ok no worries
The Athletic: Why Man Utd's profit must not drop below £65m
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United is valued at a bit more than 3 billion pounds (based on stock exchange prices), with Glazers owning around 85% of the shares. If they sell 15% of their shares, that is 3B*.85*.15 which is around 400M.
I'm sure someone else has already pointed out, the key here is that it's EBITDA - not PBT. This is crucial - it EXCLUDES our transfer spending.
The last five years it has been: 121m, 192m, 200m, 177m, 186m respectively.
So for me the clause is fairly benign, and isn't the issue. Pure cash is might be.
The last five years it has been: 121m, 192m, 200m, 177m, 186m respectively.
So for me the clause is fairly benign, and isn't the issue. Pure cash is might be.
Cash was always the problem this summer. We have only around 90m in cash (we had almost 300m last summer). Furthermore, we reported losses last quarter, and the revenue is projected to be 140m or so less than last year.
Well it's not that simple. That's a simple valuation, not what they would sell for.
Our value was dropping before covid and our sponsorship is probably dropping significantly.
Also when putting that many shares on the market it lowers the value of them.
Share selling is taxed if it's profitable.
I know, that's why I used "could". That scenario is very unlikely.
I dont disagree but Unfortunately its all a bit late for that now - we are too far down the line to go back
and Liverpool never went into liquidation - would never happen to us either, all that happens is the banks take control and sell to a new owner.
I am sure lots of our fans would actually like this to happen and its worked out pretty well for the Scouse in the end so far from the end of the world scenario some imagine.
it was in place enough to stop Murdoch buying the club but that would’ve made the club financially stronger, wouldn’t it?
Did United take season ticket money from all fans this summer?
EBITDA so nothing to do with transfers at all.
I'm sure it's possible EBITDA goes to that level but banks wouldn't fear for their loans I don't think so no real impact
Nuts when football journalists try to read into financial stuff like this
Swiss ramble on twitter is excellent
I'm sure it's possible EBITDA goes to that level but banks wouldn't fear for their loans I don't think so no real impact
Nuts when football journalists try to read into financial stuff like this
Swiss ramble on twitter is excellent
If it's below 65, does it spiral in selling of the club? Then we should do whatever we can to stick it upto Glazers
The author of the original Medium story this article is based on has since deleted the story by the way. Maybe his information were not quite as solid as he initially thought.
So, basically they either don't understand what EBITDA means (they think it means "profit") - or they're looking for cheap clicks.
First rate journalism.
First rate journalism.
The Athletic can set the lawyers on the CAF if I share behind paywall content. I shared it so that people who subscribe could know it was there.
Sorry for the nitpick, but the Murdoch takeover was blocked by the DTI on the grounds that it may have created a conflict of interests or a monolopy (BSkyB being the sole broadcaster of and owning the best team in the Premier league).
The fit and proper person test was introduced half a decade later in 2004 and is largely regarded to be about as useful as a chocolate fireguard. The Glazers passed it despite the fact that their takeover plan involved buying the club in a hostile takeover financed on debt.
Edit... regarding whether we'd be in better shape had BSkyB's takeover been allowed... you can't prove a counterfactual, but given it involved no debt and a low price in comparison to the owner's vast wealth, then I think its reasonable to assume that in hindsight it would have been preferable to the Glazer era of debt, incompetence and 'no value in the market.
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Profit is how much is left over after everyone has been paid what they are due. If banks required a business to be profitable they wouldn’t make many loans. Banks don’t care much about a business’s profits. Banks care about whether the business generates enough cash to pay back the loan. EBITDA is one measure of that.
Virtually all businesses have debt. Apple is hugely profitable and has enormous cash reserves, yet they just took out loans because they could get money cheaply. Borrowing money to make more money is good business.
To be fair to Laurie, he uses Kieran Maguire to explain all. Which he basically said what you said.
It depends what you do with the money you borrow.
Taking advantage of record low interest rates to purchase an asset or invest in training, players or a new stadium may be good business, but taking on expensive debt to increase the Glazer family share portfolio isn't good business, unless you happen to be the Glazer family.
Probably yes, a bunch of journos who nothing about anything trying to whip up a frenzy which does not exist to get 100 million clicks on their article.
Just wondering what sort of money will we have lost not having a lucrative pre-season tour? United are usually pretty big business when we go abroad.
The Glazers own the business (most of it anyway). A leveraged buyout was good business for them. On paper they’ve made a tidy profit as the club’s value has appreciated greatly during their tenure.
