Knowing nothing about football, I had wondered why our daughter Laura’s boyfriend was so incensed about the Glazer family who own Manchester United football club.
Having read this article in the Telegraph and a similar story in the Guardian, I understand where his and the other supporters’ hatred comes from.
The Glazer family, can take almost £130m cash out of the club next year alone if enough lenders sign up for the bond they have launched to borrow £500m for United.
Nestling in the small print of the 322-page bond prospectus are provisions allowing the Glazers to take £70m out of the club's cash reserves, which includes the money they have received from selling players such as Cristiano Ronaldo. The document also reserves for the Glazers the legal right to pay £25m out of the club in a dividend, and half of what is termed "consolidated net income". This is effectively the club's cash profits, which based on the most recent accounts would have meant £23m being paid out last year.
The bond's terms also note that the Glazers will have the right for £6m a year to be paid to companies they own "for administration and management services", and a further £3m "in respect of services provided by directors, officers or employees" of companies the Glazers use to hold their shares in United.
That money, added to the £70m and £25m one-off payments, plus the half of United's cash profit they can take out each year (equating to £23m last year), add up to £127m next year alone.
That huge figure is in addition to the straightforward payment of interest (yield) on the £500m the club will have borrowed via the bond, which at a mooted 9%, will be £45m. That will bring the total taken out of United to service the Glazers' borrowings, which were loaded on to the club after the family bought the club in 2005, to £172m next year alone.
It has become increasingly clear since the prospectus was launched last week that its principal purpose is to allow the Glazers to take cash out of United to reduce the amounts they owe in "payments in kind" to hedge funds, which are running at a punitive £14.25% interest. Standing at £175m in the year to 30 June, 2008, the "payments" accrued £25m interest in the year to 30 June, 2009, and so stand now at over £200m. That debt is secured on the United shares the Glazer family own, and it is clear their financial priority is to use United's giant turnover and profits to pay down that debt before the interest "rolls up" dramatically.
A calculation of the total cash which the bond would entail being paid out of United in dividend payments, the yield from the bond, management fees and the possible requirement for the club to lease the Carrington training ground, is more than £500m between next year and the maturity of the bond in 2017.
If the bond issue is fully taken up by lenders, it will mean that since the Glazer family bought United in May 2005 for £810m – £540m of it borrowed from banks and hedge funds – their takeover will have already cost United £340m in cash. That comprises £220m in bank interest plus "early-repayment premiums" made when the borrowings were first refinanced in August 2006. A further £120m will have been incurred in fees paid to bankers, lawyers and other professionals – the fees for this bond issue are noted as £15m – plus £35m incurred by the club's interest rate hedging arrangements.
On top of that, the "payments" have incurred interest payable of around £124m since the Glazers first borrowed the money to buy United.
A Glazer family spokesman, who also speaks for United on financial matters, declined to comment.
Nick Towle, chair of the Manchester United Supporters' Trust, said: "It is a shocking picture. These are immense amounts of money being leaked out of United to pay banks, lawyers, the Glazers themselves and interest, to pay for a takeover none of the supporters, or the United board itself, wanted.
"United's success and profits could have been used to keep ticket prices affordable or invest in the team but instead we see this heartbreaking waste, just because one family ultimately hopes to make a profit from the club."