Monday, 7 June 2010

Debt Junkies: The true story of First Allied Corporation

Today, in conjunction with BBC Panorama and The Guardian, this blog is publishing full financial information on state of the Glazer family's real estate business First Allied Corporation. Although all information is from verifiable public sources primarily Commercial Mortgaged Backed Security ("CMBS") filings, First Allied's own website and US county and state records, it has never been made public before today.

Analysis of mortgage filings for 63 of First Allied's 64 shopping centres shows the portfolio is hugely overleveraged and that without major improvements in financial performance in the next few months, half the centres will not be able to generate sufficient income to pay their mortgages and therefore risk going bust. I can for the first time reveal that four centres have already gone into foreclosure. The majority of First Allied's properties are currently in negative equity leaving the family little or no room for manoeuvre. Although the US recession and property crash have proved the triggers for this crisis, the root causes are the disastrous decisions made by the Glazers in the mid-2000s as the US property boom neared its height, shattering their self professed reputation as savvy business people.

After years of speculation about the state of the Glazer family's businesses, the evidence I am publishing today explains the real reason behind the Glazer family's underinvestment in the Buccaneers and at United and shines new light on the family's inability to pay off "their" PIKs without using Manchester United's cash.

Given the amount of data I have discovered and analysed, I have created dedicated pages and links on my blog covering various areas:

Having sold all their other substantial business assets (nursing homes, trailer parks, radio stations and controlling stakes in listed companies) in the last ten years, First Allied is the third major leg of the Glazer family's empire alongside the two famous sports clubs. When I wrote about the company before on 9th March, I stated that as a private US corporation, it would never be possible to obtain any detailed financial information on the business. I am glad to say that I was wrong about this.

In February, First Allied's Crosswoods Commons shopping centre entered the foreclosure process (which was completed in March) and I was able to review the centre's mortgage document which had been filed in the Federal District Court for Southern Ohio as part of the foreclosure process. The case documents showed that the mortgage the centre had defaulted on, although issued by Lehman Brothers in 2005, had been "securitized" and placed into a Collateralised Mortgage Backed Security. Because CMBS are freely traded, mortgage holders whose loans are in such vehicles must report regularly on the financial performance of the property on which the mortgage is secured. When I started to look at which other First Allied shopping centres had mortgages in CMBS, I was amazed to find that loans on 63 of the 64 properties listed on the company's website had been securitized (the final property was remortgaged in January 2008, but the credit crunch caused the market for new CMBS to dry up shortly afterwards and the new mortgage was not securitised).

Using the prospectuses of the twenty four CMBS vehicles which contain the traceable 63 First Allied mortgages, the CMBS' most recent investor reports, information on the company's own website (, county and state records (where available) and First Allied's listings of vacant property (conveniently the company lists all its available space on gives a greater insight into the financial performance of the portfolio than one would expect to obtain from a quoted real estate company.

Summary of key financial findings 

1. Today, First Allied has total mortgage liabilities of c. $570m, secured on properties with a total estimated value of only c. $556m. This debt has barely changed from the $581m originally borrowed, whilst the value of the shopping centres has fallen sharply from their total appraised value of $744m when the loans were taken out. I estimate that 31 properties, virtually half the portfolio, are in negative equity.

2. Despite generating rental income of over $76m and cash flow before interest of c. $47m the debt burden of interest and repayments is so severe that the whole portfolio is currently only producing $9.7m of surplus cash per annum before tax. This is a tiny sum for what is supposed to be a large and successful real estate business and totally inadequate to even cover the interest accruing on Red Football Joint Ventures Payment in Kind notes or to invest in the Bucs playing squad.

3. Whilst the foreclosure of First Allied's small (10,000 sq ft) Crosswoods Commons centre in Ohio in February 2010 was reported by the US and international media, this blog is today publishing previously unseen documents which show that an additional three centres have already gone bust. First Allied paid $30m, including almost $5m of equity, for these properties in 2003, 2004 and 2005. With such a huge amount of capital already tied up in the centres and with the property cycle nearing its trough, the only explanation for the Glazers' failure to inject further equity into the businesses in order to them is obvious. The family do not have the money.

