Mind numbing and utterly pointless football finance discussion thread

[Benj]

Something has to give, apparently Heitinga was close to going to Chelsea before the transfer window closed and judging by the tackle he bottled vs Blackpool and when he did the same thing vs Wolves at home I'd happily have him shipped out. I'd actually look to get rid of the higher earners in the summer along with Heitinga, maybe even Arteta and Cahill as though as much as I love Cahill I think we look better with 2 strikers. Obviously if Fellaini rejects a new contract we dont want to be in the same position as pienaar and so he would have to go, but I'd hold onto Rodwell. Apparently if Evra goes to Madrid Utd are looking at Baines so there could be massive rebuilding in the summer, I suppose the big question is if it will be done by Moyes or not, but if he can carrying on finding Colemans for £60k we'll be ok.

[The Nal]

Massive rumours today that will continue over he weekend Im sure about the Qatari royal family buying Utd. “Sources” ( ) saying the deal is pretty much done and they are only "haggling over details” and Qatar insiders saying "money is no object”.

1.6 billion apparently.

Although I reckon its all bollocks.

[The Nal]

Reuters Breaking: Manchester United plan $1bn IPO in Singapore by year-end

[eFestivals]

Reuters Breaking: Manchester United plan $1bn IPO in Singapore by year-end

and of course for a company based in the UK with American owners, Singapore is the obvious place to do things .... if you're trying to f**k over mug punters by selling them lies.

It's clearly the case that the bond and the mysterious loan has sorted out the finances, eh?

[The Nal]

Man Utd just agreed a 4 year sponsorship deal with DHL at £10m a year.... for their training kit!

Edited August 22, 2011 by The Nal

[Wooderson]

Man Utd just agreed a 4 year sponsorship deal with DHL at £10m a year.... for their training kit!

[eFestivals]

Man Utd just agreed a 4 year sponsorship deal with DHL at £10m a year.... for their training kit!

just out of interest, do utd have any other relationship with dhl?

cos from where I'm sat it looks about the same value as city's mega stadium deal.

[The Nal]

just out of interest, do utd have any other relationship with dhl?

cos from where I'm sat it looks about the same value as city's mega stadium deal.

Edited August 22, 2011 by The Nal

[ralph250]

We announced a 3 yr deal with DHL in February as our official logistics partner, so they were already one of our platinum sponsors.

The contract provides the opportunity for a wide range of integrated business-to-business and consumer marketing activities and events across many platforms including digital advertising perimeter boards, matchday programme, club website and selected events at Old Trafford.

In addition, DHL will work with the Manchester United Foundation in the development of a series of programmes to improve the lives of vulnerable young people in our local communities. More detail on the specific initiatives will follow in the coming months

http://www.manutd.com/en/News-And-Features/Club-News/2011/Feb/DHL-launch.aspx?pageNo=1

Edited August 22, 2011 by ralph250

[eFestivals]

So the value comes from the less obvious parts of the deal?

sounds very much like the city deal to me. I wonder why one gets the bebefit of any doubts, but the other doesn't.

[ralph250]

So the value comes from the less obvious parts of the deal?

sounds very much like the city deal to me. I wonder why one gets the bebefit of any doubts, but the other doesn't.

[eFestivals]

Because DHL are an unrelated company, whereas Etihad are vice-chaired by Sheikh Mansours half brother, the Emir.

they're not 'unrelated'. You've already said there's previously existing arrangements between DHL and Utd.

It's not a relationship that's as obvious, but it's the reality of the relationship which counts rather than the perception.

and as I said, possibility I guess its still a separate transaction. £10m p/a for just training kits if fairly hefty though, especially considering only for domestic matches.

I mentioned quite a while back that there's all sorts of ways a club can manipulate things to get around the FFP rules.

If the City deal is suspect as being manipulation because the value of the deal can't be easily matched to the reality of the deal, then - by your own words - the same applies here for Utd.

[The Nal]

If the City deal is suspect as being manipulation because the value of the deal can't be easily matched to the reality of the deal, then - by your own words - the same applies here for Utd.

