This blog is primarily about the financial affairs of Manchester United Football Club but also seeks to shine an occasional light on other aspects of football finance and governance.
Too often, discussion and information on football finance is poor and ill informed. With a few honourable exceptions, too many sports journalists don't understand finance and too many business journalists don't care about football. This blog aims to help correct the information gap by providing information and commentary on what is going on at United and other clubs.
The 2005 takeover
Manchester United was taken over in 2005 by the Glazer family of Tampa, Florida. The transaction was a "leveraged buyout" of Manchester United plc (which was at the time quoted on the London Stock Exchange). "Leveraged buyout" means that United was acquired largely with debt, debt secured primarily on the football club itself.
The takeover was hugely controversial at the time it happened and was opposed not only by supporters but by the management of Manchester United plc itself.
From the 2010 bond issue to the 2012 IPO
From the 2010 bond issue to the 2012 IPO
Whilst Sir Alex Ferguson and his players have worked miracles on the pitch since 2005, financially the leveraged buyout has had a major impact on United. Ticket prices have risen very significantly, pricing many traditional supporters out, transfer budgets have been reduced to levels way below what a club of United's size and profitability should be able to afford, the new owners have failed to communicate properly with supporters and in January 2010 the £500m bond issue granted the Glazer family the right to take hundreds of millions of pounds out of the club in dividends in the next seven years.
These dividend rights became the subject of huge controversy in the aftermath of the bond issue and were one of the triggers behind the major "green and gold" protests that started in January 2010. Almost all other owners of football clubs invest their own capital in their clubs, these dividend rights suggest a desire to do exactly the opposite, to take huge amounts out.
Most commentators (including the bond research team at the Glazers' bank, JP Morgan) agreed with my analysis at the time, which was that the primary purpose of the bonds was to allow United's cash to be used to repay the Glazers' "PIK" loans.
In October 2010, Bloomberg reported that holders of the PIKs had been told by senior club officials that the club's cash had not been used for this purpose because of fear over how fans would react, suggesting the protests were having a major impact. In November 2010, the PIKs were repaid (at a cost of over £240m) from another unknown source. Nobody has yet provided an explanation of where this money has come from. It seems highly possible that the Glazers have swapped old PIK debt for new debt elsewhere in the corporate structure, meaning that the club may well be the eventual source of repaying this debt.
Did the protests and pressure by supporters make the Glazers change their plans? Maybe we will never know. The family show no sign of communicating with supporters. If the original plans to use the club's cash were torn up in the face of the green and gold backlash and more reds making the huge sacrifice of giving up their season tickets, that is a huge achievement United fans should be rightly proud of.
After the PIK repayment, instead of paying dividends, the Glazers spent almost £100m of the club's money in 2011 and 2012 buying in the bonds they had issued in 2010.
After the PIK repayment, instead of paying dividends, the Glazers spent almost £100m of the club's money in 2011 and 2012 buying in the bonds they had issued in 2010.
This blog will continue digging around to find out the truth about United's owners and their plans. There will no doubt be many more twists and turns in this story before it ends.
About me
Until this the 2010/11 season, I was for many years a Manchester United season ticket holder. I still go to away games and a few matches at Old Trafford. Professionally I am the Investment Director of a small private equity firm in London with almost 20 years experience of investment analysis. I am also an advisor (on financial matters) to the Manchester United Supporters Trust, although I am not an elected official of MUST and do not speak for them.
If you hadn't guessed I am opposed to the current ownership and financial structure it brings. I believe even the biggest football clubs are still in many senses "community assets" and should be run for (and hopefully with the involvement of) supporters, not to make money for distant owners who know and care little for them.
I am often accused of not understanding what a leveraged buyout is and how it works. The opposite is true, I know exactly what they are and how they work (I've even invested in some - in normal commercial sectors). What I am trying to do is explain it to people who don't know. Because being legal and "normal business practice" should not be the only test of what we allow to happen to organisations in which people of all backgrounds invest such emotional energy and which are social and communal entities and not just businesses.
This blog is a labour of love for me, my small contribution to a campaign by thousands of United supporters to change the ownership of our football club. All the work is my own, I receive no financial support from any third parties, take no advertising and gain no monetary benefit from the blog. Any errors are entirely my own and I guarantee that I will correct any factual mistakes that readers identify. Matters of interpretation are of course just that.
Three years on from starting the andersred blog, I have to say a huge thank you to my long suffering family, friends and colleagues who have put up with me devoting so much time to this work. Their patience and tolerance really, really is appreciated.