Manchester United have fallen to third in the Deloitte football rich list. Still, it’s not bad going for a club £700m in debt!
The recent bond issue has raised the £500m which the Glazers sought, and this has bought them time. According to the latest accounts for the year ended June 2009, United owed £509m to international banks, and the money raised will be going to repay this debt. What this does is to free United from the strict financial conditions imposed by these lenders, and whilst they now have a 9% yearly fixed interest bill on the £500m, the bond doesn't mature until 2017. This is slightly more interest than they were paying before, but it removes some of the urgency to meet those obligations. The Glazer’s have also now vowed to stay at the helm, at least until the bond maturity.
Now that this debt is sorted (at least for the next 7 years), the Glazers can address the issue of the payment in kind (PIK) loans. The PIK debt may stand at over £500m by the time it matures, so addressing this, and bringing it down is where the focus will now be. The Glazers look like they can now open the purse strings a little, and blank any offer that the Red Knights are lining up. It appears that the only way they will leave now is if an offer of £1.5bn is on the table, and an offer of this size is doubtful.
So while the football finances at United continue to create the headlines, its somewhat crept under the radar, in this country at least, that Real Madrid have become the first team in any sport to record revenues in excess of €400m. The outlay on players will put a sizable dent in any profits, but there can be no doubt that Real, and counterparts Barcelona, are the clubs which are the financial powerhouses at the moment.
An interesting aside from the Deloitte league table is that there are now 5 clubs from Germany in the rankings, with a sixth in Stuttgart just outside of the top 20. Bayern Munich are not far off overtaking United too, and Dortmund have the highest average attendance over a league season in Europe. One of the reasons for this has to be the cost of watching football in Germany. Tickets can start for as little as €8, so it goes to prove that raising the cost of attending a game doesn’t necessarily go hand in hand with raising the quality on the field, and being successful off it.
So, with the financial health of football being addressed globally, and a side from the richest league in the world (Portsmouth) going into administration, the debate will rage on about the best operating model in which to run a football club. As the Glazers dig in for a long battle, the administrators are circling over several lower league clubs, and the likes of Real Madrid are showing no signs of keeping their wallet in his pocket come the summer. Is it time then for a cap, a wage limit, a ruling from the games' governing bodies so that thereis a level playing field for all ? Is it time to start taking Michel Platini’s concerns seriously ? Has the situation actually got that bad...
Robert Critchley works in the City in OTC Derivatives. He is an avid Manchester United fan, and commentates at QPR for the Soccer Sight Project.