4. The great majority of First Allied's mortgages (58 of 63) were taken out with Lehman Brothers, perhaps the greatest symbol of the excesses of the credit boom in the United States.

5. The crisis at First Allied is only partly due to the recession in the United States and is mainly caused by the excessive debt the Glazers have loaded onto the portfolio. Having put almost half the portfolio on the market in 2004 (presumably to raise funds for the bid for United), the Glazers made a disastrous change of strategy later that year and started a binge of remortgaging which continued in 2005, 2006 and 2007. During this period, the Glazers extracted more than $115m in equity through remortgaging, less than 20% of which was used to buy new properties. Although the family realised significant profits during the 2005-7 period, because they both bought and remortgaged properties at inflated valuations, the Glazers piled unsustainable amounts of debt on many of their assets and it is this that is now causing such a severe strain on the business.

6. The total estimated net equity value of the current portfolio (valuing centres in negative equity at zero) is only $59m compared to $162m when the mortgages were originally taken out and an estimated $400m+ at the peak of the commercial real estate market in late 2007.

7. An incredible 44% (28) of First Allied's shopping centres have already been placed on "watchlist" by the trustee banks of the relevant CMBS, indicating they believe there is a significant risk of default on their loans.

8. More than one in four properties (17) already has a "debt service coverage ratio" ("DSCR") below 1x (i.e. income does not cover mortgage payments). Unless occupancy rates pick up sharply, these centres are likely to go into foreclosure in the next few months as reserves are depleted.

9. The mortgages on 48% of the portfolio (31 centres) were taken out in 2004 and 2005 and have five year "interest only" periods which expire this year. At current levels of occupancy, 16 of these properties will see their DSCR fall below 1x when their interest only period ends and repayments kick in, meaning more than half the portfolio will be at very high risk of being seized by the mortgage trustees in the near future. Many of the assets remortgaged in 2005 are so over leveraged that they would be unable to pay their mortgages when repayments begin even if they were fully let at current market rents. Looking beyond the current year, a further 9 centres have interest only periods that end in 2011 or 2012.

10. When First Allied took out the mortgages on the thirty three centres either currently unable to make their mortgage payments or which will be in this position as interest only periods end, they had a total appraised value of over $394m and a net equity value of $80m, all of which is at risk of being wiped out.

Thoughts and conclusions

There are some obvious conclusions to draw from this research and also a lot of unanswered questions:

1. Unless someone can point to other assets acquired at the time, the £272m of "equity" the Glazers contributed to the acquisition of Manchester United was at least in part really debt secured on First Allied's shopping centres. First Allied itself was actually a party to the original preference share agreements with the hedge funds. As there is strong anecdotal evidence that loans secured on shares in Zapata (the quoted company they controlled at the time) were also part of this "equity" element, we are left wondering how much, if any, true equity the Glazers ever put in....

2. Although in Manchester United and the Tampa Bay Buccaneers, the Glazer family own two very valuable assets, they themselves clearly have very little cash. Until the United bond issue, they were unable to take more than a few million pounds in fees from the club and actually resorted to borrowing from it, something that makes more sense now we can see the state of their US business. Forbes estimate that the Bucs have $143m of debt, only $7m below the limit imposed by the NFL and in recessionary times a franchise experiencing TV blackouts and having to cut ticket prices (an anathema to the Glazers) seems unlikely to be able to pay the family any significant dividends.