From a purely business perspective splashing cash on all those transfers since SAF left has been a poor use of funds. If profit was all they cared about the Glazers could have pocketed that money and the club’s valuation still would have risen due to the Sky deal. For all the criticism they face, the Glazers have not cash cowed the club.
Something has just stuck me reading what you said there. How does listing a club on the stock exchange, or making shares available for purchase, marry with the leagues owners test? If the Glazers just decided to make 51% of the shares available tomorrow what recourse would the league have in deciding who bought those shares?
Why doesn't Mike Ashley just do this with Newcastle and let the Saudis buy the club that way? Surely the Premier League can't dictate to the stock market who buys what?
I don’t get the point of that article. Clearly the timing insinuates that the author is trying to suggest this clause is somehow responsible for the low levels of spending we’ve seen from the club. But the article itself then clears the air by pointing out that the money spent on transfers does not have any bearing on this minimum profit limit of 65 million (since transfers are amortized in the books etc.).
Also, the article from Medium that it cites as the main source has been removed from the site. Make what you want of it.
So all in all it’s a nothing article (which might interest people who’re into Corporate Finance) explaining how certain run of the mill covenants built into multi-million dollar lending agreements operate.
Also, the article from Medium that it cites as the main source has been removed from the site. Make what you want of it.
So all in all it’s a nothing article (which might interest people who’re into Corporate Finance) explaining how certain run of the mill covenants built into multi-million dollar lending agreements operate.
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think some paid voluntarily, there has been no demand for payment
The LBO was great for them- it allowed them to purchase an enormous prestige asset that generates more money than any normal person can ever spend without needing or risking their own capital.
It's just a shame that it has been absolutely disastrous for the millions of fans who saw their club saddled with debt for the first time and an entity of enormous cultural and historical capital which they felt a sense of belonging to become the legal property of a strange family from Florida.
Ive never known in an accounting sense how player acquisitions are treated, cash purchases asset (balance sheet) surely an amount of said players value to the club gets depreciated and hits P&L (Assuming divided by length of contract) so if we give someone a 5 year contract and they cost 50m surely that seasons account will show a 10m hit on the P&L under depreciation? I understand thats after EBITDA level but is that how its treated in a nutshell?
They didn't go into liquidation but they where on the very brink of it. The courts forced them to sell the club at an offer they didn't want to accept.
Not really - there was never any serious danger of liquidation and its the banks who forced them to sell, they tried to fight the banks in the courts and lost
There is no connection between selling shares and the league owners test.
None - which is of course how the Glazers were able to buy the club in the first place.
When Glazer bought the club it was a Publicly Listed Company in the UK with thousands of shareholders
I know mate, but where were they (the fit n proper brigade) when the Glazers came to town
Brief brief brief.
They're intangible assets so its amortisation not depreciation, but aside from that minor nitpick your example is exactly how they're treated.
If we buy a player for £50m on a 5 year contract, then the effect on the P&L is an extra £10m a year amortised cost for 5 years, and their wages become an op cost.
A player sale does the reverse - wage and amortisation is removed, and if the transfer fee is higher than the book value, that additional value is added to the P&L as profit.
Yes I believe this make sense. While BofA may not want to grant additional loan such that you can go out on a buying spree, renewing existing loan should not be an issue.
Sorry to nitpick man.
But I think you mean, the club will issue new shares worth GBP 400mn at current market prices - GBP 3bn. That will mean, 400mn will come into the club (equity infusion) and not be sold by the Glazers. Of course that means, their shareholding will go down by 15% - so Glazers will own 85% * (1 - 15%) = 72.3%
This is one of the great advantages of listing. We could do a smaller issuance, say 200mn, there is no way the club is going down because of a covenant. Business has to fundamentally suffer.
Hold on there mate, failing a covenant doesn't push you into administration. It just means you can be asked to pay the loan back immediately.
Not true
Its quite infuriating the amount of nonsense being spouted by the journalist and some of our posters.
I meant more simply selling some of their stock to pay the debt. What you are saying is a bit more realistic though. Of course, diluting the stocks might come with stocks losing value.
Nevertheless this is a non issue. The debt is less than 15% of the club’s value. No chance we will go down or anything like that. It was always just fear mongering propaganda, and never based on anything resembling the reality.
Because BoA is a leech, they will grant a benefit only if it's enforced by the Federal Government. When I first saw the article, I screamed. Of all places to get a loan, why BoA?