The Risk Factors At Old Trafford

The 322-page document released by Manchester United to accompany their successful bond issue lays bare some of the most fundamental risks that the club faces as a business. It therefore provides a level of transparency that is not usually possible. Journalists and analysts like ourselves can provide our assessment of what we think is happening, but this document tells us how the club sees things. And there are some real concerns. Here a few highlights about some of the main ones:

Eagles Go Bust

Championship side Crystal Palace are the latest club to enter administration. The South London side have not always been able to pay their players on time in recent months and face a winding up order in the High Court tomorrow over a £1.2m tax bill. A Cayman Islands company from whom they had borrowed five million pounds pulled the plug. Attendances have been falling at Selhurst Park recently, despite the club looking as if it could challenge for promotion.

Glazers Sell Bonds

‘Glazer: Forever In Your Debt’ read the large banner held by Manchester United fans outside Old Trafford on Saturdays. However, the Glazers managed to sell £500m of bonds on the open markets to refinance their debts, albeit not without some difficulty and at a relatively high interest rate. The first football club to sell bonds of this kind, United embarked on a week-long series of road shows across three continents.

West Ham Purchase Welcomed

The purchase of a 50 per cent stake in West Ham United by David Sullivan and David Gold in a deal that valued the club has been generally welcomed. West Ham fans see them as one of their own and hope that a troubled period for the club under Icelandic ownership will now come to an end. It offers a rare example of a Premiership club reverting to British ownership. There were other potential puchasers, including one from Malaysia, and there were reports that the Icelandic owners were worried about the association of Gold and Sullivan with the adult entertainment business.

Some Good News From The Non-league

Non-league football clubs with limited reserves and a fragile cash flow have been hit hard by the economic downturn. So it’s encouraging to hear some relatively good news. Blue Square South club Lewes survived a winding up order when their debt to the taxman was paid 24 hours before a winding-up order was due to be heard in court. The 125-year old club is fortunate to be located in a relatively prosperous area and supporters rallied round to find the £48,000 required. King’s Lynn did go under over an unpaid tax bill of around £70,000, but are set to return next season as Lynn FC.

United Fans Lose Their Patience With Glazers

The Glazers have never been popular owners at Manchester United. The Manchester United Supporters Trust has been resolutely anti-Glazer since the family bought the club in 2005. The club’s proposed bond issue, on which we shall be providing a detailed analysis, has reignited that anger. Duncan Drasdo, the chief executive of the Trust, told The Times ‘Now is the time for the Glazers to go. The bond issue is just rearranging the deckchairs and still leaves the club with huge debts, which they expect supporters to continue to fund.

Growing Despair at Liverpool FC

Stuttering performances on the pitch have increased the despair among Liverpool fans. Much of their anger has been directed up to now at the ‘absentee’ American owners. However, they have become increasingly critical of manager Rafa Benitez. He has made it clear that he is digging in for the long term and it is believed that, given the nature of his contract which was renewed last year, the club could not afford to sack him. The counter argument is that the club cannot afford not to sack him, but that overlooks the underlying financial realities.

Manchester City Convert Debt Into Equity

Manchester City’s owners have followed the lead of Chelsea by converting the club’s debt pile into equity. From the point of view of fans, this means that both clubs are debt free. It also means that they should escape any Uefa sanctions directed against clubs thought to have too much debt. One point that has been missed in some of the commentary is that it also makes the clubs easier to sell should their owners wish to do so. A buyer would not have to acquire a pile of debt but would able to make an offer for the club which would allow the owner to recoup some of his investment.

Norwich May Sell Ground To Deal With Debt

League 1 has four clubs who have descended recently from Premiership glory (Oldham were there much longer ago). Each of them has faced financial problems. After a regime of overspending, Leeds was eventually rescued but paid a penalty on the pitch. Southampton were rescued from administration at the last minute. Charlton have put together enough money to get through the season, but face a real threat of insolvency if they don’t get promoted or find a new investor.

That Was The Decade That Was

With the noughties ending in the most serious recession in the global economy since the Second World War, there has inevitably been discussion of the impact on football. In many respects, football has turned out to be recession proof, both in terms of gates and television audiences. This is not so surprising when low inflation and falling interest rates mean that the incomes of those in work have not decreased and in some cases have increased in real terms. Unemployment has increased, but not as much as was feared, although there has been an increase in short-term working.