Our debt has increased 133% to £474.1 million

diarm

Full Member
Joined
Jul 13, 2014
Messages
11,636
Location
Cork
Out of interest, has anyone ever done a calculation of how much of the money used to service the debt, would have instead been tax? I've seen the 1 billion total previously that's aparently whats been spent on debt repayments. Now I'm not in the finance industry, but if the debt wasn't there, does anyone know how much of that money would have instead been tax, as my undertstanding is that so called 'good debt' is essentially a way companies avoid having to pay more taxes?
Tax is paid on profits. We could've spent that money on players, coaches, the stadium, the academy, the training ground or the community if avoiding tax was the goal.
 

diarm

Full Member
Joined
Jul 13, 2014
Messages
11,636
Location
Cork
could we have afforded Sancho? What would these numbers have looked like if we had paid the £108m?
I could easily be wrong here, but a cash loss of £256m suggests we have around £70m remaining in cash so not if Dortmund were demanding a huge amount up front.
 

The holy trinity 68

The disparager
Joined
Apr 10, 2016
Messages
2,741
Location
Manchester
I'd rather have any other owner than these cash grabbing fecks. Feels like we're being run by the trump family.
Arsenal = Leach only wants money.
Chelsea = Corruption
City = Human rights issues.
Shef Utd = Human rights issues.
Leicester = Corruption.
Newcastle = Leach with questionable worker rights.

That is only the clubs off the top of my head in the PL. Not exactly better than our owners are they.
 

711

How long does it take you to count to 711?
Scout
Joined
Dec 10, 2007
Messages
21,045
Location
Don't Sign Old Players
Out of interest, has anyone ever done a calculation of how much of the money used to service the debt, would have instead been tax? I've seen the 1 billion total previously that's aparently whats been spent on debt repayments. Now I'm not in the finance industry, but if the debt wasn't there, does anyone know how much of that money would have instead been tax, as my undertstanding is that so called 'good debt' is essentially a way companies avoid having to pay more taxes?
Tax is paid on profits. We could've spent that money on players, coaches, the stadium, the academy, the training ground or the community if avoiding tax was the goal.
Beat me to it. It was a good question from Wixgaz, and what you're saying was my first thought too, but I'm not qualified so could easily be wrong. Maybe we need an unbiased corporate accountant to answer, if such a beast exists.
 

georgipep

Full Member
Joined
Aug 14, 2015
Messages
632
Location
Not far enough
Out of interest, has anyone ever done a calculation of how much of the money used to service the debt, would have instead been tax? I've seen the 1 billion total previously that's aparently whats been spent on debt repayments. Now I'm not in the finance industry, but if the debt wasn't there, does anyone know how much of that money would have instead been tax, as my undertstanding is that so called 'good debt' is essentially a way companies avoid having to pay more taxes?
Very good point and indeed, debt (and M&A activity, which is difficult for a football club for obvious reasons) is often used as a way to defer or avoid tax. For the financial year 2019, our tax rate is roughly 31.2% of profits. So, the increase in debt (about £270.6m) would have meant about £84.7m more in tax. Of course, those sums are purely theoretical as the debt undoubtedly includes interest on previous debt, which could've been repaid and/or many other cash flow operations could have happened.

Important to note is that dividends are being paid out after tax (in general dividends are very inefficient way of bringing value and return to shareholders, but that's a different point).
 

monosierra

New Member
Newbie
Joined
Jun 29, 2009
Messages
294
Classic private equity dealmaking. It could be worse if the Glazers had done what a lot of the sketchier PE shops do and gutted the club - basically take all cash flow, sell assets, and then dump the company. The more enlightened - relatively speaking - still invest in building the company in order to extract more cash flow. We are in the latter category as the Glazers also rely heavily on United as a source of income. Still, I don't hope they will invest beyond what they deem reasonable.
 

