Football finances

[Oldandtired]

I really don't understand them. ManU make a profit for last year yet are reportedly £1.3 BILLION in debt. How can they be said to be trading within any sort of rules? If this was my, for instance, sausage making company surely it would be declared bankrupt?

Perhaps someone with the knowledge of these things can explain it to me.

Edited Wednesday at 17:03 by Oldandtired

[John B]

5 minutes ago, Oldandtired said:

I really don't understand them. ManU make a profit for last year yet are reportedly £1.3 BILLION in debt. How can they be said to be trading within any sort of rules? If this was my, for instance, sausage making company surely it would be declared bankrupt?

Perhaps someone with the knowledge of these things can explain it to me.

Not got a mortgage then

[Alanh]

Their debt will have some sort of repayment timeframe against it.  They may have paid off some of that debt with revenue from last year and what was left over (after all of the other costs) was their annual profit.

[Gloucester Saint]

24 minutes ago, John B said:

Not got a mortgage then

Like a mortgage and other household outgoings eg credit card. The higher and more reliable your income, the more headroom and credit facility you will have to borrow. The dangerous bit for Utd is the amount of leveraged debt the Glazers took out in 2005 plus their £273m of their own cash. They would argue that they’ve increased the overall value of the club to £3bn+ and therefore the debt ratio isn’t disproportionate. £2bn circa was also spent on players (pretty badly for the most part) https://www.bbc.co.uk/sport/football/articles/cd9lwdegxvxo

Their ownership is very unpopular to this day. The new stadium will be an interesting test https://www.si.com/soccer/man-utd-1-billion-step-closer-record-breaking-new-stadium

Manchester as a city is one of the fastest growing in the UK which helps. Stadium itself will be privately funded but any borrowing needed will be easier because of the public realm investment around it. It really also highlights the stupidity of our politicians, because Manchester’s booming higher and further education provision is driving the ability to meet skills needs, yet politicians pit degrees, technical qualifications, and apprenticeships against each other when all are needed. 

Edited Wednesday at 17:38 by Gloucester Saint

[badgerx16]

If your annual income is £30 thousand and your expenditure is £25 thousand you make a profit of £5 thousand. If you take out a £40 thousand long term loan, the repayments of which are £4 thousand per annum  you still make a profit of £1 thousand but your debt has increased by £40 thousand.

 

Probably every Premier League team is in debt, some by what you and I might consider to be staggeringly high amounts; Man U, Spurs, and Everton owe well over £500 million each, the latter 2 in part due to their new stadia.

Edited 22 hours ago by badgerx16

[skintsaint]

41 minutes ago, badgerx16 said:

Spurs, and Everton owe well over £500 million each, the latter 2 in part due to their new stadia.

Would be interesting if they did go down, their income stream will be severly impacted, the loss of PL and CL income would be huge, and the fact I reckon none of their players would have relegation wage reduction clauses in them.

[Saint86]

Teams won't go bankrupt provided someone is prepared to buy up their debts - which is why it comes down to worth and why Leicester could be in real trouble if they get relegated to League 1 (poorer squad, loss of income - ticket sales, merch, tv monies) etc.

At a certain point, clubs are no longer worth enough to buy them out and pay off / service debts, and thats when they go to the wall.

[Matthew Le God]

19 hours ago, Oldandtired said:

I really don't understand them. ManU make a profit for last year yet are reportedly £1.3 BILLION in debt. How can they be said to be trading within any sort of rules? If this was my, for instance, sausage making company surely it would be declared bankrupt?

Perhaps someone with the knowledge of these things can explain it to me.

I owe the building society a lot of money for the mortgage on my house. I'm not going bankrupt as I can afford the repayments, so can Man Utd with theirs.

Edited 20 hours ago by Matthew Le God

[Oldandtired]

So, for instance, if Spurs were to go down with the accompanying drastic cut in revenues would that make them unable to service the debt? What would happen then?

[Patrick Bateman]

2 minutes ago, Oldandtired said:

So, for instance, if Spurs were to go down with the accompanying drastic cut in revenues would that make them unable to service the debt? What would happen then?

They will restructure the debt for more favourable payment terms. i.e. longer period to pay back or more favourable interest rate, or both. Standard business practice. They could even extend the debt to pay the debt repayments on the provision that they will 100% get promoted ...... 

[Oldandtired]

I'm not surprised they can afford such big debts, I've just read a report that fans of the top six PL clubs are paying an average of £74 for a match ticket.

[East Kent Saint]

Chelsea meanwhile have made a £355M loss !

[Monk]

If you’re interested in all that, try ‘the price of football’ podcast. They’ll no doubt explore the financial results of United next week.

There is a previous feature on the implications should Spurs go down (they’ve already lost an unnamed sponsorship). 

Its very good.

[Roo1976]

11 hours ago, East Kent Saint said:

Chelsea meanwhile have made a £355M loss !

ah there we go that good old FFP...................city still yet to be brought to account ,meanwhile other not so rich clubs walk the tightrope.