3. With First Allied contributing so little income, the argument that the United bond issue was undertaken entirely for the purpose of using the club's cash and profits to repay the PIKs is indisputable. There just is no other source of cash flow or assets to borrow against that the Glazers can use. If anyone can suggest a credible alternative view, I am very happy to investigate it.
4. The argument of many fans that the family is under investing in the Buccaneers because of their financial problems (which the Glazers dismiss, claiming they are undertaking a canny but prudent "rebuilding" strategy) is certainly lent greater weight by this research. There seem to be few ways the Glazers could conduct any other "strategy" at Raymond James Stadium as again there is no obvious source of cash for investment.
5. The Glazers are not business geniuses. Malcolm's long term track record is better of course, but since he became incapacitated, the whole structure has begun to creak at the foundations. Adding United's debt (including the PIKs) to Forbes' estimate of the Bucs' borrowing, the mortgages described above, and estimates for the family's residential mortgages, we arrive at a figure of at least $1.8bn of total Glazer family debt. This is supported by $225-250m of EBITDA (depending on how far the Bucs' EBITDA fell last season from the $69m earned the year before), a terrifying debt to income ratio of almost 8x.
6. I can only assume that David Gill and Sir Alex Ferguson have no idea about the true state of the Glazers' finances and believe they really are wealthy and successful. I will be writing (again) to David Gill to ask whether he feels United supporters should worry about the family's ability to repay "their" PIKs in the light of this research.
7. As with United's management, I assume NFL commissioner Roger Goodell's defence of the Glazers during his annual address is February when he said: "I talk to the Glazers on a regular basis. I will tell you that they are sound owners. They are terrific for the NFL and we have not seen that there is any stress that would affect the way they operate any of their professional teams, much less the Tampa Bay Buccaneers." was a product of not knowing the truth about the situation. Perhaps the NFL Finance Committee should look into the situation.

For those of us who have watched as ever more debt is piled upon Manchester United, the story of First Allied revealed in this research has some chilling parallels. First Allied Corp is not a property development company, it is a property speculator, using high levels of debt to try to ride the real estate cycle and enrich its owners. In the same way the Glazers have brought nothing but debt, risk and huge costs to United, they have added nothing to their portfolio of shopping centres, built nothing, created nothing. This would be of less concern if the management of First Allied had proved themselves adept at timing the market, but sadly the opposite is true. Not only did the Glazers borrow too much, but they did so at precisely the wrong time and at unsustainable, inflated valuations.

The more I discover about the Glazer family, the more they seem to be an unappetising morality tale for our times. Their story is one that takes in financial "innovation" by out of control banks like Lehman Brothers, which in turn allows pointless real estate speculation and creates the mirage of wealth creation, before the whole facade starts to crumble. Now we know that we can monitor the performance of First Allied on a monthly basis (and I will be doing just that you can rest assured) as well as the sports clubs, the facade is well and truly down.



Simpson said...

another great post Andy.

i m surprise with Red Knight Not Making 1billion pound bid.

i m also surprise about their strategy.
i m expecting a bid from Red Knight After we knock out of champions league. That Time Protest Much More Louder And More Aggressive .that Time Red Knight Make 1billion pound bid then its very high chance Bid Going To Accepted By Glazers.B'coz Fan can pressurize them to accept the bid.with the protest.
glazers plan has been success at now look like to hold on Manchester United For at Least a Season.
Glazers only want time and Red Knight give Them Hell Lot Of time to rethink thier strategy.
And Now Green & Gold Is Slowing Down.If Red Knight Want 2 Buy Ask Them Make A Bid Till End of This Year.
I M Very Disappoint With Red Knight In ability To Make At Least 1billion Pound.
I Support Must For This Cause But I M Not Very Much Supporting Red Knight.

Love United Hate Glazer.

Mark said...

Hi Anders. I've been following your analysis for some time, and can only highly commend the effort you put into it.

I've downloaded your spreadsheet, and, as an accountant, there are many figures for me to chew over - fascinating stuff.

I have two questions, on the first reading.

Firstly, could you please explain your calculation of the value of each property. I can see that you appear to be using a Net Present Value model based on NCF with what appears to be a discount factor of 8.5%. The problem I have with this is that there is no explanation of the SOURCE of your core figures. Why 8.5% ? And from where are you extracting the figure you call "Run Rate NCF" ? (And what does that term actually mean ? )It is important to know this, as your piece, brilliantly written, relies heavily on your assessment of the property values.