Robertd0803

Full Member
Joined
Sep 1, 2014
Messages
4,404
Worst part of all this is we have that awful Chevrolet logo going into next season!
So if they have extended the Chevrolet deal for 6 months does that mean mid season next season we will end up with a "new" jersey because of a sponsorship change?
 

ATXRedDevil

Full Member
Joined
Apr 2, 2014
Messages
823
Location
The Live Music Capital of the World
Just to point out that Net debt is the gross debt minus the cash in the bank. United had cash at end of June 2019 of about £300 million to about £50 million at end of June 2020. This is the main reason why the ‘debt’ has gone up as net debt will increase as cash in the bank decreases. The gross debt figure (i.e. The actual amount owed) hasn’t actually changed in many years. The bigger concern (which never gets mentioned) especially in the current climate is cashflow. This is what makes clubs go into serious trouble.

Unfortunately, every single quarterly report gets this same reaction because people, understandably, don’t understand the difference between gross and net debt. Btw this is not a supportive argument for the Glazer ownership just actually pointing out what the accounts actually are saying.
This. Gross debt was unchanged. Net debt increased because of cash burn. Anyone with a brain knew this was coming. This from the earnings release:

“(2) The gross USD debt principal remains unchanged. The increase in net debt is predominantly due to a £256.1 million reduction in cash and cash equivalents, which reflects the impact of deferred sponsorship payments (in excess of £80.0 million); loss of 2020/21 season Matchday advance cash receipts (typically in excess of £50.0 million ahead of a Champions League season) with new seasonal facility sales currently on hold due to the uncertainties around fans returning to the stadium; and increased player investment in fiscal year 2020 (£56.4 million increase in net capital expenditure on intangible assets compared to the prior year).”
 

SlimDizzle075

New Member
Newbie
Joined
Jul 11, 2016
Messages
259
Location
Atlanta, Georgia
hardly, just some perspective. I'm just saying its not something people need to freak out about. When you have a club worth over 2billion - 400mil in operating debt is not a pair of handcuffs and or an un-climbable mountain of debt that the media are trying to make it seem. the "doom and gloom" attitude has to go.
 

Wheato

Full Member
Joined
Jul 29, 2013
Messages
482
Location
Manchester
This is not a pro Glazer post, because I despise them. But the club is currently valued between 3.8 - 4.1 Billion. And there is 256 million in the bank. A debt of 474m is like taking equity out of your mortgage to build an extension on your gaff. We are never getting rid of these leaches, because Manchester United is the gift that keeps on giving. The longer they hold on, the more money it is worth. In the last decade, the value has doubled. I can't see any person or any organisation with the finances to buy them out.
 

nokillingmoths

Full Member
Joined
Sep 28, 2013
Messages
5,741
Well..let's follow that logic. The dividend issued in April was $0.09 per share. Manchester United has 164,572,687 shares outstanding. Multiply one to the other and you will get $14.8m (£11.3m). The title of this thread claims debt has increased 133% to £474.1m which implies that debt used to be £203.5m, so those £11.3 for the dividends are in reality 5.6% of the previos debt levels or 2.4% of the new debt levels. Any way you look at it, that's not the reason. But don't let me spoil your moan and complain session.

I realize not everyone understands corporate finance. That's ok. But here we are talking about simple arithmetic and just googling stuff. Don't be stupid, do your research, don't follow trends and narratives just because they sound easy.
I wasn't talking about the % increase of debt, but don't let that ruin you trying to be a smart arse.
 

Nytram Shakes

Full Member
Joined
Feb 2, 2014
Messages
4,038
Location
Normally dark rooms
This was obviously coming, I hope its a bit of a wake-up call for all those people who were having toddler-like hissy fits that we wouldn't break the British transfer record in the summer for Sancho in the middle of a pandemic.

Looking at this its looks like the spending we did do was pretty reckless but then the same goes for most premier league clubs. the spending by the Preimer league this summer was nothing short of stupid and many clubs are going struggle before all this is said and done.
 

