All change of ownership and Red Knights related posts here please

[Julian Denny]

Just one thing. Althought it was widely acknowledged as £716m BEFORE the bond issue, what's to stop it being £1.216billion now? Who says that they've actually cleared the senior debt with the half billion issue? Where are they getting the money to clear the PIKs from without the bond issue?

I made these notes sometime before the bond issue


The senior debt is now £425m which is secured on OT, Carrington, the most valued players, future season ticket sales as well as commercial contracts - in fact just about everything. A further £90m of unsecured loans was sold off by the original creditors whilst the £152m "payment in kind" has also been traded in the market place. This debt is apparently traded at 50%-70% of its original value due to the finanicial crisis. From what I can understand, the possibility of the hedge funds taking over United, if the Glazers defaulted, has been removed. Who currently owns the senior debt and indeed the other bits and pieces is not clear. The whole thing is, to a large extent, shrouded in mystery it seems.

So a summary of the debt was :

£ 425 m senior debt
£ 90 m unsecured loans
£ 152 m Pik

So the debt at that stage amounted to £667m. It is now £716m. I suspect the balance is made up of additional Pik interest and fees etc associated with the bond issue.

 

[Julian Denny]

The £500 m is supposed to have repaid the senior debt and £70m of the Piks leaving the balance of Piks at £130m and the unsecured loans of £90m plus the bond debt of course.

If anyone can clarify all this further, I'd appreciate it.

 

[Walrus]

right now they're asset rich/cash poor but they have an excellent "rental property" with ideal/perfect tennants paying their asset off for them.

Us.

If they hang on, it's just a matter of time before their equity increases and their debt decreases.

Unless a more suitable owner (for us) comes along

Thing is, if the debt eventually takes its toll, the trophies stop coming in and we cant afford our debts, the clubs value will start dropping dramatically, which will mean the Glazers cant get as much if they do sell.

Bare in mind that for all the chat of the debt dropping and so forth, our repayments have been purely on the interest on our loans and havent actually touched the capital amount yet. Any capital repayment is coming straight out of the clubs transfer budget or simply being converted in another debt.

The £500 m is supposed to have repaid the senior debt and £70m of the Piks leaving the balance of Piks at £130m and the unsecured loans of £90m plus the bond debt of course.

If anyone can clarify all this further, I'd appreciate it.

if that is the case then it is a far better situation than most imagined. With the senior debt nearly gone, we would soon be able to start paying off the PIKs directly which are the real cause of the damage. With those gone and only the bonds left, we have a far lower rate of interest - the issue then is how we cope with repaying the things in 2016 or whenever it is that they mature, but we can jump that hurdle when it comes.

 

[Rood]

I do wish you'd tell me how the £716m debt is made up then. Just to say they are liable for £45m on the bonds is misleading (actually £46.25m pa paid quarterly). The PIKs cannot be dismissed as you seem to want to suggest. They were £200m and now are £130m - rolling up at 14.25% and increasing to 16% odd in July/August. Simple arithmetic says that there is still another £86m somewhere. The reported interest rate on that was 12% which I imagine is in keeping with an unsecured loan arrangement.

They are not in a "comfortable" situation at all. Revenue may be going up every year but so are costs. The club made £42m net profit last yearwith the Ronaldo money. So work it out. Revenue may not continue to increase either. The whole atmosphere is likely to become increasingly antagonistic when/if the RKs put an offer on the table and its rejected. Even a partially successful boycott will be damaging.

It was already explained to you in the other thread but it seems you ignored it - the figure of £716m is BEFORE any payment to start paying off the PIK:
around £510m bond debt (@ 8.5%)
around £205m PIK (@14.25%)
We know that at some point soon, at least £70m will be knocked off the PIK - there also seems to be further provisions in the bond prospectus to make further payments out of the club to pay off the PIKs if there is excess cash to do so.

I also mentioned to you that your £40m net profit after Ronaldo is a meaningless figure as it is a post tax and post interest payment figure - but you seem to have ignored that as well.
EBITDA of £90m (not including Ronaldo) is the figure I look at to see how much cash we have available to service the debt - this comes direct from page10 of the bond prospectus.
If you think different numbers should be used then please give your source and reasoning.

It is possible that a boycott would negatively affect figures but that remains to be seen - at the moment I am focusing on analysing numbers that we know for sure and these show that revenues and EBITDA have increased year on year.

