Jump to content
House Price Crash Forum
Sign in to follow this  
AvidFan

Glazer Family In Trouble

Recommended Posts

http://www.goal.com/en-gb/news/2896/premier-league/2010/06/07/1962487/glazer-family-debts-at-manchester-united-rise-to-11bn-report

Glazer family debts at Manchester United rise to £1.1bn - report

7 Jun 2010 07:39:00

Manchester United owners the Glazer family are now in debt to the tune of £1.1 billion, according to a report from the BBC's 'Panorama' programme.

The BBC has apparently seen mortgage documents that show that the Glazers have borrowed £388m ($570m) against shopping malls that they own, as well as £66m ($95m) against their NFL team, the Tampa Bay Buccaneers.

To further add to the financial burden, part of the Glazer family's £700m Manchester United debt will soon be charged at 16.25 per cent interest.

The figure of £1.1bn debt is £400 million more than was previously believed to be the case. A spokesman for the Glazers has told the BBC that the family own more than £2bn in assets.

However, the BBC speculate that the family's spiralling debt could see their hold on the club loosen, as concerns mount amongst fans that there is no transfer cash available with which to build a new team to maintain the club's traditions of massive success.

City analyst Andy Green is the man who apparently first uncovered the extent of the debt burden carried by the Glazers.

"They borrowed more money at inflated valuations right at the top of the cycle," he said.

"These are people who tell us not to worry about Manchester United debt because they are great businessmen. In their core business in the US they got it absolutely wrong."

The Glazers' main asset, other than United and the Bucaneers, is a shopping centre business called First Allied Corporation.

Mr Green has apparently discovered that the Glazers' mortgages for their shopping mall business had been bundled with other loans as Commercial Mortgage Backed Securities. These are publicly traded, which means the Glazers are required to provide detailed information on them in the US.

The BBC claims that there are mortgages on 63 of 64 First Allied malls, adding up to £388m ($570m). The majority of these were taken out with Lehman Brothers before they went bankrupt, helping to trigger the global banking crisis of 2008.

Four of those shopping malls have now gone bankrupt, whilst Mr Green also discovered that the Glazers remortgaged 25 of their malls in the six months prior to their takeover at Manchester United.

Green asserts that the Glazers therefore borrowed against their US properties in order to buy United.

"At the time when they had to present a huge amount of cash over here in the UK they borrowed a huge amount of extra money in the US and publicly they didn't buy anything else that year," he added.

First Allied's properties would now appear to be worth £380m ($550m). However, with mortgages valued at £395m ($570m) the company itself would appear to be worth little.

This may lead to concerns about how the Glazer family will now service their debt, with the interest on their Payment In Kind loans set to rise to £16.25 per cent.

Plenty of these reports today and yesterday all over the world. The programme airs tonight. From the RadioTimes:

Panorama

Tuesday 08 June

10:35pm - 11:05pm

BBC1

Man United - into the Red

Red is the colour of Manchester United - but now it's as famous as the colour of the club's balance sheet. Thousands of its fans wear green and gold - a protest against American owners the Glazer family who, they say, have saddled the club with a growing mountain of debt. On the eve of the World Cup - and ahead of a possible bid for the club - John Sweeney explores the battle for the soul of United, the true scale of its debts and its ramifications for our national game.

Share this post


Link to post
Share on other sites

Man Utd are too big to fail. :D

No wonder Jim O'Niel and the Red Knights backed away from a takeover bid. They're going to do a "Rover" I think - wait for the whole thing to crash and pick up the remains for a bargain.

Nice one :D

Share this post


Link to post
Share on other sites

Got to love high finance the way to wealth was to borrow ever increasing amounts of money. Leverage was an easy game to play with ever increasing asset prices.

Although if I wanted to the club I'd wait for the fire sale.

Share this post


Link to post
Share on other sites

Got to love high finance the way to wealth was to borrow ever increasing amounts of money. Leverage was an easy game to play with ever increasing asset prices.

Although if I wanted to the club I'd wait for the fire sale.

I think that the Glazers will walk away with plenty of wealth. The new paradigm is simply to borrow and borrow and refinance, extract as much real cash as possible into personal accounts and then let the whole business collapse. Financial innovation, wealth creation, yadda, yadda, yadda...

Share this post


Link to post
Share on other sites

Even Man Utd will go under when this debt timebomb explodes - even if a bunch of super-rich people came in, managed to get the loans to buy it for the current asking price they could not make money from it.

There is a limit that even football clubs reach in terms of how much revenue they can generate.

Share this post


Link to post
Share on other sites

Even Man Utd will go under when this debt timebomb explodes - even if a bunch of super-rich people came in, managed to get the loans to buy it for the current asking price they could not make money from it.

