The Guardian has been rattling off story after story on the Glazer debt, giving me an image of a press room chock full of Shakespearean monkeys rattling away feverishly at their keyboards. And, whilst some of them have gotten repetitive, quite a few of them have been good reads.
The blogosphere isn’t far behind though, and there is some good material going around over there too.
Leading off is, proper journalist David Conn’s piece, describing how the Glazer family have borrowed money from club coffers. The fact that our debt and the Glazer family debt is just about one and the same, being a fully family owned private entity, the club is sadly vulnerable to money being siphoned off without really being answerable to the fans.
That is a point made quite clear in the analysis in RoM; a pretty comprehensive analysis that weighs the pros and cons of the refinancing. However, an assertion made in the analysis — especially, the bit about the difference between Profit & Loss statement and Cash flow accounts — piqued my curiosity; in particular, this:
Similarly I read some comments on the lines of “If we had purchased Carlos Tevez for £25m, our profits would have been lower by £25m.” Again not correct. Players are the operating assets of a football club and any purchase made will reflect in the cash-flow statement and not in the Profit and loss statement [For context read the preceding paragraph too]
But does that mean we can buy player after player, yet not have it show in our P/L account? Isn’t money being spent (ie, leaving the club)? So isn’t this just accounting wizardry to make things look pretty? I am not an expert on accounting practices, so I’ll be grateful towards any expert who can shed more light on this.
The ever excellent football blog Pitch Invasion, sources an image via the Financial Times, giving a diagrammatic break-down of how the Glazers have ‘milked’ Manchester United.
United Rant reports on the existing fears on fans’ minds all along: that the Ronaldo money was mostly earmarked for debt.
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A few thoughts on this whole situation:
Whilst most successful businesses can run with serviceable debt — in many cases, debt is a good indicator of growth for a business — the principles when applied for a football club is not sustainable in the long term. If the Glazers succeed it will be a miracle. And the exception. Not the rule.
The problem with such kind of ownership is the profits do not justify the investments. Other businesses grow by selling a product and being competitive by serving it. In football the product, as it were, is performance on the pitch, and an especially high performance level in United’s case to remain profitable. Very few clubs in major leagues in Europe are really that profitable. The Ronaldo money helped us to a profit. But how many Ronaldos do we need to sell every season? Also, the business model seems to rely on sustained period of success. Essentially that means it hinges on levels of human success/failure — be it the manager, or players, or poor transfer choices. That’s a lot of uncertainty if you think about it. [Not everyone has Ferguson. And even those who have a Ferguson, it’s not forever.]
So it doesn’t take Sherlock-like deduction skills to conclude the Glazer style of ownership is terribly flawed. As are most bids to buying clubs with the intent of making profits. It was the case back in the time of Martin Edwards, and it will be so in the times of Hicks-Gillet, and the Glazers. And it was also true when we were in the stock market.
I am once again tempted to quote from Simon Kuper’s book, and I paraphrase, “Buying a football club is not a business decision, it’s philanthropy.” Only sugar daddies of the Abramovich or Al-Nahyan scale can expect to buy a football club and not break a sweat. So supporter-run ownership of the Barcelona/Madrid/Schalke scale is the way to go. But, unfortunately, with the amount of debts we are in, we can consign the “let-every-United-supporter-contribute-X-pounds” line of thought to the realms of fantasy. Even if supporters stumped up the cash, there would always be another investor looking to buy it off the Glazers.
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When news broke about the issue of bonds, there has been talk of how the resulting lowered interest payments could mean money spent on transfers. In fact the Mirror are reporting that the Glazers have handed Ferguson £75m to spend. But haven’t we heard Ferguson and club spokesmen go on about how they have £80m to spend? So I’ll believe that when I see it.