 

[UnitedRoadRed]

On 11 January 2010, shortly before an announcement that Red Football's debt had increased to £716.5 million ($1.17 billion), Manchester United announced their intention to refinance the debt through a bond issue worth approximately £500 million. They managed to raise £504 million in just under two weeks, meaning that they were able to pay off almost all of the £509 million owed to international banks. The bonds were issued in two tranches, one with a coupon rate of 8.75% worth £250 million, and the other with a coupon rate of 8.375% worth $425 million. The annual interest payable on the bond came to approximately £45 million per annum, but the bond will not mature until 1 February 2017.

That's from the BBC.

It doesn't mention the PIKs being touched. Which differs from what others have claimed on here. So the bottom line is - the debt before the bond issue was the widely reported £716m and I don't think anyone will deny that.

According to the Beeb, the senior debt - the "mortgage" if you like - was £509m, while the PIKs/hedge fund loans were, by simple mathematics, £207m. The question is simple. What has the £504m raised from the bond issue paid off? Have the Glazers used the money raised solely to service our debt or to cover their own cock ups elsewhere? Are they legally bound to service other debt on the club and/or holding company with the bond money?

They've flogged a mansion in Florida for about $24m as well as selling a major stockholding too. Surely killing off the PIKs in their entirity is the most prudent course of action with the interest being far higher than the senior debt?

Under the bond issue, the Glazers have the right to flog Carrington and Old Trafford and take several hundred million out of the club over the next seven years. The bond issue itself has committed the club to an additional £806m in debt - the £504m bond value plus a total of £302m in interest over the course of seven years. So in terms of financial commitments that the club have to service, as of now we owe a minimum of £806m + £716m - £504m, with the last figure being a maximum, depending upon how much of the bond issue was actually used to service the debt. That's a minimum of £1018m without the interest of whatever's left of the £716m after an unknown-sized chunk of the £504m has been thrown at it. Bear in mind that the Glazers have, according to the bond prospectus, a right to take an additional £25m a year out of the club (without directors fees) then no wonder they wouldn't settle for £1bn as an offer!

Put whatever positive spin on it your like but you're still sat in a boat up a brown-coloured water inlet without any means of propulsion.

 

[Rood]

According to the Beeb, the senior debt - the "mortgage" if you like - was £509m, while the PIKs/hedge fund loans were, by simple mathematics, £207m. The question is simple. What has the £504m raised from the bond issue paid off? Have the Glazers used the money raised solely to service our debt or to cover their own cock ups elsewhere? Are they legally bound to service other debt on the club and/or holding company with the bond money?

Note that you should be careful when taking numbers from the media as a lot of it is misleading or just plain wrong but anyway this is my understanding:
Restrictive covenants on the previous senior debt meant the Glazers could not use cash from the club to pay off the PIK until the senior debt was cleared.
So the bond issue effectively cancelled out all the senior debt - the bond is now secured on the ground and other club assets.
This then meant that they could start paying off the PIK and the bond prospectus states that £70m of current cash in the bank will be used to do this.



They've flogged a mansion in Florida for about $24m as well as selling a major stockholding too. Surely killing off the PIKs in their entirity is the most prudent course of action with the interest being far higher than the senior debt?

Yes you would think they would try and get rid of the PIKs asap. But it is quite clear that the Glazers do not aim to put any personal cash into the club (so selling houses, stocks etc is probably irrelevant). They have now structured everything so that they can use cash from the club to pay off the PIKs.

Dont forget that the PIK interest doesnt actually have to be paid out of the clubs annual revenues - it just keeps 'rolling up' until it is redeemed so it doesnt put an annual burden on the club. I think whenever there is excess cash in the club bank account they will use it to pay off the PIK. Anymore cash after that and they will take it for themselves.


Under the bond issue, the Glazers have the right to flog Carrington and Old Trafford and take several hundred million out of the club over the next seven years. The bond issue itself has committed the club to an additional £806m in debt - the £504m bond value plus a total of £302m in interest over the course of seven years. So in terms of financial commitments that the club have to service, as of now we owe a minimum of £806m + £716m - £504m, with the last figure being a maximum, depending upon how much of the bond issue was actually used to service the debt. That's a minimum of £1018m without the interest of whatever's left of the £716m after an unknown-sized chunk of the £504m has been thrown at it. Bear in mind that the Glazers have, according to the bond prospectus, a right to take an additional £25m a year out of the club (without directors fees) then no wonder they wouldn't settle for £1bn as an offer!

