Monday, 25 January 2010

Don't take my word for it..... ask an expert.

"Scare mongering, don't understand business, very profitable club, unprecedented success since they took over...."

Yes, according to some of the ranting comments on newspaper websites (and implicitly according to Richard "£866,000 per year is a bargain" Scudamore the Chief Executive of the Premier League in his recent relaxed comments about club finances), United fans are totally wrong to worry about Glazer and the debt.

So who's right and who's wrong?  Well, someone who might know is Jim O'Neill, Head of Global Economic Research at Goldman Sachs (one of the banks that syndicated the recent bond issue).  A life long United supporter, O'Neill was a director of the plc in the last few months before the Glazer takeover (he was brought in to try to mend fences with Magnier and McManus during their spat with Fergie).  His career also include long periods  researching bond markets so he has excellent knowledge of all the relevant areas.

Despite working for a bank involved in the bond issue, almost immediately after the issue closed, O'Neill felt strongly enough about United's financial situation to appear on BBC Radio 4's "The World this Weekend" yesterday afternoon (24th January 2010).  You can download the item (which also includes discussion of the situation at Pompey) here.

So what does O'Neill think?

Here are a couple of quotes:

"Trying to use a lot of debt and leveraging the balance sheet on the belief that a company's value and its business will improve forever; in many sectors has proved to be very vulnerable when you have a recession, and in football it's becoming more apparent by the week."

So football is falling into the same debt trap that we have seen across the world of business in the last few years.

"I think it suggests that to run a highly successful football club on the basis of a leveraged debt business.... carries all sorts of risks."

So football is not suited to being run on a highly leveraged basis.

Now none of this will come as any surprise to people who have paid attention in the last five years but let's hope the it filters through to the free market ranters on the web and the ostriches who run English football.