Building a new stadium is expensive. That is a key factor behind the Glazer family’s decision to sell a 25 per cent stake in Manchester United to Sir Jim Ratcliffe — the British billionaire and founder of petrochemicals giant INEOS — in February after a year-long negotiation.
The cost to rebuild Old Trafford has been estimated at
£2billion ($2.5bn) and a task force has been created by the club to
discuss, among other things, where that money is going to come from.
More debt being added to the club to fund a new stadium or
the redevelopment of Old Trafford is a viable option and one that
decision-makers will seriously consider.
It is still a good stadium but it has needed significant
investment for two decades and has fallen behind other Premier League venues
in terms of modernity. The roof is leaky, the chicken isn’t cooked
properly and a club of United’s size and stature should have a
state-of-the-art home.
The cost of building a new Old Trafford has been estimated
at £2bn — approximately twice the price of redeveloping the existing stadium
and an amount that the club accepts will require support from funding partners.
Much has been made of the idea that public money may be
used for the plans but it is far from certain that funds would be granted:
indeed any government short of money spend on essential services would find it
difficult to justify. Even then, they would likely be earmarked for
the project’s wider regeneration aspects rather than the stadium itself.
When United released their results for the second quarter of
the financial year on Tuesday, their debt was listed as totalling £773.3m, not
including money owed in transfer fees.
But late on Wednesday night, a more detailed filing to the
US Securities and Exchange Commission revealed that on 28 February, United paid
off £120m worth of debt on their revolving credit facility — bringing their
total debt down to £653.3m.
Understandably, debt at United is a toxic word due to how
the Glazers leveraged money against the club and adding to it is likely to send
a shiver down the spine of many United fans. But when debt is used against an
infrastructure project, it is often viewed as a different scenario.
The Spurs example
Tottenham Hotspur’s stadium, which cost £1.2billion and
opened in April 2019, is considered to be the best venue in the Premier League
due to its myriad offerings that make it a year-round venue as opposed to just
where Spurs play their home matches.
To fund the rebuild, the club borrowed £637million, taken
out in multiple instalments, from Goldman Sachs, Bank of America Merrill Lynch
(now Bank of America) and HSBC.
According to Swiss Ramble, a respected football finance
analyst, and as per the club’s accounts for the 2021-22 season, more than 90
per cent of their debt was stadium-related. The average interest rate was 2.81
per cent, below recent rates of inflation.
It would be higher at the moment as interest rates have gone up.
Spurs generate just under £5million every matchday when gate
revenue and money spent by fans is taken into account. The next Premier League
side on the list is Arsenal, who earn around £4.2m on a matchday.
In comparison, and according to a URFA report, United
generated £3.2m per matchday, despite having a larger capacity than the
Emirates and Tottenham Hotspur Stadium.
Borrowing to rebuild a stadium or build a new one is a
normal use of a common financial instrument.
It is different from using leveraged debt to buy a club.
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