There is a limit that even football clubs reach in terms of how much revenue they can generate.

it would be fantastic if Man U went bust,

that would be fatastic, with a 60% HPC too, going to be back to bear soon MT , keep holding on mate

Share this post


Link to post
Share on other sites

Even Man Utd will go under when this debt timebomb explodes - even if a bunch of super-rich people came in, managed to get the loans to buy it for the current asking price they could not make money from it.

There is a limit that even football clubs reach in terms of how much revenue they can generate.

I thought this Red Knight farce seemed rather odd, they valued the club at £1.1bn and where going to borrow the money to cure the debt problem. They weren't cash buyers. Unless I misunderstood what I was reading, and some uber rich guy was ultimately behind the buyout.

Share this post


Link to post
Share on other sites

I thought this Red Knight farce seemed rather odd, they valued the club at £1.1bn and where going to borrow the money to cure the debt problem. They weren't cash buyers. Unless I misunderstood what I was reading, and some uber rich guy was ultimately behind the buyout.

If you took a loan out to buy the club you could not make money from it - it is simply too expensive.

If you had the cash to buy it then, IMPO, you would have to be a diehard Man Utd fan as you would be throwing good money after bad.

At best, I guess, Man Utd is worth 500 million and that is debateable.

I think that the footballers of the past 15 years should get down on their hands and knees and be grateful for all the money they made in the boom years - in the future football will have to bring in more sensible salaries in order to just survive.

In F1 there is constant talk of how to reduce costs, they have implemented several cost-cutting measures and

many of the drivers no longer make the salaries that were made a few years back. When do we ever hear football talking seriously about putting a cap on what is spent?

Share this post


Link to post
Share on other sites

I thought this Red Knight farce seemed rather odd, they valued the club at £1.1bn and where going to borrow the money to cure the debt problem. They weren't cash buyers. Unless I misunderstood what I was reading, and some uber rich guy was ultimately behind the buyout.

There's £500m debt from the recent bond issue. Fixed at just under 10% (half dollars/half sterlings). The interest on that is payable twice yearly, secured against the club assets and covered from revenues.

That's the debt on the club itself.

Then there's a further £200m or so in what are euphemistically called PIK notes (payment in kind debt). These are owed to hedge funds. This debt isn't directly connected to the club itself, rather it is debt owed by the Glazers against one of the ultimate club holding companys. PIK means no interest is payable, instead rolling up over the term of the loan. This is the debt which is currently accruing at 14.25% which will jump to 16.25% in the Autumn due to a likely breach of covenant.

The bond refinancing authorised the Glazers to take payments out of the club which it is believed will be used to repay some of this high rate PIK debt. It is believed that £70m from the sale of Ronaldo will be taken out of the club in this way before the PIK dent jumps to this 16.25% level in August.

The Red Knight 'plan' such that it is public, would be to retain the bond financing (£500m) and finance the remainder of the takeover (i.e. payment for Glazers shares) via an equity stake taken by this group of 50 or so subscribers in conjunection with a (minor) stake for the supporters trust/supporters.

Share this post


Link to post
Share on other sites
Guest sillybear2

I thought this Red Knight farce seemed rather odd, they valued the club at £1.1bn and where going to borrow the money to cure the debt problem. They weren't cash buyers. Unless I misunderstood what I was reading, and some uber rich guy was ultimately behind the buyout.

Exactly, the club would still be carrying as much debt than ever (maybe even more so), they'd only succeed in getting rid of the hated Glazers. Just like the UK, we're still in the shit but at least Brown is gone, for whatever good that does us.

Man U has plenty in revenues but they're like a sieve, or a monkey with diarrhea, whatever money comes in instantly goes out in wages, "like drinking prune juice while eating figs" according to Alan Sugar.

Those PIK notes are nasty, they just compound and compound upon themselves, at 16% interest that means the principle owed doubles every 5 years, and they've now done just that, £400m of personal debt in addition to the loans the club is also carrying.

Share this post


Link to post
Share on other sites

why would anyoen pay anything more than a fiver for it?seriously,are the glazers actualy trying to make a profit on it?

Well I imagine they continue to pay themselves. A lot of money no doubt. And if the business collapses ? They still will have all that 'personal' wealth.

Share this post


Link to post
Share on other sites
Guest sillybear2

Well I imagine they continue to pay themselves. A lot of money no doubt. And if the business collapses ? They still will have all that 'personal' wealth.

