As news of Manchester United’s possible flotation on the New York stock exchange is vigorously debated, RedMancunian.com spoke to Andy Green about the IPO, the Glazers, debt… and his love of United.
How did you get into supporting United?
It was passed down to me through my family (even though they were from Chester).
What is your earliest United related memory?
The ’79 cup final. My first experience of pain late in a match (although not quite as late as the last kick of last season).
How many games do you get to in a season now?
Last season I did very few, maybe six or seven games, home and away. I dropped my season ticket in 2010/11, although I still go to OT as a member sometimes. That and the usual family, kids etc commitments have all had an impact. Sad, but it happens to a lot of people….
Have the Glazers affected your enjoyment in following the team?
They’ve added a twist I’d say. During a match, it’s all about the game, but it’s hard at Old Trafford not to notice what their price hikes and the splitting of the fan base has done to the atmosphere in the place. In terms of wanting United to win, always win, nothing changes.
If I have a regret about getting involved in the politics, it’s that it has made something that was always about pure escapism for me into something more serious and that’s a shame.
The publication of the bond prospectus in January 2010. Before that, I was pretty much resigned to the Glazers, they were in place and that was about it. The bond prospectus made my blood boil because it foisted debt that was even more expensive onto the club AND suddenly allowed £100m cash to be stripped out. Financial matters can be pretty incomprehensible to most people and I wanted to explain what was going on and share my anger in a way supporters could understand.
You’re established as a credible, impartial source on Man United’s finances, but did you find it difficult at first as a Manchester United fan to be taken seriously as an unbiased, analytical observer of the club’s finances?
Actually I’ve been pleasantly surprised how receptive the media have been to work like mine and the Swiss Ramble’s (he remains the main man on football finance). One key is to “show your workings” as they used to say at school. The first big piece I did on the bonds (which the Financial Times used) had fifteen footnotes showing the sources for all the numbers. Once people know it is proper financial analysis they begin to accept what you say.
The difficult bit is to convince supporters that you can be unbiased when looking at financial figures despite being a fan yourself. I don’t like the Glazers or Liverpool or City but if the numbers say something positive about them, I’ll mention it. If you don’t you have no credibility.
What do you say to the minority of Man United fans who still feel the Glazers have not damaged the club’s ability to compete for trophies?
It’s obviously something that is impossible to say for certain either way isn’t it? You can’t prove what would have happened under different ownership, but I think the evidence is compelling.
We’ve had some great teams since 2005 of course (take the starting line up in Moscow for example), but look at our European campaign last season, look at our reliance on Giggs and Scholes, look at how other major European sides have gone forwards in recent years compared to us…. All fans can see those issues on the pitch pretty clearly. Now is that down to finances? Well, the numbers are undisputed, over £500m has gone out of the club to service the debt, far more than any gains in commercial income that have been achieved. Could the team have been stronger with that money? How could that not be the case?
What is the one question you would like to ask the Glazers above all others?
I’ve got a thousand things I’d like to know. I suppose the big question is what are their long-term intentions (i.e. would they sell and for how much)?
Do you think twitter has helped people become more aware about how much the Glazers are damaging the club?
I find it a very useful way of getting the message out, but it doesn’t lend itself to complex debate or ideas. I spoke to one of the Premier League’s PR people last year who said I’d been “hammering” the PL on Twitter. The fact he noticed and cared showed it was having an impact.
Man United lost revenue this year through not reaching the knock out round of the Champions League group stages. If that continued, would the Glazers eventually be forced into making more transfer funds available to avoid the value of their asset depreciating? Or could they have a moneymaking model with the club finishing outside the top four?
Yes, I think they would have to spend more, regular CL football is essential. The Glazers try to run United on as tight a rein as possible whilst achieving the level of success they need for their business plan and so far it has worked reasonably well (titles, Champions League knock-out stages etc). If the model stops working (like last season) they would be forced to change. The club could afford to spend more, but they CHOOSE not to. Real Madrid and Barca plough every penny they have back into their clubs, the Glazers have CHOSEN to buyback almost £100m of bonds in the last two years rather than spend it on the squad or ground….
If we accept Sir Alex has worked miracles with his transfer budget, when he eventually retires do you fear that things could become even worse for the club’s financial situation if on-pitch success decreases?
It’s definitely a risk. The prospect of Fergie’s retirement must give the Glazers nightmares. The risk of the wheels coming off after he goes could be one of the factors behind the attempt to IPO. Would another top quality manager come to United on our limited budget? Maybe that’s one reason why they want to pay down the debt, to make the job more attractive….
Were you surprised by any aspect of the New York Stock Exchange IPO announcement? If so, which one?
If you’ll excuse me, there are two big surprises; firstly that ALL the proceeds would be used to repay debt (i.e. they aren’t cashing in themselves) and secondly that they won’t pay dividends. That makes the IPO a good thing financially from a supporters’ point of view, if it happens….
Given the limited voting rights of the shares available, and the debt the club has, is there any value to buying shares in United if the IPO goes ahead?
As a professional investor I’d say no, although we don’t know the key piece of information, the valuation the IPO places on the club. This is a pretty unattractive offer; no votes, no AGM, no dividends, no say in how the business is run etc, etc.
Do you think the IPO is likely to be a good thing for the club and its supporters, the Glazers themselves or both?
