The widely trailed BBC Panorama investigation into Glazer family finances, led by reporter John Sweeney and supported by analysis from andersred blogger Andy Green, in conjunction with the Guardian newspaper, airs Tuesday night revealing the true state of the Americans’ crumbling business empire.
Revealing total family debt to the tune of £1.1 billion across its property and sports businesses, Panorama will expose a tale of staggering incompetence, greed and financial mismanagement by a family that lauds itself a savvy business people.
The eye watering numbers include Manchester United’s bond debt, which now stands at £520 million, according to the club’s latest accounts, with further Payment in Kind (PiK) debt of £220 million held by the club’s parent company. Green’s superb investigation reveals – for the first time – the additional $500 million in mortgages held on the Glazers First Allied US property businesses.
The scale of the Glazers’ US debt is such that four of the Glazers’ shopping centres have already been foreclosed (repossessed) in recent months, with half the family’s portfolio almost certainly in negative equity. Green predicts, with overwhelming evidence, that further shopping centres will close unless the company’s financial position improves considerably in the coming months.
“Analysis of mortgage filings for 63 of First Allied’s 64 shopping centres shows the portfolio is hugely overleveraged and that without major improvements in financial performance in the next few months, half the centres will not be able to generate sufficient income to pay their mortgages and therefore risk going bust,” said Green today.
“Four centres have already gone into foreclosure. The majority of First Allied’s properties are currently in negative equity leaving the family little or no room for manoeuvre.
“The root causes are the disastrous decisions made by the Glazers in the mid-2000s as the US property boom neared its height, shattering their self professed reputation as savvy business people.”
The only explanation, says Green, for the four centres being foreclosed is that the Glazer family simply could not afford to prop them up any longer.
It’s a scenario that explains, with no room for doubt, why the family has borrowed heavily from the club in the past two years, while instigating a bond issue that served only to increase the interest payments on the club’s debts.
Green’s analysis demonstrates that the family’s profit from its US property business is so low – $9.7 million before tax last year – that payment of the PiK debt can only come from club funds, exposing as the deliberate misrepresentation it has always been chief executive David Gill’s assertion that United is not responsible for a debt that will attract 16.5 per cent interest from August this year.
The dire state of the Glazer family’s finances places into question not only short-term spending by United on transfers this summer but the long-term financial health of the club.
While the Glazers have not yet removed money from the United’s bank-account this summer, the January bond enables the family to take up to £100 million immediately and then half of the club’s annual profits ongoing to do just this.
It is widely predicted with considerable evidence that the family will do so in order to pay down the ruinous PiK debt after the club’s annual accounts close on 30 June.
“With First Allied contributing so little income, the argument that the United bond issue was undertaken entirely for the purpose of using the club’s cash and profits to repay the PIKs is indisputable,” adds Green.
“There just is no other source of cash flow or assets to borrow against that the Glazers can use.”
Indeed, those fans still in doubt about the Glazer’s intentions need only look across the Atlantic to the Tampa Bay Buccaneers American Football team owned by the family. Coming off a losing 3-13 season, the Bucs are now in the bottom three paying teams in the NFL, with debts of its own approaching $150 million. It was the team’s worst performance in nearly 20 years.
The family’s “strategy” of investing in young players has failed, as was always going to. After all if 92 per cent of a team’s success is based on wages paid, then the Bucs ought to be one of the worst teams in the league.
With the family’s property business failing, United remains the Glazers’ principal cash-cow. Firstly, to pay off the family’s massive debts and then to milk the club for what profit remains – if any – after the mortgage is paid. Everything else, including a transfer budget, player wages, investment in Old Trafford or indeed trophies, comes second.
Gill will claim that United is not responsible for the PiK notes. The family’s ubiquitous spokesperson will say that the club’s profits more than covers interest on the debt. The family itself will profess to be businessmen of note. Green’s analysis over the past five months has proven each a fallacy, whatever spin emanates from the club’s hierarchy.
But in Green’s analysis there is also a stark warning. In times of financial turmoil even strong businesses have gone to the wall. The Glazers businesses are certainly not that.
Will the last Glazer supporter please turn the lights out when they leave Old Trafford.