extracted from soccernet.
Updated: Jan. 23, 2006
United's debts are 'serviceable', insists chief exec Gill
Chief executive David Gill is adamant Manchester United is in no
danger of being crushed by the mammoth level of debt incurred by
Malcolm Glazer's takeover.
While the merits of Glazer's £790million buy-out, which took the
Old Trafford club back into private hands after 14 years as a
publicly-quoted company, continue to be hotly-debated, the issue of
debt concerns most fans.
In total, the Tampa Bay Buccaneers owner borrowed £540million to
buy United, roughly half of which has been lodged against the
club's assets, with the rest sat against his own in the form of
hedge funds.
Chelsea's present undisputable status as the Premiership's top
side, coupled with the Red Devils failure to make any real impact
in Europe for the past three seasons and a subsequent 20 per cent
fall in profits, has led to widespread fears United could
eventually end up under the control of the banks who lent Glazer
the cash.
But, speaking about the debt levels for the first time since the
takeover, Gill said that neither Glazer's business plan, nor the
banks' financing plans, were set at such a high level that United's
future was in peril.
'Manchester United will not implode by finishing third in the
Premiership,' he said. 'Neither our internal business plan, nor the
bank financing plan is based on first, first, first, cup, cup,
cup.
'It is based on the sensible levels we were following as a PLC,
which were fairly conservative and based around finishing fourth in
the Premiership and getting into Europe. It is about the same
now.'
While Gill's assertion will be met with disdain by major supporter
groups whose protests against Glazer continued prior to yesterday's
win over Liverpool by the distribution of 40,000 cards urging fans
to join the Manchester United Supporters Trust, he was able to
clarify some of the misconceptions he feels have grown around the
debt and how it will be repaid.
'There are two elements to the debt, the hedge funds and the senior
debt,' explained Gill.
'The hedge funds have no security over the club and no influence
over it either. Yes, they have to be repaid but that is something
the Glazers will do from their own resources or refinancing plans
in time.
'Manchester United is supporting the senior debt, which is around
£265million-£275million.
'People need to recognise the cost of servicing the interest on
that debt is not in excess of the what we were previously paying in
dividends and corporation tax as a publicly quoted company.
'The debt itself is serviceable because our cash generation will
improve through the expansion of the stadium and other
things.'
Extra revenue is also anticipated through an increased shirt
sponsorship deal following Vodafone's decision to terminate their
£9million-a-year contract two years early.
With TV revenues unlikely to rise, United's main other area for
immediate expansion appear to be within the overseas market, which
amazingly yielded just £350,000 of the club's multi-million pound
turnover, a figure put down to the relative failure of a second
United States tour.
Prize money is another aspect which could be improved, although the
early Champions League exit has scuppered that avenue for this
season at least.
The loss of income sustained by the shock reverse to Benfica could
be eased by Sir Alex Ferguson's men at least snatching runners-up
spot this season.
Finishing second rather than third will net United an estimated
extra £2million from the central Champions League pot, while
Ferguson's men remain on target to at least equal their record in
domestic cup competitions last term when they reached a final and a
semi-final, eventually losing both.
'This is a new era,' said Gill. 'We didn't have any debt before and
now we do but I am quite comfortable about that situation.
'There is potential for expansion in a number of areas, which will
help service the debt but what we need to do is make sure we
continue to be successful, which for us is being up there
challenging for honours and getting beyond the group stage in
Europe.
'Last year we finished third in the Premiership, lost to the
eventual winners in the semi-final of the Carling Cup, got beaten
in the FA Cup final and went out of Europe to the Champions League
finalists.
'A lot of teams would say that is a great season. But I agree,
Manchester United is not a lot of teams. We want to win trophies,
that is the challenge. But in sport, no-one can guarantee
that.'