Im not following your calculations here at all - i think you have included the £500m bond debt twice?!

Put whatever positive spin on it your like but you're still sat in a boat up a brown-coloured water inlet without any means of propulsion.

Now I am not saying that everything is great and there are no risks - I would prefer a lower level of debt and it seems they are now working towards that.
But I am just trying to demonstrate that the debts are managable and there is very little chance of the kind of financial disaster that many fans seems to be worried about.
Yes the Glazers are taking out a lot of money from the club and this is a major negative, but it would not be in their interests to 'bleed the club dry' as a financially healthy club is worth a lot more to them than a dead carcass.

 

[Escobar]

Now I am not saying that everything is great and there are no risks - I would prefer a lower level of debt and it seems they are now working towards that.
But I am just trying to demonstrate that the debts are managable and there is very little chance of the kind of financial disaster that many fans seems to be worried about.
Yes the Glazers are taking out a lot of money from the club and this is a major negative, but it would not be in their interests to 'bleed the club dry' as a financially healthy club is worth a lot more to them than a dead carcass.

Its much more than that. Its turning a wealthy, well-run club into so much debt that the club suddenly becomes a huge risk. Plus, its much more than a "major negative" when the owner taking out millions of pounds for doing feck all. Plus, they didnt really "buy" the club, the club "bought" himself, and in the long term, this debt is very difficult to manage (as we saw in the last 2 years), and its certainly not easy or a good way at all the way the debt is managed, not at all. The risk of a financial disaster certainly exists, and I am more worried than ever before. The last 6 months proved that

 

[Rood]

Its much more than that. Its turning a wealthy, well-run club into so much debt that the club suddenly becomes a huge risk. Plus, its much more than a "major negative" when the owner taking out millions of pounds for doing feck all. Plus, they didnt really "buy" the club, the club "bought" himself, and in the long term, this debt is very difficult to manage (as we saw in the last 2 years), and its certainly not easy or a good way at all the way the debt is managed, not at all. The risk of a financial disaster certainly exists, and I am more worried than ever before. The last 6 months proved that

You are talking about much more general issues about moral right or wrongs of leveraged takeovers - I am talking very specifically about our current financial situation, how sustainable it is going forward and how much risk there is of financial meltdown.

Why would you be 'more worried than ever before'?
A lot of the previous uncertainty has been taken away through refinance of the senior debt and start of paying down the PIK - I am far less worried about our financial situation than before, not that I have ever been that worried to be honest. As I said in my previous post, it is not in the Glazer's interests to allow the club to fail.

Just think about it, if there was any serious financial risk then the Glazers would stand to lose everything and they would be welcoming any takeover bids to bail them out. Clearly this is not the case.

 

[Julian Denny]

It was already explained to you in the other thread but it seems you ignored it - the figure of £716m is BEFORE any payment to start paying off the PIK:
around £510m bond debt (@ 8.5%)
around £205m PIK (@14.25%)
We know that at some point soon, at least £70m will be knocked off the PIK - there also seems to be further provisions in the bond prospectus to make further payments out of the club to pay off the PIKs if there is excess cash to do so.

I also mentioned to you that your £40m net profit after Ronaldo is a meaningless figure as it is a post tax and post interest payment figure - but you seem to have ignored that as well.
EBITDA of £90m (not including Ronaldo) is the figure I look at to see how much cash we have available to service the debt - this comes direct from page10 of the bond prospectus.
If you think different numbers should be used then please give your source and reasoning.

It is possible that a boycott would negatively affect figures but that remains to be seen - at the moment I am focusing on analysing numbers that we know for sure and these show that revenues and EBITDA have increased year on year.

We're just discussing it. No need to be quite so peremptory ! I'll look through it.

 

[UnitedRoadRed]

Im not following your calculations here at all - i think you have included the £500m bond debt twice?!

No, I'm not. I'm raising the point that we have £509m of senior debt that the bond issue is allegedly covering but that the Glazers are somehow also clearing off the PIK debt.

All we know is that a bond issue has raised £504m and given us about £43.15m a year extra in interest commitments to pay out. We don't know what debt has actually been paid off with the £504m so we don't know what parts of the original debt remains.

