no other purpose than to operate and own Man Utd. To all intents and purposes it is Manchester United.

true, but your initial implication was that Man Utd were operating Chelsea-style, paying wages and transfer fees that couldn't be covered by turnover, which caused them to lose huge amounts of money each year (which German clubs couldn't compete with). That just is not the case.

The losers are the fans who now have a hugely indebted club for no upside.
Well yeah, that's kind of the point. It hasn't given them advantage at all.



The 'advantage' comes not from the debt but from the aggressive stance re risk that the debt necessitates.

I still see no advantage. The only people who could ever gain from this way of ownership are the Glazer family, and I can't imagine any football fan would want his club bought this way.

Put it this way, if Bayern could be bought this way, would it help or hinder their player acquisition? If it's not the former, then it's not an advantage.


The ability to gamble on gaining success could well be seen as an advantage, but that's just not the same thing.


As it happens I do actually believe there should be regulation in the English game, and that clubs in debt beyond a tolerable level shouldn't be allowed to increase their expenditure if their debt is increasing (or something along those lines) just to try and make sure clubs who are getting in debt try to put in right.

The "sugar daddy" factor is a more difficult one though. Historically English club chairman have given their clubs a bit of money, and new chairman usually give a cash injection to help out the ailing club (which is usually why it was for sale). It's easy to point to someone like Abramovich or Al-Fayed at Fulham (nearly £200 million in debt appareently) and say what they are doing is damaging at it forces the clubs around them to spend that bit more or risk failing, but what about the chairman at Cheltenham or Rochdale who gives his club £50,000 so the players can get paid after crowds did following poor results?

[evangel]

This argument over the past 20 or so posts has been is funny to me because everyone is simply arguing for argument's sake. Both Richard and JS have been arguing about the causes and effects of Man Utd's debt, and somehow haven't realized that they have yet to negate each other on anything. Both of you are just misunderstanding the other's posts.

You both agree that Man Utd's debt was started by Glazer's buyout. But JS has said that they have gone into more debt since then. Richard denies that the team itself is the cause of this. A debate on this point is meaningless. Man Utd has operated in essentially the same way before and after Glazer. But since that debt was created, it's going to be an issue with Man Utd at some point, regardless of whether it's the team or Glazer himself that has the debt (a good and very meaningless battle of semantics).

Once a person goes into such massive debt, that person must cut certain expenses to pay for it. Glazer has done no such thing, whether with this team or his other properties. Therefore continuing with Man Utd's current budget will increase the debt, whether Man Utd is directly or indirectly in charge of it, because what affects Glazer affects Man Utd. He's certainly rich enough to keep this up for some time, but unless he figures something out, this will be an issue for the team.

Glazer might be able to increase his capital somehow and pay for this debt without changing Man Utd's expenses. But until he does so, this will remain relevant.

I know both of you realize all this, which is why this debate seems funny to me.

[The Jitty Slitter]

This argument over the past 20 or so posts has been is funny to me because everyone is simply arguing for argument's sake. Both Richard and JS have been arguing about the causes and effects of Man Utd's debt, and somehow haven't realized that they have yet to negate each other on anything. Both of you are just misunderstanding the other's posts.

You both agree that Man Utd's debt was started by Glazer's buyout. But JS has said that they have gone into more debt since then. Richard denies that the team itself is the cause of this. A debate on this point is meaningless. Man Utd has operated in essentially the same way before and after Glazer. But since that debt was created, it's going to be an issue with Man Utd at some point, regardless of whether it's the team or Glazer himself that has the debt (a good and very meaningless battle of semantics).

Once a person goes into such massive debt, that person must cut certain expenses to pay for it. Glazer has done no such thing, whether with this team or his other properties. Therefore continuing with Man Utd's current budget will increase the debt, whether Man Utd is directly or indirectly in charge of it, because what affects Glazer affects Man Utd. He's certainly rich enough to keep this up for some time, but unless he figures something out, this will be an issue for the team.

Glazer might be able to increase his capital somehow and pay for this debt without changing Man Utd's expenses. But until he does so, this will remain relevant.

I know both of you realize all this, which is why this debate seems funny to me.

Maybe I should be clearer. I don't really have a dog in the race - I just get frustrated when debates are based on the wrong info.

For example your post above, and RichardL's contain inaccurracies that are understandable, but also have the propensity to lead to the wrong conclusions.

For instance, and typical for LBO, Glazer has in fact massively reduced operating costs at Man Utd at the same time he has massively increased debt. One way he has done this is by not paying cash for players, leaving the debt with the selling clubs. Meanwhile the academy and club staff was stripped right back, and young talent is sold off at great prices.

So he has not operated in the same way as the PLC at all. The PLC was run in a very conservative way (much like Arsenal). That was required because both those companies have traded shares.

Richard raises the very real point that this massive debt will become a major issue at Utd (and Liverpool). But at least for now, Utd can operate in a way that is not possible or even rational for other clubs.

