Manchester United have a debt of over 400 million! Now being said they are having trouble competing in transfer market and even paying wages. Shares are now being floated on NY stock exchange. How can you get a successful club like ManU in so much trouble...not a serious one admittedly as long as you can pay interest...but what happens when you can't. Shows the problems that start when you have to pay stupid wages and stupid prices to keep up with owners of man City and Chelsea.
Very easily. You borrow money to take over the club, then put all the debt on the club. It's the equivalent of moving in with somebody, then mortgaging THEIR house in THEIR name. Man Utd debt has little to do with wages or transfer fees (although the escalation in those may have made the Glazer's original business plan unviable)
That's what happened at Rangers, wasn't it? Someone buying it by layering it in debt. Also happened to Woolworths I believe...moved debts from other parts of the company until it was never viable.
I thought that Portsmouth going under might be enough to get people to stop and think about the ridiculous wages being paid. When that didn't happen then it would surely be Rangers. But in all the debates about Rangers, I've never once heard anyone mention wages. Maybe it takes Manchester United to go bust before anything changes.
We're talking about a club that had never been in debt before the Glazers "leveraged" buy-out. This is one of many recent examples of an unregulated free market economy at work. Due to their enviable history of success on the football field, Man Utd has become an internationally recognised brand with a massive presence in every continent and every corner of the globe. They fill their stadium every week, they're watched by millions around the world whenever their games are televised, and their sales of merchandise probably exceed that of every other club bar Barcelona. In short, if such a business can't finance itself, then there is clearly something rotten in the state of Denmark. The fact that they are now alleged to be groaning under the weight of the debts imposed by their current owners shows how easy it has become in today's unregulated financial climate for speculators to rip the guts out of formerly reputable businesses, be they banks, building societies, or football clubs. I'm afraid that until there is a concerted, international effort to address the culture of greed and opportunism that has taken root in the global economy, once cherished institutions swill continue to fall prey to financial piracy.
The wording in that document says that the debt makes it difficult for them, not only in the transfer market, but in paying staff wages too! Wow. The unthinkable may not be as far away as we think.
Only when the last tree has been cut down; Only when the last river has been poisoned; Only when the last fish has been caught; Only then will you find that money cannot be eaten.
Absolutely spot on. The irony of the situation of course is that there is simply no need for a concerted international effort. A simple change to the law would suffice. If you want to buy something, you simply cannot ever be allowed to use the value of the item you are purchasing as capital for the purchase. By that method, anyone on this board could have purchased Man Utd which is obscene. In future, any risk must be secured against an existing asset. Rangers problems are all wages related; they never paid tax on them.....
I don't know how it is legal, but the Glazers mortgaged the club to pay for their own purchase of it. So basically, the club paid for its own purchase, and they paid nothing. Before them, the club was rich and they were in fact a more than sustainable business. The thing that I don't get about this stock market flotation is that there is really no guarantee that the club will get any of the money, and the Glazers won't simply take the money themselves again! Worth noting also in the wake of our tax thread that United will now be based in the Cayman islands and will no longer pay tax in this country. They have become the Jimmy Carr of football, and not just because everybody hates them...
How would mortgages work then? It's called a reverse takeover. It's how Southampton leisure Holdings (AKA Rupert Lowe) came to own our glorious football club.
Should have done it. Would have made a nice hobby, like one of those computer games. I've never quite understood how these things work. How can you be allowed to mortgage the club before you buy it? Or is it done immediately after you've bought it? So you are in debt but for literally a second?
Basically you set up a shell company, probably with 1 £1 share (law firms actually own hundreds of these ready just in case a client needs it). You then go to RBS/Lehman Bros/HBOS/any other bank that 6 years ago was on a mad lending spree and say, 'look chaps, thinking of buying United. Be awfully nice if you could loan my company £800 million, then we'll use that money to buy utd.'. The lawyers then draw up a thousand page loan agreement, with one of the terms being that the loan money only goes through when the takeover is agreed. The shell company then makes the takeover offer to United's shareholders, and when it goes through, the Shell compnay owns the club. Massive simplification, but you get the general idea.
Just out of interest, do you have a source for the bit about Man U finding it difficult to pay salaries? Not that I doubt what you say, just wondering.
As I was writing I just knew someone would say that! The mortgage sector has, chiefly through rigorous self-regulation, been a truly solid aspect our the financial services sector for decades. Not only were large deposits required (subsequently eliminating most of the risk to the lender) but the fact that home-ownership was both such a struggle to attain in the first place and an aspiration for most meant that defaults were incredibly rare. Trouble only started to rear its head in that sector after qualifying limits and controls were dropped. Within a decade of these reduced controls you could obtain a mortgage through Northern Rock for 100% of the value of the property plus the cost of all the legals plus get an unsecured loan on top of up to £20k to furnish the place. In short, you could "do a United". That worked out well for Northern Rock didn't it..........?
Thought Rangers decided not to pay tax hence why they have a 70mil tax bill. Insted of just paying tax on wages straight to the players account they paid it into some dodgy scheme abroad.
