Mind numbing and utterly pointless football finance discussion thread

[The Nal]

Robbing Peter to pay Paul is never a good thing.

But it's very likely that they've found a cheaper loan, so it's a better situation than it was I guess - but everything depends on the term of the loan; see LFC.

[eFestivals]

a good chunk of the money in the bank will be nothing other than the club's 'float money', there as a reserve. It's the norm for any business to keep at least enough to cover three months of no income - which in Utd's case is about £75M I think.

[The Nal]

a good chunk of the money in the bank will be nothing other than the club's 'float money', there as a reserve. It's the norm for any business to keep at least enough to cover three months of no income - which in Utd's case is about £75M I think.

[eFestivals]

Where did they get the other 140m then? They’re paying back 220m.

You're not getting what I'm saying. I'm saying around £75M of the money in the bank is money that won't be spent (unless there's desperate financial circumstances for some reason) - it's held back in reserve in case of a financial hiccup of some kind. As I say, this is a very normal thing for any business to do, and the Glazers would probably find it much more difficult to raise a loan (such as the one they seem to have raised) if they weren't doing what is regarded as standard business practice.

The money they're paying off, I have no idea where that's coming from, but it's presumably borrowed in some way cos they have nothing of their own. All I have to go on with that is from outside of the club somewhere, cos that's what the reports say.

And while the money might not be borrowed directly against the club, it's exceedingly likely that there'll still be a claim back onto the club in some manner if Glazers default - people tend not to loan £220M at a cheapish rate without feeling secure that they'll see their money back.

[ampersand]

will this stop the halfwits wearing norwich scarfs?

[The Nal]

You're not getting what I'm saying. I'm saying around £75M of the money in the bank is money that won't be spent (unless there's desperate financial circumstances for some reason) - it's held back in reserve in case of a financial hiccup of some kind. As I say, this is a very normal thing for any business to do, and the Glazers would probably find it much more difficult to raise a loan (such as the one they seem to have raised) if they weren't doing what is regarded as standard business practice.

[ralph250]

You're not getting what I'm saying. I'm saying around £75M of the money in the bank is money that won't be spent (unless there's desperate financial circumstances for some reason) - it's held back in reserve in case of a financial hiccup of some kind.

Edited November 16, 2010 by ralph250

[ralph250]

board statement: "The board notes recent press speculation. The board can confirm that there has been no dividend of club cash”

[ralph250]

1st quarter results

Turnover:

- Year on year revenue growth of 9.7% from £57.7m to £63.3m

- Matchday revenues increased 0.5% from £19.6m to £19.7m

– Media revenues increased 3.7% from £18.7m to £19.4m

– Commercial revenues increased 24.7% from £19.4m to £24.2m

- Year on year EBITDA growth of 4.5% from £15.4m to £16.1m

- Gross debt reduced to £509.4m from 514.7m last year

- Cash balance of £151.7m, up from £146.6m last year

http://www.mufplc.com/

Edited November 16, 2010 by ralph250

[eFestivals]

Wouldn't advocate clearing the whole funds in case complete collapse, but not sure if they'd need the full £75m held back you're suggesting, as the £75m revolving credit facility does pretty much the same thing. Relief facility to be used when needing working capital; help with seasonality/delay in income etc.

All I'm saying is that holding back enough money to cover 3 months of no income at all is considered the standard rule of thumb for all businesses, including (and especially) those businesses who have a lot of cash (or near-cash - credit cards) turnover.

It's pretty unlikely that Utd would want to be working outside of that, as not working to that amount of 'reserve cash' would impact back on the club (as it would any other business) in various ways - it would give other businesses less confidence in the continuation of the club as a stable business, meaning that business partners would pay less for their partnership deals and banks and the like would be less likely to come thru with any chunks of cash the club might need for spending on things.

You've mentioned a "£75m revolving credit facility" - but it's quite likely that that facility has only been granted precisely because the club has that reserve in the bank, and wouldn't have offered it if it didn't (the standard thing of banks only lending to those who don't need to borrow the money). And it's quite possible that that credit facility has a clause along the lines of "any use of this facility obliges the club to hold at least £50M in cash prior to its use and again within 3 months of its use". I guarantee they wouldn't have that facility if their bank account was near-empty as standard.

[ralph250]

All I'm saying is that holding back enough money to cover 3 months of no income at all is considered the standard rule of thumb for all businesses, including (and especially) those businesses who have a lot of cash (or near-cash - credit cards) turnover.

It's pretty unlikely that Utd would want to be working outside of that, as not working to that amount of 'reserve cash' would impact back on the club (as it would any other business) in various ways - it would give other businesses less confidence in the continuation of the club as a stable business, meaning that business partners would pay less for their partnership deals and banks and the like would be less likely to come thru with any chunks of cash the club might need for spending on things.

You've mentioned a "£75m revolving credit facility" - but it's quite likely that that facility has only been granted precisely because the club has that reserve in the bank, and wouldn't have offered it if it didn't (the standard thing of banks only lending to those who don't need to borrow the money). And it's quite possible that that credit facility has a clause along the lines of "any use of this facility obliges the club to hold at least £50M in cash prior to its use and again within 3 months of its use". I guarantee they wouldn't have that facility if their bank account was near-empty as standard.

Edited November 16, 2010 by ralph250

[eFestivals]

Yeah, above definitely makes sense. I'm just saying that £50-60m might be sufficient and use the facility if we had to.

oh, I'm not saying that none of a £75m reserve can never be used - there's always a bit of leeway with these things - but essentially they'll be expected to always have around 3 months turnover in the bank as a reserve, and will be expected to borrow money for any trading needs rather than use that reserve; they'll be expected to always have a significant reserve of cash by the likes of bankers and the business world, as is expected of any major business.

