Glazers know they are on to a winner
Published 07/03/2010 | 05:00
It says much for the standing of the Glazer family that a bunch of City bankers and businessmen -- led by a man employed by Goldman Sachs, the US investment bank that spawns more envy and resentment than any other -- can be cast as saviours for the supporters of Manchester United.
Where else in this world of financial crisis and banking failure, other than Old Trafford, would a banker be a potential hero?
Jim O'Neill, the banker in question, leads the Red Knights, a consortium that wants to pull together scores of wealthy individuals so that it can mount a credible bid for Manchester United and persuade the Glazer family to pocket a profit and move on. The theory seems to be that a bid backed by hard cash provided by wealthy investors would allow the Knights to buy United without using much debt, freeing the club to re-invest its cash in players rather than interest payments and guaranteeing success into the future.
It is a neat enough idea but it faces one rather significant hurdle: the Glazers have no apparent interest in selling the club. They have recently refinanced the debts, raising £500m in a bond issue that does not mature until 2017 and securing new terms on those bonds that allows the family to strip cash from the club to pay down a second chunk of borrowing (called payment in kind bonds) that carries a punitively high interest rate.
United's fans can moan about the debt and protest about the amount of money the Glazers take out of the club, but they cannot change the fact that the Glazers are doing very nicely with their investment in United. More pertinently, they expect to do even better in the years ahead as the digital revolution gathers momentum and United's media rights grow ever more valuable.
Already, United is listed by Forbes magazine as the most valuable sports club in the world, ahead of American giants like the Dallas Cowboys, Washington Redskins and New York Yankees, even though the true value of its media rights is constrained by the group deals for TV rights organised by the Premier League and UEFA. The Glazers know United's potential earnings are not even close to being tapped, so why sell?
That is where the alliance between the Red Knights and disgruntled supporters comes into play. The Love United Hate Glazers campaign may be just an irritant for the current owners, but it underscores the persistent hostility that has dogged them since they bought United five years ago, much of it organised intelligently by the Manchester United Supporters Trust. Supporters, however angry, cannot force absentee landlords to sell, but they can make the hassle of ownership too much to bear if there is a profitable alternative on the table.
LUHG also damages the United brand, not by waving green and gold banners but by highlighting the lack of investment in players that threatens future success. Since selling Cristiano Ronaldo, United has stood still in the transfer market, spending less last year than the season before (and most of last year's money was the residual cost of buying Berbatov). If it wants to compete next season, it will have to spend heavily, but its cash is earmarked for interest and bond payments, not fresh legs.
There should not be any conflict between the Glazers and the fans because both need the same thing: on-field success. Winning trophies is the only way to maximise the value of those media rights and to ensure that fans in Asia and China clamour for their slice of United's success, but the Glazers have failed to convince the fans that they understand what it takes to secure that success. Perhaps they have been lulled into complacency by Alex Ferguson's phenomenal drive and success, even when in charge of a squad that lacks depth; perhaps they just feel they can extract as much cash as they want and Ferguson will keep the team ticking along.
United fans fear the worst. They think everything is for sale -- that Wayne Rooney (pictured) will go the way of Ronaldo if the price is right -- and that the proceeds will go to the Glazers and their debts, not the club.
O'Neill's Knights promise a different future: a club owned by wealthy fans and ordinary fans, run for success not profit, its spending dictated by the needs of the team, not the demands of its creditors. It is an undeniably attractive proposition, one that requires the goodwill and cash of many philanthropic fans before it can mount a credible offer, and one that requires the Glazers to walk away from future profits in return for a quieter life and cash in hand.
O'Neill may get some leverage if he and his partners buy up United's bonds on the open market, but it is difficult to see how he can force the Glazers to sell. For the moment, though, he has achieved what no other banker in the world has managed: hero status for a pariah class.