Teja

Full Member
Joined
Aug 17, 2014
Messages
711
Location
Boston, MA
I think the key bit is:

Still paid out £23m dividends to shareholders, largely the 6 members of the Glazer family.
It's amazing that we incur loses (in an exceptional year) and yet take on additional debt to pay out dividends. Most normal companies have paused / severely reduced dividend payouts and buy backs because of COVID.

IMO this is borderline fraud, but I'd like to hear a finance / accounting take on it.
 

MTF

Full Member
Joined
Aug 17, 2009
Messages
3,738
Location
New York City
It's amazing that we incur loses (in an exceptional year) and yet take on additional debt to pay out dividends. Most normal companies have paused / severely reduced dividend payouts and buy backs because of COVID.

IMO this is borderline fraud, but I'd like to hear a finance / accounting take on it.
Financial analyst here. It is not fraud. They are the controlling shareholders, they can continue to pay themselves dividends if they want. If they end up needing cash to make up for those dividend payments, they can take out more debt or raise equity and dilute their stake.

It's fine. @Wheato summarized it best: if the club is worth USD 2.5+ billion (entreprise value), USD 500 million in debt just isn't a big deal.
 

WR10

Correctly predicted France to win World Cup 2018
Joined
Jul 19, 2009
Messages
5,166
Location
Dream
I spent all summer in the Sancho thread explaining the financial distress the club was in. Hopefully people can wrap their head around the COVID impact now
 

Nytram Shakes

Full Member
Joined
Feb 2, 2014
Messages
4,038
Location
Normally dark rooms
I spent all summer in the Sancho thread explaining the financial distress the club was in. Hopefully people can wrap their head around the COVID impact now
People didn't want to hear it, people just wanted the shiny new signing. It's the same ever were in the world right now, everyone needs to make and accept cutbacks but people don't want to hear that.
 

Revan

Assumptionman
Joined
Dec 19, 2011
Messages
42,341
Location
Munich
Nothing to worry about. The debt has increased simply because we took a new 150m debt to cover the operational costs, aka to cover the money that we won't get from match attendance.
 

Jezpeza

Full Member
Joined
Apr 20, 2018
Messages
731
Just to point out that Net debt is the gross debt minus the cash in the bank. United had cash at end of June 2019 of about £300 million to about £50 million at end of June 2020. This is the main reason why the ‘debt’ has gone up as net debt will increase as cash in the bank decreases. The gross debt figure (i.e. The actual amount owed) hasn’t actually changed in many years. The bigger concern (which never gets mentioned) especially in the current climate is cashflow. This is what makes clubs go into serious trouble.

Unfortunately, every single quarterly report gets this same reaction because people, understandably, don’t understand the difference between gross and net debt. Btw this is not a supportive argument for the Glazer ownership just actually pointing out what the accounts actually are saying.
To me the debt level has never really bothered me but has indicated the Glazers intentions. The leveraged buyout secured their purchase cost against the clubs revenues, They’ve constantly refinanced and paid it off slowly, always cashed out their dividends.

they arent in a hurry to pay it off but the clubs value is so much higher now it doesnt really affect us in terms of viability, but just means we keep wasting stupid amounts of revenue on interest.

if you consider that they bought us for 800m and the debt is still 474 they havent been in a rush
 

HackeyC

New Member
Newbie
Joined
Dec 31, 2018
Messages
241
Reading the report this is "net debt". What that means is that overall debt principle has not materially changed, but cash in hand has reduced. Think of it like your mortgage less your cash balance in the bank. Genuinely this is not a surprise, nor is it a problem. I would suggest that if you aren't financially inclined it is best to wait for reasoned analysis before hitting the panic button. Apologies if I seem disparaging, that's not my intent but by reacting you are just playing into the hands of a shock and awe news article used to secure clicks.
 

JuriM

New Member
Newbie
Joined
Jun 23, 2020
Messages
105
Blue Moon is on a verge of happy ending. How can one bunch of people so fickle.
 