[eFestivals]

Its possible yeah but Utd dont need to get around the FFP rules. Apart from the massive debt used to buy the club ( ) Utd are a very well ran football club financially. City are not.

Utd have a huge wages bill of course but operate on a wages vs turnover ratio of about 45%.

Citeh, before Aguero and this summers signings etc, operated on a ratio of about 125% which is a two fingers to the FFP rules.

Chelski are similar.

It must be more now. Again, over to you Ralph.

"well ran football club financially" surely only really means that they're able to pay their bills. And on that score City are streets ahead of Utd.

But anyway, while at this precise moment there might be no need for Utd to manipulate things to their advantage, who know what the future will bring? Because those rules work by looking at a time period of a couple of years (longer later down the line isn't it?), then it might be the case that what's done now is of great importance further down the line. And so, on that basis, manipulation can't be ruled out on the basis that a club is safely within the FFP rules right now.

=====

While from one angle I think these rules are a great idea - after all, football needs to be financially sustainable - the way they've been done stinks to high heaven. They're very obviously been framed as a protectionist measure for the current 'top' clubs, to ensure that no clubs are able to usurp them from their current position - positions they've achieved by throwing money they didn't have at the situation no different to what City might be said to be doing right now.

I say 'might' because City could have that money from their Sheikh as a gift and not a loan and still be outside those rules - and yet a gift would not put the club in any sort of financial jeopardy. The fact that a gift isn't allowed gets to show the real purpose of these rules is not what is claimed.

[ralph250]

they're not 'unrelated'. You've already said there's previously existing arrangements between DHL and Utd.

It's not a relationship that's as obvious, but it's the reality of the relationship which counts rather than the perception.

I mentioned quite a while back that there's all sorts of ways a club can manipulate things to get around the FFP rules.

If the City deal is suspect as being manipulation because the value of the deal can't be easily matched to the reality of the deal, then - by your own words - the same applies here for Utd.

[eFestivals]

Related party for FFP.

So what you're saying - and UEFA too - is that you don't believe that there's any 'detached' organisation which would help any football club subvert the FFP rules (which is doing nothing illegal, I'll point out), even when there's a mightily good reward to them for doing so.

I guess then it's safe to say that you're being as dumb as UEFA is about this.

But of course, just as with UEFA, it suits you to be that dumb, because it's to the benefit of your own wants, which are nothing to do with making football financially sustainable, only about ensuring that the likes of Utd can't be usurped.

If I'd have won that last Euro lottery (it would have helped if I'd bought a ticket ) of £120M or whatever it was, for a laugh I'd have bought Aldershot - that sort of money is more than enough to get them to the Champs at least. Why shouldn't I be allowed to do that, especially when every other club is where they are on the basis of the money they have, absolutely no different to what I'd be doing with Aldershot? Money is money - as long as it's acquired legally it makes no difference whether it comes from gate money or a gift from me.

[ralph250]

and what's the mightily good reward for DHL chucking £10m to United to help them subvert FFP? (if we even needed to be subverted), that implicitly you appear to be suggesting they make a loss. After all, if it makes profit, then fair argument its been a successful investment.

Also, as said at the time.

Yeah, as above, seems that it's increased renegotiated shirt deal aswell so perfectly justifiable. If just £30m for stadium rights I think they'd have trouble getting it past "fair value" test, though as I said yesterday hard for UEFA to ascertain value of something.

Edited August 23, 2011 by ralph250

[eFestivals]

OK, so you're against these FFP rules.

But that says nothing about why you feel (away from the FFP rules) that there's something about this DHL deal which somehow makes it OK and above board, while the City deal isn't - despite you saying it's a stupidly high price.

The FFP rules might save it from UEFA scrutiny, but that doesn't mean it's less of an attempt to manipulate the rules to the club's advantage, or any less of a scam.

The fact that the Glazers are up to all sorts of financial deviousness makes it more likely to be more of a scam in my eyes. Everything is out in the open with the City deal and so people are able to make a judgement on it fairly easily, while the same doesn't appear to be true for Utd (from your own doubts about it's value). And yet it's free of UEFA scrutiny, while the City deal isn't. How's that any sort of 'financial fair play'?