So, to summarise,
On the bonds:
We've got £504m to find in 2017
We've got £43.15m to find each year for 7 years on that - a commitment of £302m

On the senior debt:
We've got a £509m mortgage with annual interest repayments of £45m

On the PIKs:
There are various reports, but based on £716m debt pre-bond issue, the PIK loans total (716-509) £207m. Interest on those is almost as much as the senior debt.

Although the announcement was a declaration to refinance the debt, it doesn't state what parts of the debt it was there to refinance. Was it just to kill off the PIKs and give Fergie a warchest to buy a bit of favour with the fans and a "look, we've got money to spend" as well as meet a year or two of the new interest payments? We've no idea what has actually been paid off until the next set of accounts get publicised or someone else (a PIK or senior debt holder) confirms that their debt has been fully or partly cleared.

Until then, all I know is that we've got a lot of financial commitments with up to £504m to throw at it, less what they want to throw at the club to buy the fans with a war chest for Fergie - the £20m annual budget plus the £61m David Gill said had been "ringfenced" from CR's sale less purchases last summer. If that £61m is already ringfenced in a pot in the club's account then fine, but the £20m that they commit to still needs to found from somewhere.

Individual TV rights may kill the Premier League but it would save our club. A tough call.

 

[Escobar]

You are talking about much more general issues about moral right or wrongs of leveraged takeovers - I am talking very specifically about our current financial situation, how sustainable it is going forward and how much risk there is of financial meltdown.

Why would you be 'more worried than ever before'?
A lot of the previous uncertainty has been taken away through refinance of the senior debt and start of paying down the PIK - I am far less worried about our financial situation than before, not that I have ever been that worried to be honest. As I said in my previous post, it is not in the Glazer's interests to allow the club to fail.

Just think about it, if there was any serious financial risk then the Glazers would stand to lose everything and they would be welcoming any takeover bids to bail them out. Clearly this is not the case.

Its not general, it's a fact that we have less and less profit, more and more debt, more money taken out of the club etc.
The problem is, if the club would fail, the Glazer would not lose as much as United would, they didnt really invest much from their own pockets. Its all on the club, so they can play around with it as they like. For the Glazers, their franchise is certainly not a serious financial risk

 

[Rood]

We're just discussing it. No need to be quite so peremptory ! I'll look through it.

Dont take it personally - it's just my style !
I am interested in any alternative analysis - although it is probably better to keep it to the bond thread.

Although the announcement was a declaration to refinance the debt, it doesn't state what parts of the debt it was there to refinance. Was it just to kill off the PIKs and give Fergie a warchest to buy a bit of favour with the fans and a "look, we've got money to spend" as well as meet a year or two of the new interest payments? We've no idea what has actually been paid off until the next set of accounts get publicised or someone else (a PIK or senior debt holder) confirms that their debt has been fully or partly cleared.

I explained it all to you above already. We know exactly what is happening as it is all laid out in the bond prospectus - just have a look at page29 'Use Of Proceeds'.
The bond issue clears the previous senior debt and then allows the Glazers to start using club cash to pay off the PIK.
Although you are correct that fine details about the PIK are currently unknown.

Its not general, it's a fact that we have less and less profit, more and more debt, more money taken out of the club etc.
The problem is, if the club would fail, the Glazer would not lose as much as United would, they didnt really invest much from their own pockets. Its all on the club, so they can play around with it as they like. For the Glazers, their franchise is certainly not a serious financial risk

Im sorry but that is just plain wrong.
The club's revenue and profits have increased every year since the Glazers took over.
It is true that the debts were increasing in the past but there now seems to be a plan to bring the toal debt down and more importantly get rid of the highest interest portion.

The idea that the Glazers have nothing to lose from the club failing and will just shrug their shoulders and walk away is stupid.

 

[Baby Faced Assassin]

Dont take it personally - it's just my style !
I am interested in any alternative analysis - although it is probably better to keep it to the bond thread.




I explained it all to you above already. We know exactly what is happening as it is all laid out in the bond prospectus - just have a look at page29 'Use Of Proceeds'.
The bond issue clears the previous senior debt and then allows the Glazers to start using club cash to pay off the PIK.
Although you are correct that fine details about the PIK are currently unknown.