If you still doubt this, I redirect you to this point.

How can it be that in a financial year where Arsenal (with similar turnover and expenses to Man Utd, incl. debt obligations) made a tiny 5m profit BEFORE tax on the basis of spending bugger all - whilst Utd can 'afford' all the players they bought?

The only way that is possible is via the huge loss that Utd in fact racked up.

Finally I agree re the difficulty of legislating re Chelsea. The problem is that if you made rules, then RA can simply inject the money into the club in a different way.

[The Jitty Slitter]

true, but your initial implication was that Man Utd were operating Chelsea-style, paying wages and transfer fees that couldn't be covered by turnover, which caused them to lose huge amounts of money each year (which German clubs couldn't compete with). That just is not the case.


It is in fact true in the financial year for which we have accounts.

Not so much the wages - The Glazers, like any LBO merchant want to have an excellent spreadsheet for the football business.

The figure I keep pointing you towards is the massive escalation of bank and 3rd party debt in the second year.

Part of the escalation in bank debt relates to the refinancing of 150m in PIK. But overall debt went up by 120m, and the Group made a whopping loss.

That can only be because the business in fact spent large amounts of money it did not have.

Just one of the ways they did this was to acquire players with 30m of IOUs ;)

[Duck Manson]

This can all be fixed quite easily by selling Ronaldo to Man City for €800m :cool:

[RichardL]

It is in fact true in the financial year for which we have accounts.

for the point I'm making, it isn't true.

A club with £200 million turnover who spends £170 million a year on wages/transfer fees is "doing a Chelsea".

A club with £200 million turnover who spends £100 million a year on wages/transfer fees isn't.

Including the non-football related losses, using the figures you present, Man Utd could be fielding an amateur pub team every week and still be losing money, and you'd be claiming they had an advantage over Bayern Munich.


Clearly, a club bought in a LBO who is allowed to increase their debt will be at an advantage against one bought that way that isn't, and will also be at an advantage to a club like Arsenal, who have a huge debt to pay off their stadium and are making more of an effort to not increase their debt, but on it's own the Glazer's action have been nothing but a hindrance to Man Utd, with the effect of limiting the amount they can spend.

[The Jitty Slitter]

Lets see the evidence for this and what the increase in debt was actually for. If you are implying it was salary or transfer dealing then you are clearly just on a troll run. Their turnover and profit pre loan repayments was dramatically increased this year. They are not being run unsustainably in the slightest, the only question is whether the Glazers can make enough profit from running the club to justify their purchase or if someone will make a more profitable offer for their shares.

Not sure where the anger comes from in this post.

I am the one who has posted lots of actual figures - whereas you are the one who is claiming things based on no quoted figures at all.

One can only conclude you actually don't know what the figures at Utd are.

[RickChelsea]

you people turned an honest topic for everyone to rip into duck into one filled with numbers and calculations....

[evangel]

you people turned an honest topic for everyone to rip into duck into one filled with numbers and calculations....

Why don't we all just agree that Glazer is an idiot who turned a good club in a risky profit making game.

[Cirdan]

AFAIK - the LBO is not possible in germany. Nor is the sugar daddy. Therefore, even an incredibly rich club like Bayern has no way to compete with Chelsea which can pay so much money as to take Bayern's very best player, and then have 3 players earning that amount.

Nor can Bayern commit over 100m euros on dodgy structured deals to Hargreaves, Tevez, Anderson, and Nani, and then another 40m to Berba. All within a year or so :D

As i said though - i don't see the situations at Utd or Liverpool as long term, especially now. Debt can't continue to spiral.

What I do think is outrageous is the impact of this on the match day fan.


LBO is not possible because if the team is not an "e.V." eingetragener Verein) itself (basically a memberowned non-profit organization), the majority of its shares has to be owned by the original e.V. There are 2 exceptions however: Leverkusen and Wolfsburg, who were already incorporated and sold to Bayer/VW before the current rule was in place.

Well, seeing the ManU example, I must say I'm quite happy that we still have this rule... I guess the ManU example might also be a reason why the DFL decided against abolishing it in a recent decision.

[Duck Manson]

you people turned an honest topic for everyone to rip into duck into one filled with numbers and calculations....Was more fun before wasn't it :D

Although readin about how Man Utd and Liverpool get raped financially is quite fun as well. But then again you American idiots wouldn't know much about economics now would ya, Ricky.

[RickChelsea]

I wish i was american so i could answer your question. Maybe you can bring in your view of the current economical climate in Norway?

[Duck Manson]

Haven't really been hit that badly by the mess you guys have made. Isn't it kind of sad that the only superpower left has the dumbest population in the developed world. I find that very worrying.

[Gandalf The Red]

Duck stop having sex with reindeers:eek:

[Duck Manson]

Reindeers? They have sex? Wow.