I think that as we are stuck with them as owners for the moment, an IPO that reduces the debt burden would, on balance, be good for United. I think it is a huge missed opportunity to offer supporters a real stake in their club however. They are showing incredibly clearly again that they don’t want supporters involved in the club in any way other than as paying punters. If they can pull it off, keeping full control and getting some other suckers to pay off a chunk of the debt it is clearly good for the Glazers. That all leaves a bad taste in the mouth.
Can you speculate as to the reasons why the IPO was suggested to have been shelved?
As I write this (26th July) it isn’t clear whether the IPO is going ahead or not and there is a lot of spin and rumour. If it does get pulled, they will no doubt blame volatile financial markets etc, the reality is far more likely to be that not enough institutional investors wanted to buy shares on the terms being offered.
The Glazers have spoken to various potential buyers in recent years and attempted to list the shares in Hong Kong and Singapore and each time their valuation of the club has been too high. Combine an excessive valuation with the unattractive voting structure etc and you can see why the IPO could be in trouble.
Is this good or bad news for MUFC?
Financially in the short-term it is bad news if the IPO is cancelled, because the interest savings won’t happen and the Glazers may well carry on with bond buybacks. The sort of debt costs we have seen in the past will continue (£71m in the first nine months of the 2010/11 financial year).
The bigger question is whether a failed IPO could mark the beginning of the end for the Glazers’ ownership of United. If international institutional investors deliver the same message on the Glazers’ valuation of the club as the Qataris and Red Knights then maybe they will begin to face reality.
Do you think, in retrospect, this goes some way to explaining Sir Alex’s unusually vocal comments about transfers this week, and other comments about the Glazers?
The timing and content of his comments was pretty unusual, he never normally speculates about transfer targets. I’m sure this was part of a concerted PR push for the IPO.
Does this attempted IPO suggest the Glazers are having money troubles?
This is the big unanswered question. Why are they so very, very keen to do this IPO in the face of tough economic conditions? One theory is that they are struggling financially and that they borrowed to repay the PIKs in November 2010. Paying off the PIKs cost $400m and it could well be that that new borrowing has conditions attached to it about the total debt the club has (what are called financial “covenants”). It would go a long way to explain this pretty sad scramble to raise money in first one market and then another….
If so, how does their financial situation impact on the club?
Thankfully if the Glazers are in financial trouble it won’t have much impact on United as they have never put money into the club, it’s not like the impact on Chelsea if Abramovich went bust! Thankfully also, the bond terms restrict what they can take out personally. I hope real financial problems would speed up their departure but as I’ve said, they need to be more realistic about what the club is worth.
Do you think this failure means the Glazers will attempt other, possibly more damaging ways, of raising funds?
As I said, there are quite tight restrictions about what cash they can take out of the club (it’s one of the few good things about the bonds), so they can’t do something crazy like sell off the playing squad.
Are we still registered in the Cayman Islands?
Rather ridiculously right now nobody outside the club knows the answer to that. The move to Cayman was meant to happen prior to the IPO and we don’t know if it has happened yet or not. If it hasn’t, we also don’t know if they will make the move even if the flotation is pulled.
Commercial revenue has increased significantly in recent years, are we nearing the point when that growth cannot be maintained? What effect would that have? Are there any other areas of the business than could be optimized in similar fashion?
If you’d asked me a year ago I’d have said we were nearing the top and then we signed a £40m deal for training kit! Logically there is an end point of course, there are only so many corporate names you can attach to your “brand” before companies stop feeling special by linking with the club.
Revenue growth is vital to offset the massive wage increases we have seen in football and for the Glazers that is even more so as they want to show a profit to boost the club’s value (most football clubs run at breakeven at best). The scale of the problem is clear when you think that United’s commercial income has doubled in the last ten years, but wages have tripled over the same period. There isn’t much capacity to boost matchday revenue (the Glazers know this, hence the price freezes of recent years) and TV money is out of the club’s hands. The surprise in recent months has been the huge increase in the Premier League domestic rights deal (it has even surprised the Premier League). The big unknown is whether all this extra TV cash will end up in players’ pockets.
Do you think more should have been done by the football authorities to prevent the damage done to Manchester United by this takeover, and situations elsewhere such as the one at Portsmouth?
Yes, absolutely. They fell down badly in 2005 and still don’t have tight enough regulations today. Everyone who has looked at debt funded takeovers (what are called “leveraged buyouts”) in football has come out against it (including the House of Commons select committee last year) except the FA and Premier League.
It isn’t hard to write rules to prevent a repeat of what has happened at United (or what happened with Hicks and Gillett at Liverpool). The NFL rulebook bans leveraged buyouts in just twenty two words. It’s easily done.
The current level of debt stands at £423 million. Assuming the IPO goes ahead and the money raised is used to pay down the debt, at what amount could we begin to believe that the debt would no longer affect our behaviour in the transfer market?
A recent story from Reuters suggested the IPO would only seek to raise $300m (about £195m), rather than the $500m (c. £322m) they had been hoping for. That sort of figure won’t have an enormous impact on the club’s cash flow, the interest bill would go down £17m each year but tax paid would increase so the saving would only be around £11m.
What would make more of a difference is if an IPO marked an end to the bond buybacks the club has been making. These have soaked up almost as much as the interest payments in recent years. I’d like to see the debt below £200m and refinanced (the bonds are very expensive), taking the annual cost down to (say £10-12m). At that point the burden would be very manageable.
Do you have a gut feeling on how this story will end?
I think they’ll sell up one day and we’ll get an owner who is in it for the glory of Manchester United. I’m an optimist!