Im sorry but that is just plain wrong.
The club's revenue and profits have increased every year since the Glazers took over.
It is true that the debts were increasing in the past but there now seems to be a plan to bring the toal debt down and more importantly get rid of the highest interest portion.

The idea that the Glazers have nothing to lose from the club failing and will just shrug their shoulders and walk away is stupid.

With the current level of debt, I don't think we will have nearly the same amount of profit as we had last year or for the next three years for that matter. Plainly because we do not have a Ronaldo to sell every year. But one aspect where Glazers deserve credit is bringing in so many different sponsors from all over the world. They are really reaping the maximum benefit of our global appeal. There is no denying the fact that the Glazers are brilliant businessmen but sadly that's what this club is to them, a piece of business.

 

[Escobar]

Im sorry but that is just plain wrong.
The club's revenue and profits have increased every year since the Glazers took over.
It is true that the debts were increasing in the past but there now seems to be a plan to bring the toal debt down and more importantly get rid of the highest interest portion.

The idea that the Glazers have nothing to lose from the club failing and will just shrug their shoulders and walk away is stupid.

This year, we would not have made a profit if it would not have been for the sale of Ronaldo but rather a huge loss! Last year, the profit wasnt as high as before. IIRC, the interest payments have increased as well, as has the debt. This for me is worrying, and it gets worse, no matter what you state. The club's financial situation is so much worse than it was 5 years ago! If you dont see that, I cant help you. No matter what the club does now with the level of debt, over the last 5 years, the club lost a loooot of money due to the debt, which just is ridiculous. And it gets worse and worse! Plus, we get rid of the highest interest portion by taking on more debt. The debt is still here.

As I said, the Glazers would lose a bit of money yes, but not close to what United would lose. Thats the huge difference. United will be fecked up, the Glazers wont

 

[Escobar]

With the current level of debt, I don't think we will have nearly the same amount of profit as we had last year or for the next three years for that matter. Plainly because we do not have a Ronaldo to sell every year. But one aspect where Glazers deserve credit is bringing in so many different sponsors from all over the world. They are really reaping the maximum benefit of our global appeal. There is no denying the fact that the Glazers are brilliant businessmen but sadly that's what this club is to them, a piece of business.

As it is well published, we would have made a loss of about 40m if we would not have sold Ronaldo. We're getting better financially indeed

 

[UnitedRoadRed]

The revenue is going up year on year = ticket price increases plus extra tv money. Still the fans paying for the club. Hopefully they'll realise that they've reached saturation point with league games going on open sale for the first time since we won the Prem.

 

[UnitedRoadRed]

I explained it all to you above already. We know exactly what is happening as it is all laid out in the bond prospectus - just have a look at page29 'Use Of Proceeds'.
The bond issue clears the previous senior debt and then allows the Glazers to start using club cash to pay off the PIK.
Although you are correct that fine details about the PIK are currently unknown.

So we're likely to be hit with higher interest rates on that. Surely killing off the PIKs should have been the priority, together with paying off a large portion of capital on the senior debt.

Have they explained how the PIK loans are going to be paid off and where the £81m transfer budget is coming from?

Im sorry but that is just plain wrong.
The club's revenue and profits have increased every year since the Glazers took over.
It is true that the debts were increasing in the past but there now seems to be a plan to bring the toal debt down and more importantly get rid of the highest interest portion.

The idea that the Glazers have nothing to lose from the club failing and will just shrug their shoulders and walk away is stupid.

They only ploughed £290m of their own money in to the original deal. They can asset strip, milk what they can and walk away without giving a feck because the don't have the love for the club we do. You're dealing with a guy who sued his own sister.

 

[UnitedRoadRed]

I wonder how much of the bonds and PIKs the Red Knights currently own? Could be an interesting 6 months.

 

[Rood]

As it is well published, we would have made a loss of about 40m if we would not have sold Ronaldo. We're getting better financially indeed

Do you believe everything you read in the newspapers?
Have you ever actually looked at the financial statements of the club?

This thing about the club needing to sell Ronaldo to make a profit is a complete red herring and doesnt give the full picture. I could explain this further but i get the feeling I would be wasting my time.

Anyway I am just trying to calm people's fears about the financial situation of the club but it seems you prefer to believe that the sky is falling in - so be it, I'll leave you to wallow in your doom and gloom.