So that means (based on £75M being 3 months turnover) if they've £75M in the bank and need to spend £25M on a player, they're more likely to borrow the £25M for the player and keep that £75M reserve rather than use £25M of that reserve and then only have £50M as a reserve.

There might be circumstances where they'd use the reserve instead of borrowing, but it's likely that if they did they'd be doing it knowing that the reserve would be topped up again in the very near future (probably not much beyond a month) by money they have coming to them from elsewhere (eg: TV money, or something).

[The Nal]

Appears like the Glazers could be looking for a sale.

[eFestivals]

Appears like the Glazers could be looking for a sale.

I think the most telling words in that piece are these....

"If I put my cynical hat on, if it was good news you would think they would want the whole world to know."

But I had to laugh at the mention of Liverpool's selling price in that piece - it hadn't occurred to me previously, but I bet when the Glazers saw that price they nearly had a heart attack. Hicks & Gillet had come up with their £800M figure off the back of the guff going around on the value of Utd, so to see LFC only really worth a quarter will have focused the Glazer's minds I reckon.

[The Nal]

I think the most telling words in that piece are these....

"If I put my cynical hat on, if it was good news you would think they would want the whole world to know."

[eFestivals]

Yep I agree. If they've cleared the loans with another loan of slightly lesser interest rates for example, they should let the public know. And if its good news, of course they should. They could be doing a little “I told you so” dance outside Old Trafford right now. Maybe not as good as it looks…..

another loan at a lower rate seems the most likely with the little info floating around at the mo, but I'm having trouble seeing how they might have actually got that loan without it being put against the club - which then suggests that there could be something more to it such as an imminent sale, as that piece suggests.

Just out of interest, do you believe the story the Glazers put out about having turned down £1.5Bn within the last year? It seems stupidly unrealistic at all levels to me.

Edited November 17, 2010 by eFestivals

[The Nal]

another loan at a lower rate seems the most likely with the little info floating around at the mo, but I'm having trouble seeing how they might have actually got that loan without it being put against the club - which then suggests that there could be something more to it such as an imminent sale, as that piece suggests.

[eFestivals]

They defo haven’t taken it from the club. Gill confirmed that and then followed up with “I don’t know where they got it from”.

you of course missed the "yet" from that.

It's probably not what's going to happen given what's in the limited info, but it might be I guess - after all, they might have taken short term loans to pay of the PIK's, and will then borrow against the club to pay off those short term loans.

I'd guess that if they did that they'd probably be less of a stink kicked up by fans than if they'd used money borrowed against the club from the off - after all, doing things in that way would at least hammer home the benefits of a cheaper loan, whereas a straight swap of debt from the PIKs onto the club just gets to look like the club being loaded with more debt and the benefit of cheaper loans is far in the background of that.

Me too. Honestly, I really don’t know. Utd are amazingly well run (minus the massive amount of debt!! ), I know that.

The Red Knights were willing to offer 1.25B and were told to f**k off, so it is possible I guess. Nobody knows the long term goal here from the Glazers, they’re so insular. They’re going to have to make a statement of some sort about this pay off. It either proves they do or don’t have cash, depending on how they did it.

Is this just a cover up, and they've reported as much positivity as possible as further announcements would expose them as being broke, or was this part of their long term plan?

I think the Red Knights thing needs taking with a huge pinch of salt - they'd talked about making an offer at that level, but they didn't have the money to make it, and plenty of the people within them would have withdrawn if the offer price had been at that level (some stated it explicitly).

As for Glazers long term plans, I'd always thought they planned to profit from the capital gains via the increase in value of the club - but that's an opportunity now not available to them for 5+ years I reckon, given the recession. So I'm thinking they've had to come up with a Plan B of some sort because otherwise there's a big risk of them losing everything - as that piece you linked to pointed out, it's unlikely that selling the club right now would give them enough to cover the debts.

[The Nal]

Qatar Holdings bid looking like the real deal. Glazers turned down a 1.5B bid?!

[eFestivals]

Qatar Holdings bid looking like the real deal. Glazers turned down a 1.5B bid?!

I thought I'd read something in the last day or two which had the Glazer's denying that they'd received a bid from Qatar since Qatar won the right to hold the WC.....?

[jump]

I thought they were discussing the offer though...

http://www.marketingweek.co.uk/sectors/sport/man-utd-in-sale-talks/3022620.article

Make sense since they were tidying up the clubs debt a while ago.

[The Nal]

I thought I'd read something in the last day or two which had the Glazer's denying that they'd received a bid from Qatar since Qatar won the right to hold the WC.....?

[rabid]

My first and probably last venture into this thread, thought I'd drop in this little bit of good news for a struggling local team.

http://news.bbc.co.uk/sport1/hi/football/eng_conf/9074705.stm

[Benj]

BUMP!

Interesting(ish) stuff

http://andersred.blogspot.com/2011/02/everton-200910-results-very-typical-pl.html?wwparam=1297415472

Confirmation of how fooked things are. Everton should sell Rodwell and Fellaini and start from scratch, tight belt, hang in there till the others fall then be in a good position to perhaps move on.

Well that or hope Bill Gates becomes a Toffee

[lost]

BUMP!

Interesting(ish) stuff

http://andersred.blogspot.com/2011/02/everton-200910-results-very-typical-pl.html?wwparam=1297415472

Confirmation of how fooked things are. Everton should sell Rodwell and Fellaini and start from scratch, tight belt, hang in there till the others fall then be in a good position to perhaps move on.

Well that or hope Bill Gates becomes a Toffee