John Chidley Hill.com A blog about reading, writing, pop culture and sports.

21Jan/101

Mea culpa: Manchester United is in financial trouble

Almost two years ago I wrote on my defunct blogthat European soccer fans should “relax” about foreign ownership like Tom Hicks and George Gillet of Liverpool and the Glazer family of Manchester United.

Yesterday BBC News announced that Manchester United’s debt has now reached £716 million(that’s $1.1 billion USD), with patriarch Malcolm Glazer handing out loans of £1.67 million to each of his children who happen to be directors of the club.

Hey ManU fans? My bad. I was wrong. The Glazers have put your club at risk with their mishandling of team funds. A small piece of good news is that the Red Devils can stay afloat as long as they keep winning, which they are sure to do.

The original uproar surrounding United was sparked by the Glazers’ takeover of the publicly traded franchise, effectively taking it off the market. The closing remark in my original post was: “Thanks to [the European] system of relegation and ranked leagues, for these men to make money, they need to make sure that their teams are constantly competitive.”

I still believe that, but the Glazers’ tenure as owners of Manchester United is definitely putting my theory to the test.

United is still one of the best teams in the English Premier League. They’re currently in third place, one point behind first place Arsenal, and in a position to return to the Champions League. Forward Wayne Rooney is one of the best players in the league, with 14 goals so far this season.

Their merchandise is as popular as ever, with their familiar red and gold logo still gracing jerseys, shirts, hats and all kinds of kit.

So where is all this money going? Running a professional team of Manchester United’s calibre is always a costly enterprise, but to the tune of £716 million?

According to journalist David Conn on the Guardian’s Football Weekly Extra podcast, the Glazers have loaded the club with the debt they had taken on to buy United. That’s right; the team is paying for its own purchase. That original debt, plus interest and the usual litany of fees from banks and lawyers, has eaten away at the club’s value.

It gets worse. Conn says that contrary to manager Sir Alex Ferguson’s claims, the £80 million in transfer fees collected from Real Madrid for Cristiano Ronaldo’s transfer won’t be available for roster acquisitions, as the money has already been paid towards United’s debt.

In their most recent financial report, Manchester fully acknowledges that if they can’t continue their current competitive pace, they are in grave financial trouble.

This reinforces my belief that relegation/promotion and on-field success are still the keys to making money, but there is still cause for concern. The Glazers are making the same mistakes that launched the financial downturn that is still affecting the global economy. Debt to pay off debt is never sound planning. Although the football side of the team can maintain this pace, the business side definitely can not. Things have to change at Old Trafford, and soon.

Fans of Manchester United, and soccer fans as a whole, should be keeping their eyes on this situation. There’s more than just pride at stake on the EPL tables with United needing on-field success to stay afloat financially.