Gill exposed on PIK debt as BBC lays bare Glazers’ finances
Andy Green, author of the andersred blog, has called on Manchester United’s chief executive David Gill to reveal the truth about the club’s debt tonight. In an open letter to the United boss, Green asks whether United will now pay down the so-called Payment-in-Kind (PIK) debt that stands at £225 million, rather than club’s American owners.
Green, in conjunction with the Guardian’s David Conn and tonight’s BBC Panorama programme, published extensive research into the state of the Glazers’ finances this week. That research revealed for the first time the precarious state of the family’s US property business, which stands on the precipice of bankruptcy and places into doubt the family’s ability to pay the PIK debt through their own funds.
The analysis demonstrates that First Allied, the Glazers only non-sport business, made just $9.7 million before taxes last year, while four shopping centres have already been foreclosed and a further 16 are on a bank ‘watch list’ as at high risk of default.
“I have no doubt you will have seen the new research about the state of the Glazer family’s US real estate business on this evening’s BBC Panorama, in yesterday’s Guardian or on my blog,” writes 37-year-old financial analyst Green in an open letter to Gill tonight.
“I am also sure that the parlous financial state and weak cash generation of the business will have been as much of a surprise to you as it was to me.”
Green cites an interview given by the United chief to BBC Radio Five in February in which Gill claims the club’s board is not concerned about the PIK debt and United’s funds will not be used. Green claims otherwise, arguing that the Glazers cannot afford to pay down the PIK debt from any other source.
The PIK debt carries an eye-watering 14.25 per cent annual interest, rising to 16.25 per cent in August, and is secured on shares held by the Glazer family in United’s parent company, rather than the football club’s assets such as Old Trafford or the Carrington training complex.
It is this that has enabled Gill to consistently claim the ultimate responsibility for payment lies with the Americans. But the January bond issue allows the Glazers to remove nearly £100 million from United’s bank account immediately and then up to 50 per cent of United’s ongoing profits.
“Given the evidence now in the public domain about the profitability and levels of debt in the Glazer family’s other businesses and hence the family’s inability to pay off the PIKS from their own resources, it seems the only possible source of cash to do so is Manchester United itself,” adds Green in the letter to Gill.
The third part of Green’s analysis – his contribution to Panorama – aired on BBC One tonight. Investigative journalist John Sweeney, a Tranmere Rovers fan with a track-record for exposing truths organisations would rather keep secret, led the piece that used Green’s original analysis.
“Football is a community thing and is also a business and in the last ten years 34 clubs have gone into administration,” said Sweeney, who recently published the controversial Wayne Rooney biography, Rooney’s Gold.
“English football is in the red. Mighty Liverpool is nudging £400 million in debt, Fulham is £300 million in debt, West Ham £100 million in debt and Arsenal £400 million in debt.
“But Manchester United are unequaled champions of debt. Probably the biggest club in the world is worse off than Tranmere Rovers, with debts of £700 million that has made thousands of fans unhappy. They’re not just unhappy, they’re angry.”
Conducting parallel research into the Glazers’ property business, Sweeney confirms that the total family debt has now topped £1.1 billion on just over £2 billion in assets. But as the old business cliché tells us – cash is king and the Americans are desperately short of the green stuff.
Yet the family has steadfastly refused to sell United, with the club now the Glazers’ sole remaining cash-cow as the US property market crumbles.
“What could persuade the Glazers to sell, it’s not as if they need the cash. Or do they?” ponders Sweeney.
“The Glazers might be struggling to keep their head above water. The original mortgage documents available in county courts show that on 63 of 64 of the Glazers’ shopping centres there is a total mortgage value of £500 million.”
If the Glazers’ US business model is under pressure then fans’ green and gold campaign is potentially having an affect on United’s ticket profits. While the campaign forced the family to freeze season prices for next season, a report in Goal.com today claimed that just 18,000 supporters have renewed to date. This time last summer, claims the report, the club had sold 30,000 tickets.
This is in stark contrast to the club’s insistence – both in public and to the analyst community – that season ticket sales are roughly in line with previous years.
Anecdotal evidence also points to the club selling new season tickets to supporters not currently in possession of the pass, which costs between £700 and £950 per year, well ahead of the 13 June renewal deadline. Then today the club sent text messages warning fans to renew before Sunday’s deadline or risk losing their seat.
Desperate is not the word.