Devilishly clever? Or just diabolical?

The Glazers' aggressive, high risk gamble and 'plan'

Sure they spent a lot of money to buy United, you say (£921 million to be exact), but the banks wouldn't have lent it to him if he didn't have a plan, would they?

Of course he has a plan. We have no doubt about that. But consider the following...

What does it say about his plan if he's paying THREE OR FOUR TIMES the going rate for a loan?

Imagine walking into your High Street bank looking to borrow some money. There's a rate posted on the wall, and you go up to the manager and say I'd like a loan and you point over to the poster. The manager calls you over, takes down your information, and checks your credit. You're deep in the hole. You've borrowed loads of money, and your current obligations are more than you can reasonably be expected to pay back. (This is meant to be a hypothetical example of course!)

If this happened to any one of us, the bank manager would quickly usher us out the door with a shove and a terse thank you for stopping in. If you're a big stakes gambler in the investing game though, there are ways of getting someone to take the risk. Basically this involves paying an exorbitant rate. In this case, Glazer is paying upwards of 15-20% interest per year on his loans! People charge exorbitant rates like this when they believe they aren't going to get their money back, and the hedge funds like the ones the Glazers approached are the loan sharks of the banking world. They balance extreme risk with ridiculously high rates. And the Glazers are paying for it -- through the nose.

Further to the point, the hedge funds don't much care whether the Glazers pay them back or not. If the Glazers succeed, the hedge funds get their money plus interest. However, if the Glazers fail, the hedge funds get control of Manchester United. Real control of the board. Real ownership. Do you really think these sharks are going to care about our club's history?

In the end however, it all comes down to maths.

How are they going to do it? Remember, United were THE MOST PROFITABLE FOOTBALL CLUB ON THE PLANET prior to the takeover. They were being run by the SAME Chief Executive who, in addition to saying their plan was unrealistic, basically went on to say that it if there were extra money to be found, they would have found it!

Let's say, purely for the sake of argument, that every pound you spent on United was straight profit (which it isn't of course, but indulge us). Would you be willing to spent MORE THAN DOUBLE what you're spending now? For the next 3 years? And do you think that EVERY SINGLE UNITED SUPPORTER would do the same? We're not joking either. That's what it would take.

So if the supporters aren't to fund his folly, where's he going to get the money?

As we have found out over the years, the club's success on the pitch ebbs and flows. Our recent form combined with realities like the Russian Revolution at Stamford Bridge will make it even harder to be successful in the League and in Europe. So there is no guaranteed source of funds there.

What about the new 7,500 seats at Old Trafford? Good question. We have another... What do you think these seats are going to cost? The Glazers are going to have to raise ticket prices, the only question is by how much. And with attendances already in decline, both at Old Trafford (for cup matches) and across the League in general, there is only so much blood they can get from this stone. Supporters are already being priced out. There's only so much we can afford to pay.

What about the TV money, you ask? Well TV revenues are declining across England. And his grand hope -- that United could break away from the collective Premiership TV agreement to sell their own TV rights -- has met with disapproval from the EC and would surely be rejected by the other Premiership heads. Nothing here either.

(Update - 12/5/2006 - As of the 2007 season, premiership clubs will be benefitting from a new television deal, up nearly 2/3 from the past. There's no doubt this is an unexpected windfall for the Glazers, but the facts remain: at best United's EBITDA - the critical measure for the Glazers' - will at best grow by single digits. Even a new TV deal doesn't move the needle sufficiently as we estimate this to be worth under £20 million. Even the new AIG sponsorship, which is about £5 doesn't cut it, and they're likely to book that money in this season's accounts.)

Maxxed out on TV money & sponsors, ordinary fans are being priced out...

There's only one way that the Glazers will be able to turn things around, and that's by selling off the club's assets. Conservative estimates are that Old Trafford would go for £200 million, which the club could then theoretically lease back (the Nike Theatre of Dreams presented by Budweiser?).

In the meanwhile, you can already see the signs of cost cutting.

It’s not just us saying this either. Nobody with any knowledge of how football clubs are run can figure out how this is going to work. Not even the man most familiar with the reality of the Manchester United financial machine, Chief Executive David Gill. He was on record about its aggressiveness, he knew they had exhausted all the significant possibilities, and he knew the bid likelihood would damage the club. His position has recently changed of course. Do you think it might have anything to do with him making a fortune cashing out his shares, or having the Glazers continue to fill his pockets? Hmm...

Our Professional Advisors have prepared a comprehensive financial analysis based on the Offer Documents presented by the Glazers' bankers at Allen & Overy. We invite you to review them for the full details.

But don’t just believe us. Do your own figures. You don’t need to be a chartered accountant to understand it. Glazer may be a borrowing wizard, but he can’t pull revenues out of a hat where none exist. They’re selling their houses, parts of their businesses, anything they can to raise funds. They know all too well the piper needs paying.

But the truth is they can't afford to keep us, not unless their fortunes change drastically. And if they can’t, how successful do you think we might be when the banks and hedgefunds take over and start selling off everything that isn't nailed down to recoup their losses?

OK, you say, so he can't make it work. United just aren't going to double their profits out of nowhere, and the Glazers are leveraged to the teeth. But why did he go through with it?

» Why the only way out was forward, not back...

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