Things are going more and more tits up for the Glazers - them doing this share issue proves that, after years of saying they'd never do anything like that. They've hidden the accounts, they've suddenly acquired a pile of money from somewhere but won't say where, next up is a share issue but in a place where there's less scrutiny of the books than would be the case in London or New York (which would be the 2 logical choices, given the location of the businesses), and now this deal - who's taking the piss over money the most, City or Utd?

[ralph250]

Things are going more and more tits up for the Glazers - them doing this share issue proves that, after years of saying they'd never do anything like that. They've hidden the accounts, they've suddenly acquired a pile of money from somewhere but won't say where, next up is a share issue but in a place where there's less scrutiny of the books than would be the case in London or New York (which would be the 2 logical choices, given the location of the businesses), and now this deal - who's taking the piss over money the most, City or Utd?

[eFestivals]

Surely the most logical is where they realise the highest shareprice, plus from what I've read the IPO fees are cheaper there.

where the shares are traded should make no difference to the value of any shares - a company is worth what it's worth, after all.

The IPO costs might be cheaper - but we're not talking a huge amount for the difference. But we are talking about a huge amount of difference in scrutiny.

Equally, when have they ever said they wouldn't do an equity offering. The bond prospectus outlines it as a possibility and allows them to redeem 35% at par (c. £170m) as opposed to early redemption penalties otherwise. As said before, they've also bought £29m of the bonds on the open market in the past year, but with reference to the post below, they're trading around 1.065 currently and will have been inflated with the Saudi buyout talk.

they might not have explicitly said "no shares will be issued" but they've definitely said they club is not for sale. Yet selling shares is selling (a part of) the club.

The bond is fairly recent. I'm guessing it was included within that as a possibility because the writing was on the wall, but it might have merely been them covering all possibilities in a sensible manner.

Also regards going tits up for the Glazers. What's to say they're not adapting to change. The football landscape has changed significantly past couple years with City's emergence and the introduction of FFP. Barcelona and Madrid have strengthened their foothold in Spain with the TV inequality. Whats not to say they're looking to reduce the debt burden ahead of schedule to increase cashflow or capability to compete further with those clubs. Conversely perhaps that they feel a partial float will facilitate giving themselves dividends that they're reluctant to do currently due to negative PR.

nothing abut the share issue at this point is about FFP, because selling those shares doesn't financially benefit the club (a major flaw with share-trading laws IMO, but nothing particularly to do with Utd) only the Glazers.

And even if they were to do an investment by shareholders down the line somewhere, that's no benefit for FFP either - it's nothing different to the Sheikh pumping money into City, which isn't allowed.

Reducing the debt is obviously a positive thing for FFP - but they'd only be doing this way (given their comments over the years) because there's no way for them to borrow money personally (which we already know to be the case).

Surely everything depends on what the share offering achieves (and what type of shares they issue). If you consider they bought the club for £800m of which £500m+ was leveraged on the club, their input was about £300m including the PIKS. If they were to achieve anything like the rumoured amounts and sell c.30% of the club for £400-600m, then they can pretty much redeem that 35% of the bonds (and possibly more), clear their initial investment, and still own 70% of a company valued £1.2-1.8m. Tits up indeed.

the club profits were meant to pay down the debt, something it's been unable to do. So yes, it's tits up on their initial plan. They're doing this because their previous plan has failed.

And, don't forget, those share buyers will be looking for more than capital profit (tho at the suggested float rate they might be lucky to get even that) - so they'll be dividends to pay instead of debt servicing. There isn't much of a saving there unless the shareholders get shafted because shareholders tend to be greedier than the big-business loan-sharks.

If things pan out with football finances in general how I think it's likely to over the next few years then those shareholders aren't going to be very happy. And before you come back on me for that, you've only really the grounds to if you're one of those who'll be in for the shares - otherwise you believe the future is bright less than you're saying.

Did any football PLC pan out in line with the prospectus? Not one of them, not close. It won't be any different here.