 

[Joga_Bonito]

Im sorry but that is just plain wrong.
The club's revenue and profits have increased every year since the Glazers took over.
It is true that the debts were increasing in the past but there now seems to be a plan to bring the toal debt down and more importantly get rid of the highest interest portion.

The idea that the Glazers have nothing to lose from the club failing and will just shrug their shoulders and walk away is stupid.

This is true, but it also can't be divorced from the source of those increased revenues, and though I may have missed it, I have yet to see you fully interact with that point? Others can argue about ticket prices and other price increases as a source of that increased revenue, but what I am most concerned about is the fact that we are fairly reliant on continued success.

How certain are you that if we didn't win the league for the next five years, say, or any other trophy for that matter, that we would still be able to meet the debt repayments without having to take action that could further harm the club?

It's easy to brush those concerns off by pointing to the fact that success has come relatively easily to us for such as long period of time, but that would be naive in the extreme, in my opinion.

There is a fairly high probability that Sir Alex will retire in the next couple of years. At that point, I am not at all confident that we will continue with anything like the current level of success. And if we failed to make the Champions League, even for one year, how confident are you that the Glazer's wouldn't sell players in an attempt to make up for any losses?

I ask that question because, despite some of the rather weak "refutations" of the idea that our situation could mirror that of Leed's United, I am yet to hear a serious argument that fully explains why it is not possible that a further weakening of the squad (for the reasons that I have just specified), along with the fact that there is a new manager in place, has the potential to lead to more than one season of failure to make the Champions League, and possibly several?

And if that did happen, there is a distinct possibility that things could start to go downhill very quickly, in my opinion, as happened at Leed's United. If this doesn't concern you, why not?

 

[Escobar]

Do you believe everything you read in the newspapers?
Have you ever actually looked at the financial statements of the club?

This thing about the club needing to sell Ronaldo to make a profit is a complete red herring and doesnt give the full picture. I could explain this further but i get the feeling I would be wasting my time.

Anyway I am just trying to calm people's fears about the financial situation of the club but it seems you prefer to believe that the sky is falling in - so be it, I'll leave you to wallow in your doom and gloom.

United would not have resulted a profit if we would not have got 80m for Ronaldo.

You can try to calm people down as much as you want, but the situation doesnt look rosy at all and I am glad more and more are waking up. There are so many aspects that proof that and that piss me off. If you really think that the debt is not much of a problem and can be easily handled, then you are deluded or ignoring the truth. The club is in a much worse situation that before and it is getting worse. We are more reliant to success on the pitch than never before. Plus, the increase of general prices isnt a good indicator, neither.

 

[Rood]

So we're likely to be hit with higher interest rates on that. Surely killing off the PIKs should have been the priority, together with paying off a large portion of capital on the senior debt.

Have they explained how the PIK loans are going to be paid off and where the £81m transfer budget is coming from?


The £70m of PIK money comes from current cash reserves. There was £140m of unused cash in the club bank account as of 30Sep09. Money for transfers will also come out of this pot of cash.
Plus whenever the £70m goes to pay the PIK, it will be replaced by a new £75m revolving credit facility (at interest rates far lower than the PIK of course)


They only ploughed £290m of their own money in to the original deal. They can asset strip, milk what they can and walk away without giving a feck because the don't have the love for the club we do. You're dealing with a guy who sued his own sister.

Yes they can but it doesnt make financial sense to do so.
They are here to make as much money as possible - asset stripping and letting the club die would be foolish from a financial perspective.
They stand to make more money in the long term by keeping the club healthy and continuing to grow revenue and earnings numbers as they have been doing since they arrived.

 

[UnitedRoadRed]

Yes they can but it doesnt make financial sense to do so.
They are here to make as much money as possible - asset stripping and letting the club die would be foolish from a financial perspective.
They stand to make more money in the long term by keeping the club healthy and continuing to grow revenue and earnings numbers as they have been doing since they arrived.

Brace yourself. We're hardly healthily in debt.

 

[Rood]

This is true, but it also can't be divorced from the source of those increased revenues, and though I may have missed it, I have yet to see you fully interact with that point? Others can argue about ticket prices and other price increases as a source of that increased revenue, but what I am most concerned about is the fact that we are fairly reliant on continued success.

How certain are you that if we didn't win the league for the next five years, say, or any other trophy for that matter, that we would still be able to meet the debt repayments without having to take action that could further harm the club?