(What is not clear to the average guy in the street, is that these values appear to be nothing more than a mathematical computation, with no independent corroborating evidence at all. My fear is that your critics will use this against you. )

If there were independent professional valuations on these properties, they would be far stronger pieces of evidence.

Secondly, much of the spreadsheet itself will, in its current form, be incomprehensible to almost anyone reading it, unless they are very well qualified/experienced.

Can you please explain, maybe on the spreadsheet, what the terms actually mean, where the source of the information is, and why it is relevant.

Please don't take this the wrong way, I mean this very constructively.

Remember that you, whether by choice or not, have thrown yourself into the public domain and some very clever people (and some half wits) will be reading what you put up there, as will their lawyers. You have to make sure your figures are capable of repelling any attack from the Pro-Glazerite factions.

At the moment, this spreadsheet would not pass an accountancy exam in its current form, without much further detail.

And I do think you ought to qualify it in any case by stating that the valuations are NOT based on professional valuations, but on the NPV model, which I've used many times in my career, (without ever seeing an asset realise anything other than "what someone is prepared to pay for it").

Have you seen, or do you know how to get hold of, a copy of the last FAC audited Accounts. They may well make interesting reading.

As to the rest of your article, I completely agree that IF your analysis is correct, there really is not a Glazer Cash Pot anywhere in sight. This is worrying. I imagine, although I do not care, for them too.

At the same time, I'd like your opinion on the Balance Sheet presented for March 31st. Particularly the apparently "black" balance of £795million. Which, if true, makes things look far rosier than many might think. But, whilst the accountant in me can read a Balance Sheet, I still don't understand where the £695 million of "current assets" have been generated from. In the absence of that level of profit, what has caused this ?

Thanks, once again, for your work on this. I know that you must feel as frustrated as anyone else, but if it brings about the exit of the Glazers then perhaps you will get the only reward you want.

Victor said...

Interesting, although subjective analysis. In particular I would question your estimates of property values. Not saying they are wrong, just very subjective.

Also with upcomming economic recovery it seems the Glazers have survived the worst times. With Red Knight apparently pulling the plug on any takeover it looks like nothing will change, not in the nearest future at least.

andersred said...

On methodology questions, I've written a whole page here:

Hopefully that will help.

The valuations are the most subjective element, but they are not very important. The non-subjective part is cash generation at current occupancy and debt costs.

All that is factual.


Jeremy said...


Thanks again. This has obviously kept you busy for quite a few months, and is amazingly in-depth. It will be interesting to see how well the Panorama team put it across.

It will be interesting to see if there is a response from them. I suspect not, but given the timing of your release, and the time difference, I bet they got little sleep last night ;-)

Quetzalcoatl said...

A superb piece of work, Mr Green. You must be very gratified to see the traction this has gained already in today's press and the blogosphere.

I'd like to see Gill spin this one without resort to his usual - ever so slightly condescending - blandishments.

It doesn't surprise me for a second that the Glazer's supposed equity investment in United - often trotted out by Glazerphiles in their defence - was in fact nothing but a piece of financial legerdemain. The chutzpah of these people is breath-taking.

The only solace we can extract from these terrifying revelations is the hope that, backed into a corner and unable to concoct further fairy tales, the Glazers might be persuaded to sell quicker and at a fairer price.

Anonymous said...

Glazer did not put up a penny of their own cash into United - even their intial transactions were financed with the help of Commerzbank (Dalman).

Jörgen said...


It seems you've spent an awful lot of time to go through this. A commanding body of work, indeed. Are you getting paid to do this or are you doing this in your spare time? If you have a family I suppose they are the understanding type of people.

Considering the cash flow the First Allied are generating per annum, is the figure of c 9.7m based on 2009 or earlier figures? Are there any benchmarking figures?

United Rant said...

Bravo Andy - a fantastic piece of work. This is the smoking gun that exposes the Glazers as 'business people' of rank poor quality, David Gill as the liar he is and Sir Alex Ferguson as a brilliant manager who has brought "unprecedented" success to the club despite not because of the club's ownership.