Shares have fallen around 30% from their peak - but not Man Utd. They have a special place with god, where the investment can only go up.

Edited August 23, 2011 by eFestivals

[ralph250]

Well if that market attracts different investors then of course it might affect the price. Additionally perhaps Singapore has different regulations to the UK regards disclosure of transfer fees. Better to negotiate for signings if they don't know you just paid £35m for your last signing and you can stick a big "undisclosed" on instead. What's generally being reported aswell is that they feel they'll be able to entice more commercial investment with an even greater presence in Asia. Why they've chosen Singapore over Hong Kong I don't know. FT say due to avoiding over-identification with China. Equally perhaps their regulations are more amenable to the Glazer acting in their surreptitious ways. Mwahahahaha! Who knows? There will have to a fairly hefty disclosure with the IPO prospectus so might know more shortly, and equally as discussed will have to make full disclosure to UEFA, including parents and subsidiaries. I'd also envisage they'll wish to make it more difficult for UK based supporters to buy into the club, as they'd be less likely to wish to relinquish those shares again if Glazers wished to repurchase.

I think they probably did look to cover a lot of bases in the bond prospectus. They outlined the big dividend carveout - yet to be exercised - which everyone presumes was going to be used for the PIKs. Possibility it was just a security. Possibility they may have deterred by the fan reaction. Possibility they may still exercise it. Prior to our summer expenditure, we should've had around £180m cash in the bank, and even then transfer fees are rarely paid all upfront, so the moneys there if decided to do so.

Not sure why you're saying this helps nothing with FFP. Surely dependent on whether they issue new shares or existing. If existing shares, the proceeds go to the Glazers. If new shares, proceeds go to the club to which the bond covenants restrict their ability to extract; namely just the £95m one off carveout and the prescribed dividend entitlement of 0.5x(EBITDA-net interest) thereafter. No longer applicable if completely cleared the bonds but questionable whether that would make sense. Whilst possibility they issue a combination of both kinds, I'd envisage more the latter with the proceeds going to the club, as question marks start ringing if looks like a bail-out, and tough to attract interest if aren't going to invest those proceeds from the IPO into the club to make it further more profitable. Obviously thats distinguished from "shareholder investment same as Sheikh" due to the change in equity. As such, if all 100% are new shares, then combined cash balance from proceeds of IPO (eg. £400-600m) plus cash currently in bank (£100-150m+) gives a fair amount of leeway, whether redemption of the 35% of bonds, taking the prescribed dividend entitlement, investment in playing personnel, or significant capital expenditure (eg. real estate, domestically and internationally; Beijing, Shanghai etc) to increase revenue further.

The income of non-football operations only needs to be excluded from the calculation of relevant income if it is clearly and exclusively not related to the activities, locations or brand of the football club, in which it must be excluded.

Examples of activities that may be reported in financial statements as non-football operations but for the purposes of the calculation of relevant income and expenses would not normally need to be adjusted include:

• Operations based at, or in close proximity to, a club’s stadium and training facilities such as a hotel, restaurant, conference centre, business premises (for rental), health-care centre, other sports teams; and

• Operations clearly using the name/brand of a club as part of their operations.

http://andersred.blogspot.com/2011/08/some-more-thoughts-on-uniteds-singapore.html'>http://andersred.blogspot.com/2011/08/some-more-thoughts-on-uniteds-singapore.html

Edited August 23, 2011 by ralph250

[eFestivals]

Well if that market attracts different investors then of course it might affect the price.

I think that's unlikely with a high profile sale such as with Utd. Everyone who wants to be in will be.

Additionally perhaps Singapore has different regulations to the UK regards disclosure of transfer fees. Better to negotiate for signings if they don't know you just paid £35m for your last signing and you can stick a big "undisclosed" on instead.

so even more hiding of the truth, where shareholders and UEFA have to rely on the word of Utd, which is run by people who hide things for a reason.

There will have to a fairly hefty disclosure with the IPO prospectus

but less so than with a London or NY float, and with less independent scrutiny.

and equally as discussed will have to make full disclosure to UEFA, including parents and subsidiaries.

