Life after debt
Flicking through the sports pages this week, I happened upon the following exciting news item on current events at Old Trafford. Just one paragraph should suffice to give you a tantalising flavour of the thing. Strap yourselves in… “The seven-year bond is expected to be priced at between 9% and 9.5%. That will increase the amount of interest the club pays on its £562 million debt, currently fixed at just over 5%, but will create a mechanism for the Glazers to funnel up to £79m from United’s existing cash flow to their holding company to start paying down a £225m hedge fund debt secured on their shareholding. These so-called payment-in-kind notes are accumulating at a rate of 14.25% a year.”
Well, I don’t know about you, but I’d have a sneaking suspicion that Con Houlihan had no hand, act or part in the crafting of that sparking prose. No mention in there, you’ll note, of burning cakes and addled mothers and that sort of thing.
As to what it all means, your guess is as good as mine. And probably better if your name is George Lee and you stumbled into this column with a big eureka, thinking you’d landed on the business page. Sorry, you’ve come to the wrong place, Georgie boy.
In truth, one of the reasons I got into sports journalism in the first place was that it seemed to be about as far from a career in accountancy as you could get without technically having to leave the planet but, in the light of current trends, I see that I might have to revise my life-long game plan.
Bu there’s hope yet. Having popped several elephant tranquillisers and lain down in a darkened room for an hour, I finally worked up the courage to revisit that news item on Manchester United and, to my relief, discovered the familiar words “European leg” buried in there.
Let’s see now, yes, here it is “…as the club’s banks and executives started the European leg of a series of roadshows designed to spark interest in the owners’ attempts to refinance the debt.”
Has the phrase “spark interest” ever seemed more misplaced? Now don’t get me wrong. Debt, I understand, believe you me. But when it comes to football clubs, there are debts and there are debts. Manchester United’s debt is not the same as, for example, Portsmouth’s. Whereas Pompey’s players have suddenly discovered what it is to peek into their bank accounts and discover that the few million in there hasn’t been topped up this week, as far as I know there are no indications yet that Wayne Rooney will be getting onto the St Vincent de Paul any time soon for help with his grocery bill.
Meantime, I can only pay tribute to Wolves owner/chairman Steve Morgan, who this week spoke about top-flight football’s financial squeeze in words even an economics dullard like me can vaguely understand.
“I would hope that more common sense and more business acumen would come into the game,” he said.
“It can’t be good for the game that people are coming and spending today and hoping that the game will bail them out in the future. It is a bit like a running up huge credit card bills. At the end of the day the interest costs are quite horrific. Some of the biggest clubs in the country are running round the hamster wheel just to pay off the banks and that can’t be right. There are 20 Premier League businesses out there and sometimes decisions are made and I am at a loss to understand them. It strikes me as very short-term to go out and spend money that you don’t have and hope that it will come right in the future.”
Not entirely comfortable with that “20 Premier League businesses” line but, otherwise, all very sound. And it makes you think: when League of Ireland clubs went off the rails trying to get up there with the elite, little did they think that, operating off similar woozy logic, the elite would do their level-best to come down and meet them halfway.
But while it might be wide of the mark to talk about the global downturn as a great leveller in football terms – especially not when you have a Manchester City apparently intent on spending like no football club has ever spent before – the upside of the squeeze being felt at places like Old Trafford and Anfield is that we might finally be seeing the breaks applied to the previously unstoppable momentum of an untouchable league within a league.
Okay, so the Americans can hardly be held directly responsible for Rafael Benitez’s brainstorms or Xabi Alonso’s departure or injuries to Fernando Torres and Steven Gerrard but Liverpool’s boardroom battles, along with their woes on the pitch, have combined to create the sense that even the biggest guns are not immune to decay.
So it’s hardly a coincidence that the Premier League is a tad more unpredictable this year or that the FA Cup has been galvanised by old-style upsets, with Reading doing the ‘Pool and Leeds coming back from the grave to haunt Man United.
Yes, that’d be the same Leeds who tried to fly too close too the sun back when, as Flann O’Brien used to say, it was neither profitable nor popular. Indeed, a colleague swears that the first time he ever came across the word “securitisation” was in the context of the same Leeds United.
Where football goes, the rest of the world follows, it seems.
So, maybe there is life after debt. I’m just off to look up “securitisation” in the dictionary, anticipating that it has nothing whatsoever to do with a big, no-nonsense bloke in the heart of the defence. Never had to do that with “stopper”, as I recall.
