I’ve only today read about the Man Utd debt problem, that seems to be an over a decade old issue dating back to the Glazer’s takeover. I understand that finances in the prem are always under scrutiny and so I assume this “type” of debt doesn’t influence FFP regulations. But the number quoted, £1.3bn, is outrageous. Especially when considering a significant portion is in transfer fees. Can anyone explain how and why this would be allowed? This is a genuine question that stems from little explanation in the article regarding premier league financial regulation.
by SpiritedSloth007
19 Comments
this is what PSR should be stopping. Huge debt putting jobs at risk, not a few wealthy owners gifting their club money for a bit of pay to play
Short answer is the club isn’t spending more on transfers and wages than it makes via income over a multiple year period so no FFP rules are being broken.
Most of the debt stems from the owners buying the club via borrowed money, hardly paying any of it back, then paying themselves huge dividends every year. This is why most United fans hate the Glazers.
A significant portion of the debt is actually the money the Glazers borrowed to buy the club in the first place.
Every company is financed by debt. Debt is only a problem if certain ratios are exceeded and you can no longer service the interest. Most of Manchester United’s debt is from their shareholders. Do you expect Manchester United’s owners to pursue liquidation against their own asset or something?
It’s such a joke that the Glazers’ takeover was even allowed. How can you buy an entity with zero of your own money, then put all the debt accumulated through the takeover on the entity you just bought. It’s good that this sort of bullshit business practice in the prem is not allowed anymore! What a shame!
The same way I can have a mortgage and not be bankrupt.
Hey there. A significant portion is not transfer fees really. The vast majority of the debt is from the takeover in 2005 (Glazers) and constantly restructured loans. These loans of course tie into the transfers etc, but a lot of these transfers were agreed across multiple seasons, pushed to later dates (and agreed by the clubs) etc, we are not actually “in debt” to other clubs so to speak. We do owe them money, in long, restructured fees. But these fees are all balanced by United’s (as a company) income etc.
We would breach FFP if we promised to pay transfer fees and then didn’t cough up, or if we were ‘operating at a loss’ or if our wage bill was challenging our income. It’s not, United make a ball of money every year through games, tv, merch, hotels, sponsorship, etc.
The debt keeps growing because the Glazers treat the club like a business. Most big businesss have tons of debt that is leveraged to keep business moving. There’s no benefit to a lot of companies paying off all their debt because there’s a constant need to borrow against assets etc.
Don’t get me wrong, fuck the Glazers for bleeding United dry. If we don’t get a Sheik owner, the next ones could really bottle the operations and land us in hot water.
But that debt isn’t massively significant with regards to FFP.
I hope this is helpful, I know there’s a ton more information to read up on, this is just a general overview.
EDIT: I noticed the other comment regarding PSR – United haven’t technically breached PSR rules as although they have shown losses over £105million over 3 years (the criteria for PSR) they have availed of deductibles to reduce that amount – youth and women’s team investment are deductibles due to initiatives signed off on by the League, training facilities are also deductible, etc.
The sneaky stuff is similar to how a self employed person might try to wiggle some stuff into their expenses that people might frown on but are technically legal. I don’t know the ins and outs of exactly what they claimed are deductible but I do know there was calls when Chelsea started selling hotels etc, so I imagine United are doing similar things.
Take me with a pinch of salt, I don’t know all the ins and outs 👍
Because majority of the debt was to buy the club itself.
It’s like a mortgage to buy a home.
Not only is every club allowed to amortized transfer fees and spread payments to other clubs.. which is a good chunk of that 1.3 Billion… Other clubs do that too.
The debt of the club isn’t an issue in a FFP as the club is “paying” it back and hasn’t missed repayments .
How ever the premier league itself would be on the hook if the where to charge united on this debt for the club because not only have the allowed it they have also banned it going ahead in future.
Now don’t mistake my point by saying the debt isn’t an issue as it’s an absolute disgrace they allowed this to happen. However united not only remain profitable they fall well with the wages to revenue percentage and are overall a well run club considering the cunts that own it
Tell me you know nothing about the history of the glazers takeover and how companies work without telling me
The PL is all teams plus FA so 19 representatives is why.
Because the club didn’t make the debt, it’s the owners external debt
The Premier League is a company made up of the 20 teams plus the FA. It’s not some separate entity
Look up “leveraged buyout”
If you think that’s shocking, you should look at Chelsea finances since BlueCo took over.
Roman left the club debt free and now we have similar to United. All the “loopholes” are just accounting tricks that allow us to pass regulations, but that doesn’t mean our finances aren’t looking pretty dire.
Debt to market value ratio isn’t terrible for the scale of the business.
Because they can manage it
Because it stems from Glazers doing something which is now prohibited and which the League & FA should never have allowed in the first place (hence their culpability); loading substantial personal debt onto the club. Minus debt repayments (and earlier, the Glazers dividends) United were paying for their transfers via commercial and sporting-related revenue. The Glazer purchasing debt (including interest payment etc) has been calculated as costing the club 1.5billion…
Transfer fees are amortised so they pay it over years, also Man United can afford to pay off the debt so it’s not crippling.