The Glazers and United's debt

When Glazer bought his first wedge of United shares in March 2003, spending about £9 million on a 2.9 per cent stake, the club was on its way to an eighth Premier League title in 11 seasons and had cash in the bank without debt.

By the time he completed his hostile takeover, just over two years later, the club was £660 million in debt, with half of that borrowing placed on the club itself and the other half on his takeover vehicle, Red Football. The split was pretty academic, though, as Manchester United were paying the interest and that bill was enormous.

In 2006, the club’s interest payments totalled £113 million, against annual revenue of £168 million. Over the next four years, United paid an average of £95 million a year in interest, which meant more than a third of the club’s total earnings were being taken to service

Malcolm Glazer had needed some eye-wateringly expensive loans to get over the hump in 2005, and these payment-in-kind (PIK) loans ended up in the hands of three hedge funds: Citadel, Och-Ziff Capital Management and Perry Capital. The interest on these loans ramped up from 14.25 per cent to 16.25 per cent, and United’s total debts were now over £700 million.

But five years after the takeover, the Glazers were able to refinance via a £500 million issue of bonds — debt securities that banks, individual investors or pension funds buy at an agreed interest rate and an agreed term. In United’s case, this interest was about 8.5 per cent, cutting the bill in half, and the term was seven years.

In 2005, United’s annual turnover was just under £159 million, with the largest slice (£66 million) coming on match days. Commercial revenue was £45 million.

In 2019, the year the club earned a record £627 million, match-day receipts had nearly doubled to £111 million, but commercial revenue had grown by 600 per cent to £275 million. That figure alone is over £100 million more than any club outside the Premier League’s “big six” earns in total.

Kieran Maguire of the PriceofFootball commented, ‘United had £6 million in the bank and no debt when the original deal took place. The lenders provided about £600 million of the cost of the acquisition. The club is now worth, in my opinion, at least £2.6 billion and the debt is still £500 million, which leaves more than £2 billion for the shareholders and a 2,000 per cent return on investment.’

‘Initially, the interest rates were high, peaking at 16.25 per cent, which reflected the risk in the eyes of the bank. But as the revenues have increased, so the risk level has fallen and the debt now is a non-issue. The banks get a guaranteed £20 million in interest every year and the Glazers can kick the can down the road in terms of the capital payments.’

They have taken out more than £120 million in dividends over the last five years, on top of consultancy fees and soft loans in the early years, and now the siblings are starting to sell significant chunks of their shares.

In March, Avram Glazer sold £70 million of shares, and last month his brothers Kevin and Edward sold similar stakes, bringing in almost £140 million… for them, not United. And the family still owns nearly 70 per cent of the total shares and all of the all-important class B shares, which are worth 10 votes for every class A share. The club is a private cashpoint for the Glazers at this point.