It's easy to brush those concerns off by pointing to the fact that success has come relatively easily to us for such as long period of time, but that would be naive in the extreme, in my opinion.

There is a fairly high probability that Sir Alex will retire in the next couple of years. At that point, I am not at all confident that we will continue with anything like the current level of success. And if we failed to make the Champions League, even for one year, how confident are you that the Glazer's wouldn't sell players in an attempt to make up for any losses?

I ask that question because, despite some of the rather weak "refutations" of the idea that our situation could mirror that of Leed's United, I am yet to hear a serious argument that fully explains why it is not possible that a further weakening of the squad (for the reasons that I have just specified), along with the fact that there is a new manager in place, is unlikely to lead to more than one season of failure to make the Champions League, and possibly several?

And if that did happen, there is a distinct possibility that things could start to go downhill very quickly, in my opinion, as happened at Leed's United. If this doesn't concern you, why not?

To cut down your lengthly post and get to the point, I guess you are basically asking if we are dependant on success to survive?

I have thought about this question a lot recently.
It is a very difficult question to answer as it is not easy to try and work out what % of our revenues come directly as a result of our recent success.
My conclusion is that we do not necessarily need to win anything but that qualifying for the CL is of vital importance to the business plan. I think our revenues streams are strong enough to cope with missing out on the CL for a couple of seasons but if a decline went on longer than that then it would become a problem.

 

[Rood]

Brace yourself. We're hardly healthily in debt.

Debt in itself is not a problem - only too much debt is a problem.

Our debt levels are higher than I would like but, as I have explained, I believe the debt levels have peaked and will now come down.

 

[RK]

And will ticket prices?

 

[KingMinger22]

why do you think Earnings before Interest, Taxes, Depreciation, and Amortization is so important?


It's the bottom line that counts.


And United's would have read (40 Million) in the red had we not have sold Ronaldo

 

[UnitedRoadRed]

Debt in itself is not a problem - only too much debt is a problem.

Our debt levels are higher than I would like but, as I have explained, I believe the debt levels have peaked and will now come down.

Apparently they'd peaked last time we refinanced, so I'll reserve judgement on that.

 

[Joga_Bonito]

To cut down your lengthly post and get to the point, I guess you are basically asking if we are dependant on success to survive?

I have thought about this question a lot recently.
It is a very difficult question to answer as it is not easy to try and work out what % of our revenues come directly as a result of our recent success.
My conclusion is that we do not necessarily need to win anything but that qualifying for the CL is of vital importance to the business plan. I think our revenues streams are strong enough to cope with missing out on the CL for a couple of seasons but if a decline went on longer than that then it would become a problem.

From page 31 and 32 of the Prospectus:

Now, I'm not an expert (obviously), but that looks to me as though, after tax and debt repayments and all other expenditure, we made a profit last year of £25.5m (and substantial losses in the previous two years).

If that is the case, missing out on the Champions League just once would have serious consequences, unless of course the debt burden has reduced sufficiently for us to become considerably more comfortable over the next few years.

But even if that is true, there doesn't appear to be a great deal of wiggle room, and it still looks as though, despite being almost as successful as it is possible to be over a three year period, we are heavily reliant on continued success in all competitions (prize money, gate receipts, etc).

 

[Rood]

And will ticket prices?

No - the ground is still mostly sold out, until that changes then there is no reason for prices to come down.

why do you think Earnings before Interest, Taxes, Depreciation, and Amortization is so important?

Because in my opinion that is the real amount of money the club makes on an annual basis - and more importantly this is the amount of cash that is available to service debts.
Have a look at the accounts, huge amortisation write offs hide a lot of the profit - it is a massive tax dodge basically.

Edit: In fact while I wrote that Joga Bonita has posted the exact page of the financials that I refer to. The EBITDA line and then huge D+A write off is there for all to see.

 

[Rood]

From page 31 and 32 of the Prospectus:

Now, I'm not an expert (obviously), but that looks to me as though, after tax and debt repayments and all other expenditure, we made a profit last year of £25.5m (and substantial losses in the previous two years).

It is too simplistic to just look at the bottom line figure - there are a lot of things going on here.
We must remember that if a company shows big profits then they have to pay big taxes.

Anyway thanks for posting that page as it is exactly the page that I wanted to highlight but I just couldnt be bothered to get the image up there.

