Manchester United chief David Gill has dismissed supporters’ fears over the club’s finances and reiterated his stance that Sir Alex Ferguson has money to spend in the transfer market. It’s an increasingly tired line, coming in a week when the club posted record losses as the Glazer family’s leveraged takeover bites on United’s ability to compete.
Gill conceded that the club’s huge debt reduces the amount of money available but again denied that the £45 million per season interest payments effect United’s ability to compete in the transfer market.
It begs the question: just how foolish does the 53-year-old executive believe United’s supporters to be?
“I cannot disagree that, without the debt, we would have more money within the club, but the interest payments do no impact on the club’s ability to attract players,” he said.
“We have more than £160 million earning interest in the bank and the Ronaldo money remains largely unspent. The money is definitely there, if Alex requires it.”
It is precisely this kind of statement from Gill that the doormat tendency at Old Trafford is all too willing to follow, with some misguided – read deceived – supporters believing a challenge to the Glazer regime is akin to an attack on the club. It’s not.
It is those same fans, who slavishly follow the pronouncements from Gill and Ferguson, that the Glazer family is exploiting to prop up an ailing regime. Don’t believe the headlines, they say; it’s the anti-United media faction making the most of accounting rules to talk down the club.
Others know that Gill is telling at best half-truths.
True, remove the non-cash adjustments to United’s audited annual accounts and the club would have made a £25 million cash profit. That is, in a season where United achieved a record turnover on the back of increased ticket prices and a new television rights deal, United could afford to spend about one-third of a Cristiano Ronaldo in the market and break even.
With no growth in television or gate revenue likely in the current year, and United’s over-exploitation in the commercial market gathering pace, there is a good argument to say 2009/10 may represent the peak of the club’s financial might.
This is the rub, while United retains about £160 million in the bank, £28 million is already effectively spent on the disastrous debt-swap and £70 – £95 million will be carved off by United’s parent company Red Football Joint Venture (RFJV) to pay down the so-called Payment in Kind (PIK) debt.
Moreover, in this financial year the Glazers can also take up to another 50 per cent of United’s profits in further dividends. The family almost certainly borrowed money from the club in 2008 to buy up 20 per cent of the PIK debt and they will again. It makes no financial sense for the Americans to not draw from United’s funds once again.
Despite all the evidence to the contrary, Gill says that money is there for Sir Alex to compete in the transfer market. Fans know he’ll need it, with up to four players retiring in the coming summer, while Owen Hargreaves and Michael Owen are out of contract. It’s going to take a lot more than £25 million to revitalised the Scot’s squad.
Don’t worry, says Gill, the benevolent Glazers have retained money in the business for this purpose.
“They have retained that money in the bank and it’s there for Sir Alex if he needs it for players, and for investing in the training ground and the stadium,” said Gill, who labelled debt the ‘road to ruin’ before accepting £1.7 million per season to play turncoat.
“United fans should not be concerned, we have a long-term financing structure in place, excellent revenues that are growing, we are controlling our costs – total wages are 46% of turnover – and we can afford the interest on our long-term finance.
“There is zero pressure at all to sell any star player whether it is Wayne Rooney or X, Y or Z. I can categorically say that. The philosophy is to retain and attract the best players.”
United’s ability to pay off interest is the bean-counters’ concern, of course, not the supporters’. Meanwhile, double-negative talk of United not selling star players is little more than a red herring.
United isn’t struggling to pay debt interest, as Liverpool has done in recent times. Neither is the club under financial pressure to sell Rooney or others.
However, United fans are genuinely worried about the ticket prices at Old Trafford and whether the team can remain competitive on the pitch with no significant net investment in the player squad over the past two summers.
With no plan to de-leverage in the next six years the Glazers will continue to use the Reds as a vehicle to pay interest and PIK debt. After all, RFJV owns no other asset than the club.
Supporters of a less ostrich-like ilk understand that unless the club’s ownership changes, debt will continue to play a significant role up to and including 2017. At that point the club will need to find at least £502.5 million to pay down the bond or refinance yet again. Debt in perpetuity.
If the PIK debt is no longer a factor by then it will surely mean United has been drained of a further £200 million.
This much supporters understand. At least those who have given up listening to Gill that is.