Stay up to date with notifications from The Independent

Notifications can be managed in browser preferences.

Sam Wallace: Glazers have fallen into trap set for Abramovich

As Uefa lead a crusade against club debt, Sam Wallace reports on why the Glazers’ finances may put them first in the line of fire

Wednesday 13 January 2010 01:00 GMT
Comments

Your support helps us to tell the story

From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.

At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.

The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.

Your support makes all the difference.

In the days before the Glazers finally took control of Manchester United in 2005, it was not debt that was the problem at Old Trafford – it was how to spend the money that this sporting and commercial behemoth earned which was the preoccupation for those who managed it.

As a plc, United were acutely aware of the unpopularity of paying dividends to shareholders from the cash in their reserves so they ploughed it into other projects, notably the £45m "quadrants" development at Old Trafford, the most recent phase of the stadium's redevelopment. Work on the two corner stands on the pre-existing East Stand began in April 2005, a month before the Glazer takeover, and they were opened a year later taking the capacity of Old Trafford up to 75,790.

Now the priorities are very different. Without the £80m sale of Cristiano Ronaldo in June, the club would have posted a loss of £30.8m in their last financial results because of the £41.9m profits re-directed to service the loans taken out by the Glazer family to buy the club. But United's debts, as outlined in the details of their bond prospectus, could yet have wider implications.

Among the "risk factors" that the club identified for the benefit of potential investors in their latest bond prospectus was the threat posed by Uefa's new rules on clubs with debt. Under the "financial fair play" initiative that will be introduced at the beginning of the 2013-14 season, clubs wishing to play in the Champions League will have to demonstrate to European football's governing body that they can balance their books.

In the bond prospectus United identify the risk that Uefa's financial fair play initiative could become a problem for any club that has become so heavily indebted. Yesterday, sources at Uefa confirmed that this would be the case. They pointed out that United would have another three and a half years to address the matter of their debt, although even in that timeframe there is no guarantee they could do so.

The Uefa president, Michel Platini, calls the initiative the end to "success on credit" and it was aimed at clubs such as Chelsea and latterly Manchester City who have spent far beyond the revenue they have generated. Back in the pre-Glazer plc days, it would have been hard to imagine that it might apply to United.

While United run at an operating profit, it is the repayments on the loans taken out by the Glazers that drag them down. As United say in the bond prospectus: "These rules are intended to discourage clubs from continually operating at a loss. There is a risk that, in conjunction with increasing player salaries and transfer fees, the financial fair play initiative could limit our ability to acquire or retain top players and, therefore, materially adversely affect the performance of our first team."

The bond prospectus also revealed that the Glazers now have a facility that allows the parent company to take up to £70m from the club's profits to pay down the £202m debt on the family's payment-in-kind loans. This is the part of the debt that the American owners are personally liable for and taking money out of United's profits to pay it is likely to go down as badly with Uefa as it does with the fans.

With the Glazer debt now at more than £700m and no Ronaldo to sell next summer to balance the books, it would appear that United will attract the interest of Uefa if they are still under the same ownership come 2013. Their business plan includes a £75m rolling credit line which United could use in the transfer market. Buying players on credit is the exact opposite of what Platini wants clubs to do.

Roman Abramovich, the owner of Chelsea, and Sheikh Mansour, Manchester City's owner, have both converted their extraordinary investment in their clubs into equity in order to fall into line with the new Uefa rules. Making the debt disappear at United will require much wealthier owners than the Glazers.

£30.8 million

The amount United would have lost in the last financial year without the £80m received for Cristiano Ronaldo.

Red rage: Fans vent fury at Americans' tenure

"Now is the time for the Glazers to go. The day the Glazers put the club up for sale you can expect celebration on the streets of Manchester. Most supporters have had enough.

"If it were a race, then United are dragging their owners behind them like a broken tractor, while City's owners are providing rocket fuel. It just shows what a fantastic job Sir Alex [Ferguson] and the players have done that we are still ahead despite the deadweight of the Glazers' ownership.

"It is in everyone's interest for the Glazers to exit and make way for a new investor. Manchester United doesn't need a sugar daddy – we just need to get rid of the leeches."

Manchester United Supporters' Trust chief executive Duncan Drasdo

"Since the Glazers arrived in 2005 all we have done is lurch from one tortuous re-financing to the next and news that the Glazers have been lining their own pockets just adds insult to injury.

"There was a big protest when they first took over but now, for the first time since then, fans who have been staying quiet are now speaking out.

"It demonstrates that our system in England is breaking down. When you look at us and Liverpool and Portsmouth and almost every club without a wealthy benefactor and the debt levels are worrying. It can't happen in countries like America and Germany so why are we left so vulnerable over here?"

Independent Manchester United Supporters Association spokesman

"That already rich people could be taking money out of my club at a time when they are forcing me to pay more to watch my football team beggars belief. I am apoplectic with rage.

"Glazer-apologists cite how much the club has achieved since the takeover. What they fail to realise is that Manchester United has been successful in spite of the Glazers' involvement and not because of it. Sir Alex has done a magnificent job in the face of overwhelming under-funding.

"The FA should hang their heads in shame at their 'do-nothing' stance when it was obvious to all that the Glazer family were not 'fit and proper' owners. It is time for them to go and for honourable people to come in."

Peter Hargreaves, member MUST (Manchester United Supporters' Trust)

"We are organising a protest outside Old Trafford to get rid of these blood-sucking owners. They have turned our club into a circus with day-trippers and made it unaffordable for loyal and local fans to go every week. Plus we are on the brink of financial disaster. We need to act now."

'We Want the Glazers Out' Facebook Group (currently 6,280 members)

Join our commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

Comments

Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged inPlease refresh your browser to be logged in