So what you're saying is that the likes of City - who have made a suspect deal that they claim isn't suspect (their word, just like Utd will give their word) - should be hauled over the coals for taking the piss in the open, while Utd would never ever do anything underhand meaning that UEFA can have full confidence in their word in what happens with no public disclosure completely different to how City are treated.

Yeah, that's fair, and there's no room for cheating by Utd there.

And surely you're contradicting yourself by saying the Glazers can't procure financing personally. Surely the assumption is that they did so for the PIKs to have been refinanced. Only alternatives is that the sold off other assets in their porfolio, or alternatively I guess could've converted debt to equity by means of a 3rd party. Doubt the PIK holders would accept that themselves, as default by the Glazers converted 100% equity between the three issuers. They'd want to wait it out if felt Glazers in trouble. I'd think it might be doubtful though they'd want to dilute their stake that much though, both through PIKS and IPO. Additionally see the quote below as to why this is unlikely.

my apologies for omitting "at an interest rate they can afford to have".

They got those PIK's because cheaper 'standard' business borrowing wasn't open to them. They issued the bond because cheaper 'standard' business borrowing wasn't open to them. These are known facts.

And they can only be issuing the shares because cheaper 'standard' business borrowing isn't open to them; after all, why hand over something that is great for lining their pockets if it's actually managing to line their pockets and which would then enable to them to take standard loans because it's lining their pockets?

Plus you seem privy to what their plans were. I haven't a clue considering they operate rather cloak and dagger.

If everything is above board, why the need for the cloak and dagger stuff??

People do things for a reason, not no reason. They've recently taken a path that says "we're hiding all we can about what we do with the money". Any smart investor would ask 'why?', and should conclude that it's not a safe investment, particularly in light of the extremely strong suggestion that things are only where they are because the previous financial plan has failed.

Were the clubs proceeds meant to repay the debt as you say? Completely paying it off wouldn't make a lot of sense due to the tax shield its afforded, and we've sat on bucket loads of cash for a fair while now that could've done so if we felt it beneficial.

the 'bucketloads of cash' is nearly all a pretty standard cash float for any business. Any business without the cash in the bank to pay for 3 months expenses when there's zero income is playing with fire, particularly a business that is already hocked up to the eyeballs and where the traditional loan financing routes are known to be closed off to that business.

While having a loan is tax efficient, the saving is much less than the money they could be pocketing if the debts weren't there.

Whether they go through with the IPO or what it achieves I don't know. Only going to be a minority interest so might struggle to match their expectations.

Yep. Which means that the smarter investors are likely to shun it, particularly when so much of what they're buying into has to be taken on trust from devious characters who are known to be technically bankrupt (with debts exceeding the value of their assets; it's only 'technically' because they're still managing to service the loans).

Shares will fluctuate and possibility of hefty fall when Ferguson retires...we've had a fantastic 5 years that will be hard to sustain in relation to matchdays/prize money, but equally feel theres a lot of untapped commercial growth still; Nike renewal, continuation of our regional telecommunications deals etc. I'd like to have enough money to buy a share or two, but unfortunately I need to clear my own debts before Uncle Malc's.

That "fantastic five years" has seen Utd lose money for some of them, even when servicing the loans is taken out of things, and also included a player sale at a price & profit that's very unlikely to be repeated.

As I've said many times, Utd is worth about £800M at best on any standard business valuation, with that 'commercial growth' having changed things almost nothing (turnover means f**k all, profits mean everything). Anyone who buys shares at the suggested valuation of £1.6Bn or so is mugging themselves.

Are their enough Utd-loving mugs to make the IPO a success? Very possibly, but they'll have still be mugged by a mugger who knows how to take the piss and doesn't care that he does - yet another reason why anyone with sense should swerve it.

Having said that, I reckon it'll be a much harder sell than the bond with a guaranteed (well, almost) return. With shares having fallen off a cliff in the last few years yet there still being plenty of companies with as-good-as-definite good returns at a time of incredibly low interest rates who have suffered no less, why would anyone of sense make a risky bet at a premium price on Utd shares when there's so many hugely better options?