Sadly it will be met with more spin from the Glazers, lies from David Gill and - sadly - total denial from far too many United supporters.

Even today, with this analysis widely covered in the media, the nay sayers are out in force. We can only wait for the inevitable diatribe from Gill.

But the Glazers strategy of denial, spin and FUD is unravelling and your analysis is key to that process.

Anonymous said...

Anders, another piece of compelling evidence that all is not well in the world of the Glazers. The figures and your analysis speak volumes about the high risk and debt that they carry. The data collection and analysis must of taken you hours; however, it was worth every minute.

rooneythenewking said...

United Rant - I am a blogger from the rom site I might become a member on your website. I cannot post on ROM for the time being because the site is unstable because of virus problems that infected my computer. I am using my sisters laptop and I am not going on rom because it could happen to her laptop is well.

I agree with you they are not great buisnessmen they are hacks, I said plenty on the disgrace of how MUFC has been taken over by what I call parasites PPl like wakey continue to give big explanations to paint a great picture when I said this on ROM? you can put a top hat on a goat its still a goat, or if a guy dressed in drag its still a guy.

The new bond issue has totaly been the worse case scnario for MUFC, they now can take more money out of the club, its a great deal for the glazers a deal they wont be able to do in 3 years time, for MUFC it is an awful situation to be in. Its going to be a depresing night when its shown on bbc

rooney the new king said...

andersred - also many seem surprised the RK's did not go too far, well they tried its not their fault their dealing with PPL who have lost touch with reality in terms of their price, it will take a Wayne Rooney transfer to really wake all united fans up.

MUFC like I said on ROM is not a business that can grow that will lead to other big profit deals so it can pay off their debts like Sony apple Microsoft? because they will go into debt because they can because what they earn blows anything MUFC will ever make, when businesses go into debt it can expand the business open up great doors that will lead to debts payed off in huge chunks, if its not that debt can drain the clubs profits making MUFC a business that stops growing on and off the pitch, because its stuck with a mountain of debt and interest payments that cannot be payed off.

and this is where another problem arises, for clubs team and manager maintenance is a huge factor in a successful F,C that's how they make their money on the pitch, if the club is not doing well on the pitch it will be a devastating effect off the pitch that's why the glazers model makes absolutely no sense at all. so how can you keep a successful club running? when you have to pay off the debt, the interest payments, maintain the quality of the squad, and also in the end bring in a new manager how can you keep all that up.

also 08/09 is united's most successful season in the history of the club on and off the pitch.

- we won the premiership
- we won the Carling cup
- we won the world club cup

add the prestige prise money winning those trophies, the games counted up that is enough to pay for 2 world class players.

we can add

- we got to the champions league final
- semi finals of the FA cup

how much TV money did we make for getting this far in both tournaments, the gate money that alone we should have made a fortune and profits should have seen united in the green by well over a hundred million, we made a 22 million pound profit because of the sale of ronaldo these are outrages results.

we also made a 44 million pound loss in 07/08 for winning the 2 biggest prizes in club football, call me crazy but this alone makes the glazers business model? has the foolish man who built his house on sand, we know what they said about the titanic? how can you sail with lifeboats only available for half of the PPL on board oh forgot the titanic is unsinkable LOL, the glazers business model for united is a time bomb ready to explode.

Jörgen said...

@ United Rant

Would you prefer it if we just took everything that was reported in the news for granted? I really like your blog, but lately it seems this matter has just stopped you from being critical. If the numbers Anders presented are correct and his interpretation of them stand, we are surely in a bad state. But until that can be established we should try and put Anders statements under as much scrutiny as any other perspective. And don't call me pro-Glazer just because I like to try and think for myself.


I know a lot of businesses that had been extremely happy to see a cash flow surplus at all, last year, nevermind how big it is. Some people might even call a success.