HackeyC

New Member
Newbie
Joined
Dec 31, 2018
Messages
241
All the arguments about debt aside, why are they taking dividends when we made a loss? That's the worst part.
Dividends are paid out of retained earnings so a one year loss is not likely to reduce the shareholder funds significantly enough to prevent a dividend from being distributed.
 

b20times

New Member
Newbie
Joined
Sep 3, 2018
Messages
170
How can we be in so much debt yet UEFA haven't even laid a finger on us about FFP? Doesn't it seem a bit odd after them going after man city for doing everything right and not being in debt?
Have things finally caught up with us for having a buffoon in charge of matters behind the scenes?
 

vanderpants

New Member
Newbie
Joined
May 19, 2012
Messages
2,652
Location
Manchester
Covid has hit us the hardest out of the top 6 as we don't have a sugar daddy with an unlimited bank account, match day revenue is a major part of our income, and it's going to be a while before we get 76000 back into OT so the long forecast doesn't look good. You would have thought if there's ever a good time to sell Utd would be now but with the Saudis getting booted out of Newcastle who would buy us now? The glazers are disgusting as to the way they have treated the club and the fans, we deserve better ......a lot better
 

HackeyC

New Member
Newbie
Joined
Dec 31, 2018
Messages
241
Ex/EFF DATETYPECASH AMOUNTDECLARATION DATERECORD DATEPAYMENT DATE
04/23/2020CASH$0.0902/25/202004/24/202006/03/2020
11/29/2019CASH$0.0911/18/201912/02/201901/06/2020
04/25/2019CASH$0.0902/14/201904/26/201906/05/2019

The latest tranche were committed on 25th Feb and paid on the 3rd June, i.e. pre-COVID.
 

shabz

Full Member
Joined
Jan 16, 2012
Messages
2,491
Location
Manchester
Hopefully they will want to sell sooner rather than later if business is harder to be productive.
 

Revan

Assumptionman
Joined
Dec 19, 2011
Messages
42,341
Location
Munich
What month are the dividends paid? If it's anytime after covid then it's pretty scandalous really.
Pre-covid. Let's see if they take dividends in November or not. Would be very awful if they still decide to take it.
 

Teja

Full Member
Joined
Aug 17, 2014
Messages
711
Location
Boston, MA
If they end up needing cash to make up for those dividend payments, they can take out more debt.
This is the bit that I don't understand. If we were a private company, there's not much you can do here, but isn't there some mechanism that prevents someone from simply taking on debt to pay out dividends in a publicly listed company? That just seems ripe for abuse.

Is the expectation that investors will see behavior like this sell / short the stock and it self corrects by the stock price falling (and therefore reducing value of the asset itself?)
 

WR10

Correctly predicted France to win World Cup 2018
Joined
Jul 19, 2009
Messages
5,166
Location
Dream
Net debt 101
Net Debt as of 30 June 2020 was £474.1m, an increase of £270.5m over the year, due to a decrease of £256.1m in cash and cash equivalents and adverse movements in the GBP:USD exchange rate. The gross USD debt principal remains unchanged

Nothing to do with Glazers directly. Simply we had to dip into our huge cash reserves (300m) on a rainy (COVID) day to pay the bills when our sugar daddy (broadcasting $$) was slashed in half overnight.

This should be in the OP.
 

MTF

Full Member
Joined
Aug 17, 2009
Messages
3,738
Location
New York City
This is the bit that I don't understand. If we were a private company, there's not much you can do here, but isn't there some mechanism that prevents someone from simply taking on debt to pay out dividends in a publicly listed company? That just seems ripe for abuse.

Is the expectation that investors will see behavior like this sell / short the stock and it self corrects by the stock price falling (and therefore reducing value of the asset itself?)
No. In fact taking out debt to pay large one-time dividends or share buybacks is a valid financial strategy when interest rates are low. Investors usually like that, if they deem that the level of debt taken on is still reasonable. Investors in both the equity or the debt should be concerned if they deem the level of debt is too high, and might then look to sell or short the equity or the debt (shortable via CDS instruments).