Manchester United's supporters are rightly up in arms about what has happened to the balance sheet of their club. Thanks to the Glazers, and the method they employed to finance the deal, United are far from being financially robust.
The reality however, is that the debt mountain exists and any company in the club's position has to do what it can to ease the burden; the action taken by Manchester United's executives is an example of textbook balance-sheet management -- something had to be done to tackle the club's expensive and short-term debt, regardless of who was responsible for it. The fact that part of the payment-in-kind notes look likely to be paid out of the bond proceeds is unfortunate, but not uncommon.
Manchester United supporters will have read with horror that the club would be willing to sell Old Trafford to repay bond investors should the club's finances worsen, leaving it unable to meet repayments from normal funds. However, because the bond strengthens the club's financial position, the bond makes selling the Theatre of Dreams, star players and even the dressing room sink for that matter, far less likely.
The deal stretches out the club's debt for a number of years and removes any threat from the bankers, who might well enjoy their corporate hospitality at Old Trafford on a Saturday, but would not bat an eyelid about pulling the rug from underneath the club when they get to work on Monday morning, should their profits be threatened by a deterioration of United's financial position.
Even those worried about what seems to be an eye-wateringly high interest rate can take solace. Many traditional investment houses in Europe refused to touch the deal because the yield is so low. Such are conditions in the debt markets that the club has actually got a competitive rate by market standards. A year ago the deal could have cost them twice as much.
Moreover, because Europe's big investment houses showed little interest in the bond, the club's finances now rest in the hands of thousands of Asian retail investors, individuals that in many cases are supporters and are content to back the club with their own personal savings.
Those fans calling for the resignation of Alex Ferguson in protest are missing the point. Unpalatable as it might seem, there were few options other than the bond left to Manchester United. Its successful sale puts the club in an infinitely better financial position than it was in a month ago. (© Independent News Service)