And even if some centres have bad DSCR's, it seems the group as a total can make these payments (so far). Don't you think we will see improvements as we are moving out of the recession? I don't agree that their financial state is only partly because of the recession, since before it, they were seemingly doing ok.

EastStand375 said...

Don't you go talking sense again Jorgen.

Didn't you get the memo? We're all supposed to take whatever Anders says as gospel and any independent thinking is not welcome.

The whole philosophy of the anti-Glazer movement gives us an insight in to what it must have been like for the poor buggers living in the communist Soviet Union under Stalin.

It disgusts me, it really does.

Jörgen said...

I'm trying to work and post comments at the same time and it certainly shows in my spelling, phrasing and grammar, not to say what it does to my work effort.

Hopefully, you understand me anyway.

RobC said...

EastStand375 is also busy here:

Please people, make your own mind up about EastStand375's bona fides.........

Another excellent piece Andy, it's going to be interesting to see how Gill et al spin their way out of the Panorama expose: Man United - Into the Red, BBC One, Tuesday, 8 June at 2235BST and then available on in the UK on the BBC iPlayer.

Big_Pooma said...

A classic non-denial denial from Tampa this evening.

"Buccaneers fans should know that the Glazer family is as financially well-positioned as ever before," said team director of communications Jonathan Grella. "Companies they own generate revenues in excess of $800 million each year.

"Sophisticated real estate experts know that the family's refinancing of their commercial real estate before the global meltdown has proven to be the wise move.

"While First Allied represents only a small portion of their asset portfolio, it continues to generate significant profits, enjoys over 90% occupancy, and has long term non-recourse financing.

"This franchise remains committed to bringing the resources to build its next championship team."

As the commentator says here, no denial of the existence or magnitude of the total debt.

Jack said...

lots of effort and great work on it!

CMBS was kind of "the way to go" a few years back so i wouldn't say too much on their use of this structure.
like Jörgen mentioned, with the state of the economy, businesses are happy to see positive cash flow, although i don't think it would be any better in the near term

Quetzalcoatl said...

My theory is that EastStand375 is actually David Gill in (not very good)disguise - exasperatedly posting in his pajamas from somewhere in the leafy glades of south Manchester.

As I write he is assembling an insertion-ready voodoo effigy of andersred and muttering fearful imprecations under his breath.

Unbekownst to David - who assumes his slow descent into reality-denying loopiness is merely the inescapable consequence of his Quisling gutlessness - his every move and utterance is now remote- controlled via RFID chip from a secret bunker in Palm Beach, Florida by none other than Uncle Malc himself...

Ergo EastStand 375 is Malcolm Glazer. that's a load of shite - but one load of shite deserves another eh?

Jörgen said...

@Big Pooma

In the comments to the article you linked to, one person claims that the Glazers aren't spending on the Buccaners because they are "dumping money by the boatload into Manchester United". That's comedy!!!

To be serious though, I've read several articles where the Glazers are considered in the top third of the best franchise owners in the NFL. Not spending on the Bucs is alsothough to be linked to the fact that owners opted out early from the CBA. That left free agency a little bit uncertain.

When looking at summary of key financial finding 3 you reach the conclusion that the centres were allowed to go bust because the Glazers have no money.

Isn't it plausible, though, that they considered it to be a lot cheaper to let the centres enter a foreclosure process rather than to try to save them? They had only put 5m into it (out of 30m) so it's not that far fetched. If not, where is the evidence that your conclusion is more likely?

Guesty said...

The tampa tribune picked up on this story pretty early in the day and have since updated it to include some comments on the story by the Bucs Communications Director. I studied in Florida the Bucs one the Superbowl and even then the fans weren't entirely happy with the owners. The comments on this link show how strongly they are disliked in Florida too:

andersred said...

Thanks for all the comments guys.


I don't think net cashflow of $9.7m is any good at all. When I originally looked at First Allied, before I found the CMBS sources I looked at similar quoted REITS. They all deleveraged substantially last year, raising new equity. Net debt to gross assets was around 50%. This mean they were able to generate far better cash returns (at the cost of more equity of course) than you see at FA.