Yup, the family pays itself tens of millions in "consultancy fees", so even if (when?) the club implodes due to some debt spiral they'd still be millionaires, I'm sure the sons can eek out a pretty reasonable standard of living from £6m :-

http://www.guardian.co.uk/football/blog/2010/jan/12/manchester-united-glazers-debt

Part of what they've done with the bond issuance and what they're planning to do by paying themselves special dividends is to reduce their own exposure, transferring the risk to the club, even so the parent company Red Football is of course limited liability so their personal exposure is limited.

What they've done is extreme but no different from various other clubs or what private equity groups have done to the wider economy, clearly people aren't so passionate about Boots the chemist. This the logical outcome of a fiat money system with interest rates set artifically low, debt fueled speculation and ponzi style asset bubbles are more enriching than productive wealth generating industry.

Share this post


Link to post
Share on other sites

why would anyoen pay anything more than a fiver for it?seriously,are the glazers actualy trying to make a profit on it?

Good question.

I think you have to go back to the heady days of 2003/4/5 and the private equity leveraged model. i.e. cut costs, drive up revenues, service debt and just wait for capital values to increase.

What they appear to be doing is to keep rolling the debt to some point in the future that never arrives - We've seen this before!! That point may arrive when live streaming over mobiles and broadband becomes more widespread globally, or they can double their money, I don't know.

Anyway, the problem with the PIKS is that the Glazers can effectively strip assets from the club (Ronaldo's £70m for instance, sale/leaseback the training facilities and so on) to pay them down. This benefits the Glazers as it reduces their personal liabilities but doesn't help the club itself. Money has flowed one way only during their tenure and that flow looks to be increasing. If Andy Green's analysis on the indebtedness of their First Allied shopping malls is correct (and I'm sure it is), then they may be under pressure to reduce those borrowings. United could be providing some of the cash to do this also. It's all about cash flow to them. I don't think they care very much where that cash comes from.

The problem is that what may make sense as a part debt/part equity valuation to the Red Knights clearly doesn't make sense to the Glazers who know they can withdraw cash and sell assets.

The problem in a nutshell is the level of debt. It's certainly not the revenues which are around £250m, nor the operating expenses. Player wages have never really been an issue for United. It's the debt and in particular the PIK debt.

Share this post


Link to post
Share on other sites
Guest sillybear2

The problem in a nutshell is the level of debt. It's certainly not the revenues which are around £250m, nor the operating expenses. Player wages have never really been an issue for United. It's the debt and in particular the PIK debt.

They've turned Man U into the financial equivalent of the Channel Tunnel, except they haven't stopped digging.

The supporters pay for the privilege of insulting Glazer by turning up to protest, they're like junkies too, provided you've paid at the gates why does he care about the colour of your scarf :-

http://www.moneyweek.com/news-and-charts/profile-of-malcolm-glazer-47731.aspx

Edited by sillybear2

Share this post


Link to post
Share on other sites

They've turned Man U into the financial equivalent of the Channel Tunnel, except they haven't stopped digging.

The supporters pay for the privilege of insulting Glazer by turning up to protest, they're like junkies too, provided you've paid at the gates why does he care about the colour of your scarf :-

http://www.moneyweek...azer-47731.aspx

I'd agree to an extent, although raising the profile of the impact of the debt is perhaps part of the process of gaining the support required to do something about it. Not everyone who watches football cares very much about such things in the same way not everybody who votes worries about the deficit. It's only when the effects impact them personally they sit up and take notice.

Do you worry about the complex finances of the Channel Tunnel when you're sitting on the Eurostar?

Share this post


Link to post
Share on other sites

Good question.

I think you have to go back to the heady days of 2003/4/5 and the private equity leveraged model. i.e. cut costs, drive up revenues, service debt and just wait for capital values to increase.

To be fair for those who got in first it was a great plan, I remember reading in the NY Times about I think a bed company that had been repeatedly bought out over a number of years in this manner, very profitable for the owners. Unless of course you are the last buyer which means it's game over.

The bed company used to be very profitable, now it just has debt.

Share this post


Link to post
Share on other sites
Guest sillybear2

I'd agree to an extent, although raising the profile of the impact of the debt is perhaps part of the process of gaining the support required to do something about it. Not everyone who watches football cares very much about such things in the same way not everybody who votes worries about the deficit. It's only when the effects impact them personally they sit up and take notice.

Do you worry about the complex finances of the Channel Tunnel when you're sitting on the Eurostar?

Maybe, though you probably question the price of the tickets. People may complain about the Glazers raising prices but they're still daft enough to turn up, that just illustrates the strong fundamentals of the business when somebody so hated can still cash in on the loyality of the brand. It's the opiate of the masses, football is the new Big Tobacco, with the added advantage of not killing your own customers.

Edited by sillybear2

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 259 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.