Bonds of trust

In the first part of a feature on the financial turmoil that has enveloped football, Ashley Shaw looks at the fury caused by the Glazers' attempt to load even more debt on to Manchester United

There have been few more important documents in the history of Manchester United than the bond prospectus published last month. The admission that the Glazers have already taken out £22.9 million in loans and fees, and could suck a further £500m out of the club over the next seven years, means there can no longer be any pretence about the motivation for the 2005 takeover. The age of the football asset-stripper is at hand.

One chief side-effect has been to galvanise a dozing support, previously happy to accept the Americans at their word. There can be few sane supporters left who are now prepared to “wait and see”. Nor can chief executive David Gill again claim that the switch from plc to private ownership has improved the club’s chances in the transfer market when it took the sale of their most lucrative playing asset to keep the club’s accounts in the black.

The astronomical levels of debt loaded on to the club are already having an impact on United’s ability to attract and keep the best players. If it wasn’t spelled out before, the events of January 2010 make it painfully obvious that Man Utd are officially skint, with every prospect of the crisis worsening. The publication of the prospectus could not have been better timed. As supporters looked back on a dominant past two decades, most now realise that they will struggle to match that success in the next ten years. The imminent retirement of a number of key personnel and an increased competitiveness at the top of the Premier League will surely lead to an extended period of “transition”.

The Carling Cup semi-final against freshly minted rivals highlighted the lengths to which the nouveau riche in English football are catching up the Big Four. Despite United’s victory, the gap between the teams has clearly narrowed to the extent that it is now City, rather than debt-laden, mismanaged Liverpool, who represent United’s fiercest rivals. The intense atmosphere and festering subplots made for a soap opera cast of villains and heroes. This is clearly now the fiercest rivalry at the top of the English game.

Yet the crisis at the club remains misunderstood by many. The successful take-up of the £504m bond issue, sought to pay off senior (bank) debt, consigns United to a fate worse than administration in that it frees the club’s owners from oversight, allowing them to suck yet more cash out. This isn’t new money to improve the club but replacement debt for the original bank loan Malcolm Glazer took out to buy the club, attracting a higher interest rate but with fewer strings attached.

According to one expert, the covenants in the prospectus could allow the Glazers to take over £500m out of club coffers in the next seven years. This figure includes the £8m leaseback of Carrington, a total of £161m in dividends to the Glazers, an estimated £333m in interest payments and a potential £63m in management fees and “expenses” (from All of which makes the £22.9m taken out in loans and fees since 2005 resemble the amuse-bouche ahead of a seven-course cash banquet.

When one considers the continuing plight of the Glazers’ other businesses, principally First Allied Corporation, a holding company that, among other things, owns shopping malls in recession-hit small-town America, it seems likely that the family will seek to glean every cent available from United.

Falling ticket sales and tight player salaries have further hindered the Glazers’ other sporting acquisition, the Tampa Bay Buccaneers – a combination that led to them ending the season as the third-worst team in the entire league. Saved from relegation by the franchise system, the Buccs can look forward to a high draft pick and renewed hope for the season ahead.

The same could not be said should Alex Ferguson or his successor continue to be limited to low-rent signings in a market inflated by the arrival of mega-rich owners.Yet the money underpinning these plans is generated almost exclusively by United supporters, either via television rights, merchandising or ticket sales. An organised, meaningful protest would not be too late to disrupt an over-leveraged business that relies on on-field success to maintain it. On the contrary the Glazers appear more vulnerable now than they have been at any point during their reign.

The original 2005 protests failed because the vast majority of match-going Reds were not prepared to change the habit of a lifetime. The formation of FC United created a split in the support that the Glazers, Sir Alex Ferguson and certain fan groups enthusiastically exploited. From 2006 onwards dissent toward the ruling family was muted and, aside from the publication of the club’s annual accounts, there was very little for sceptical fans to get their teeth into. Of course the trophies also kept on coming.

Five years on and a successful mass boycott seems the only feasible way to de-rail the Glazers’ plans. Initially this would impact on the club and lead the owners to suck more key assets out of the club, with the sale and leaseback of the stadium (valued at £235m) top of the agenda, along with the disposal of remaining playing assets. In the longer term, however, it would surely disrupt the owners’ plans.

For proof check out page 17 of the Glazer prospectus where they freely admit “We depend on our matchday supporters”, continuing: “A reduction in matchday attendance could have a materially adverse effect on our matchday revenues and our overall business.” The ball, as it has been since 2005, remains in the supporters’ court. Put simply, every ticket sold props up the Glazer regime.

As it is the 2010 version of this campaign is still in its infancy and from the off it already seems more visible and media-friendly. In place of the riots that scarred the last attempt, supporters have taken up the green and gold colours of predecessor club Newton Heath which has seen the issue raised to a profile not enjoyed since the original takeover. What happens when the story moves on is a different matter.

Not that removing the Glazers will be quick or easy. In a 1989 interview with the Milwaukee Sentinel Malcolm Glazer said of his business interests: “Everything we have, we keep for 100 years. I don’t sell many things. When I buy them, I keep them.” Mr Glazer may be many things but he cannot be accused of stupidity. With a cash cow like United at his disposal and his other business interests hit by the recession, why would he sell?

As it is, a couple of high-profile signings, via the fearsome-sounding £75m “revolving credit facility”, could yet pull the wool over mainstream supporters’ eyes and the protests could peter out just as they did back in 2005. Here’s hoping that the lessons of that campaign have been learned before there is nothing left of a once proud football club.

From WSC 277 March 2010