 

[M13]

Because in my opinion that is the real amount of money the club makes on an annual basis - and more importantly this is the amount of cash that is available to service debts.
Have a look at the accounts, huge amortisation write offs hide a lot of the profit - it is a massive tax dodge basically.

Edit: In fact while I wrote that Joga Bonita has posted the exact page of the financials that I refer to. The EBITDA line and then huge D+A write off is there for all to see.

'to service debts' that we absolutely should not have to service.

 

[KingMinger22]

Just look at those finances.


We keep making a profit on player sales. Hilarious when you look at what our competitiors, e.g. Chelski, Real and Barca do.


The thing is, with these accounts you obviously don't see the PIK's impact but we all know they are the club's responsibility in reality. The cuning Glazer's have no cash to pay 'em off.


The Glazer's are so over stretched and they will be feeling it bad. Those finances are NOT substainable.

We will make big losses this year - no Ronaldo payday.

 

[KingMinger22]

No - the ground is still mostly sold out, until that changes then there is no reason for prices to come down.

When the public sector takes its hit after the general election, Old Trafford will have a fair few more empty seats.

VAT increases to 20% in the UK are a very big possibility too.


I think match day revenues will fall over the next few years

 

[Rood]

'to service debts' that we absolutely should not have to service.

That is a completely different issue - please stick to the point at hand.

The Glazer's are so over stretched and they will be feeling it bad. Those finances are NOT substainable.

We will make big losses this year - no Ronaldo payday.

I guess you are just going to totally ignore what I explained to you above? Or perhaps you just dont understand it?
Oh well - I did try ...

 

[Joga_Bonito]

It is too simplistic to just look at the bottom line figure - there are a lot of things going on here.
We must remember that if a company shows big profits then they have to pay big taxes.

Of course, but if you use the pre-tax, pre-debt repayment figure, it's much harder to figure our how finely balanced the finances are. A profit of £90m looks fantastic, until you realize that all but £25m of that is being eaten up by tax and debt repayments.

In the end, if you want to make an informed decision about whether the debt is excessively prohibitive, or how reliant we are on future success, you have to use some figures, and while I have no doubt that I have over-simplified, that bottom line figure is inarguable, even if it is context related.

 

[Escobar]

It is too simplistic to just look at the bottom line figure - there are a lot of things going on here.
We must remember that if a company shows big profits then they have to pay big taxes.

Anyway thanks for posting that page as it is exactly the page that I wanted to highlight but I just couldnt be bothered to get the image up there.

With the amount of of debt we have and the interest we have to pay, the EBITDA is not the right measurment, but rather the EBT

 

[KingMinger22]

Of course, but if you use the pre-tax, pre-debt repayment figure, it's much harder to figure our how finely balanced the finances are. A profit of £90m looks fantastic, until you realize that all but £25m of that is being eaten up by tax and debt repayments.

In the end, if you want to make an informed decision about whether the debt is excessively prohibitive, or how reliant we are on future success, you have to use some figures, and while I have no doubt that I have over-simplified, that bottom line figure is inarguable, even if it is context related.

Well said.

 

[KingMinger22]

I guess you are just going to totally ignore what I explained to you above? Or perhaps you just dont understand it?
Oh well - I did try ...

I didn't ignore it and I do understand.


I just don't agree with that perspective.

 

[Rood]

Of course, but if you use the pre-tax, pre-debt repayment figure, it's much harder to figure our how finely balanced the finances are. A profit of £90m looks fantastic, until you realize that all but £25m of that is being eaten up by tax and debt repayments.

But it really isnt - that is what I am trying to explain to you. Just follow the steps from EBITDA downwards in the figures you posted above and see what is happening to get to that bottom line figure.
It is all about the annual Amortisation and Depreciation write off.

In the end, if you want to make an informed decision about whether the debt is excessively prohibitive, or how reliant we are on future success, you have to use some figures, and while I have no doubt that I have over-simplified, that bottom line figure is inarguable, even if it is context related.

Personally I think that is very niave but if that is what you prefer to believe then that is upto you. As far as I am concerned that bottom line figure is hugely manipulated by creative accountancy to be as low as possible so does not reflect the real story.

Anyway I think I have wasted enough time trying to explain my view - I realise that some people can never be convinced as they have already made their minds up.