The $9.7m is a "run-rate" number. There is a big lag in reporting so most centres have reported to Dec 2009. What I did was to take the Dec 2009 numbers. If current occupancy was 5 percentage points higher or lower I adjusted income for the up to date numbers. The "raw" number is very slightly lower, $9.5m.

The other thing to bear in mind is the impact of interest only periods rolling off in 2010. The total "P&I" (principal and interest payments) last year were $38.8m. Annualised P&I post the interest only periods (those ending in 2010) will be $43.m. That brings "debt service" below 1x to a further 15 centres, and takes 16 centres to the dangerous 1-1.2x level.

That makes a mockery of the Buc's spokesman's:

"Sophisticated real estate experts know that the family's refinancing of their commercial real estate before the global meltdown has proven to be the wise move."

It was a stupid move.

On the question of why they haven't supported centres, we can only speculate. As circumstantial evidence, it points to a lack of cash (as do the personal loans and the failure to repay any PIK debt). They haven't exactly opened the cash taps at the Bucs and as for investing in United.....

Final point to Eaststand. Debate with Jörgen and others is a pleasure, coming on here to tell everyone it's Stalin Russia is just childish.

I'm happy to debate the numbers and conclusions with you, but you now appear unwilling to do so.


The Red Devil said...

Been busy today so I have not had the time to really digest all this and am waiting for the actual documentary to come on TV so I can watch it before commenting.

Perhaps for your next project, you would like to look into the finances at the BBC?

Talk about pot calling kettle...

EastStand375 said...

Hi Anders (or should that be Miss Marple?),

My reference to the communist Soviet Union under Stalin wasn't a personal attack on yourself or your blog. It was a reference to the attitudes and thinking of the wider anti-Glazer movement. You see they just won't accept an alternative point of view and anyone that does is childishly labelled a ''Glazer apologist''. It's pathetic and I suggest those people should grow up.

So on that front, you can calm down and put the violin away.

Now, as for the substance of your article:

My view would be that if you look at the overall state of the portfolio it is in pretty good nick considering the economic conditions of the last few years. It strikes me that First Allied have calculated that attempting to prop up a small proportion of the portfolio just doesn't make good business sense as it would be a classic case of throwing money at a problem when it could be used more efficiently elsewhere. And of course crucially, First Allied is still generating enough cash overall to cover the total cost of servicing all of the mortgages after the 2010 interest only periods expire. So the situation with First Allied is clearly not as dire as I imagine you would like everyone to believe. It's not great by any means but you would expect that the economic conditions will soon become more favourable and that will of course put the company on a more stable footing going forward.

What I don't understand though, is what any of this has to do with Manchester United?

Who has ever claimed that the PIK debt would be repaid with First Allied's net cashflow?

To the best of my knowledge, nobody has.

Well done though on your work, but I just don't see what relevance it has to the football club we support.

PS. I'm curious as to why you've made so little mention of the Tampa Bay Bucs franchise on your blog. Perhaps that should be your next assignment?

Anonymous said...

Who has ever claimed that the PIK debt would be repaid with First Allied's net cashflow?


Well, YOU have constantly and consistantly, as the mouthpiece of 'the company', suggested that the PIK debt is not the responsibility of the football club. You have still been claiming this today under your pro-Glazer turbo-posting GCHQ alter-ego on Redcafe. Still feeling sore following your banishment from the mighty Red Ish when it was discovered who you work for?

The facts are quite clear. The Glazers clearly have no means to service 'their' PIK debt using 'their money' or even by yet further borrowing against 'their' assets. The only way is by using yet more of Uniteds cash.

If you really think that the state of the Glazers' other businesses has no effect on United then you're deranged.

Ruud said...

I might have missed something obvious but can someone explain to me what relevance the Glazer's other businesses are to Manchester United?

Surely they are all seperate entities?

Or is Andersred suggesting that they are going to take money out of the club to support other failing businesses elsewhere?

the rest of the internets said...

Does Eaststand have nowhere better to post his pro-glazer drivel?... oh wait...

great post as always anders, let's hope panorama puts some pressure on them by exposing what they've been trying to hide on top of all this.

FCUMRED said...


If First Allied arent paying the PIKs, and the buccs arent paying it.

Then who is ?

You say that its nothing to do with United and not their problem.

According to you, if we all just close our eyes then they'll magically disappear.

D. Ebt said...

Are you getting paid to do this or are you doing this in your spare time? If you have a family I think they are the understanding type of people.

The Druid said...

Fantastic work Andy.

Tuscan said...

Anders - can you clarify how you see this revelation affecting United in the future?

Are you suggesting that First Allied is unable to save itself without an external cash injection?

Is the suggestion that the PIK repayments will be put to one side whilst the glazers channel money out of United to save their other businesses?

Or are people reading too much into it, when the article is just meant to illustrate that United will definitely have to pay off the PIKs themselves?

andersred said...


Thanks for your comment. You identify some important questions.

Just to be totally clear, I am NOT suggesting United's cash will be used to bail out First Allied. I am trying to show two things:

1. The Glazers' other business (excluding United) CANNOT pay off the "their" PIKS. Only United has the cash flow to do so. This flies in the face of David Gill's statements (and those of various apologists) about the PIKS.

2. Less importantly, rather than being experts at managing debt in companies, in their original business (in a market they are supposedly experts), the Glazers have totally screwed up the level of debt taken on. Not reassuring when they and their employees tell us all is well.

Hope that's clear.


Tuscan said...

Cheers for the answer Anders. Great work on the blog. I thought your explanations on here had far more clarity than the Panorama episode. I know they were trying to get a lot of content into short period of time, but it was like watching "Debt for Dummies" on CBeebies. The whole gnomes thing was ridiculous.

Anonymous said...


great piece of work and completely agree with the 2 points you made to Tuscan.

On the PIKs - can they be "researched" in the same way as you have done with the First Allied CMBSs? I heard a year ago that they were being offered on the market and their value had dropped to 70%......I might be wrong here.

Does that mean they are traded on the market and if so can we tell who owns them?


Anonymous said...

Red Devil you went to town on Andy's posting a while ago - and now all this comes to light all you can say is 'I'm busy' ?

On the one hand I have Andy posting factual, detailed financial summaries and the other I have you posting 'It's not that bad' (with no figures) and 'I'm busy' ?!

Who am I to believe ??

Anonymous said...

Hi Anders Red,
As a ManYoo fan 1st and as a finance person 2nd, I'm concerned regarding the 'Debt' culture originating from USA especially from Wall Street. What ever happened to 'Thrift'? Eversince Michael Milken singlehandedly pioneered the Junk Bond market & subsequently , Wall Street have been creating even bigger debt monsters including the recent Collateralized Debt Obligations (CDO)[containing risky sub-prime mortgages with a low investment risk rating due to pooled assets] which was responsible for the recent Global Financial Crisis (GFC) in 2008. In addition, the derivatives market have created another monster, Credit Default Swaps (CDS) underwriting those CDOs which nearly brought down AIG (ironically the Manyoo's major sponsors). The unlamented Lehman Brothers and other US investment bankers sold now-toxic Structured Investment products (which were backed by CDOs) to individuals in Asia and to county, cities & town councils globally. When GFC hit in 2008, those investors lost everything.
Property markets tend to have a slow burn ie. 2-3 years before it unwinds and dramatically collapsed. As long as mortgagees pay their mortgages, the banks cannot foreclose the property. However, the mortgagees also known that they are paying for an asset which is fast depreciating and cannot allow them to exit without pain (negative equity). Also as capital values declined drastically, rents also declined especially when both are closely linked to the real economy. In this scenario, the term, 'cutting loss' is key. Like cancer, cutting off an infected part is painful but saves the body; however, if delayed, the whole body succumbs to cancer. That in a nutshell, sums up the First Allied Corporation situation!