Richest Soccer Club Cites Media Drought as Profits Sag

25 January 2006

Britain's Manchester United soccer club, acquired last year by US national Malcolm Glazer and his family, has presented its new owners with a 20% slump in profits - triggered by a fall in TV rights income.

The downturn reflects the club's relatively poor performance during the 2004-05 season when it finished third in the English Premier League. Fans the world over expect to see Man-U, as it is affectionately known, topping the table.

Even though the club is not the money-printing machine of old, many companies would be delighted to post operating profits before depreciation, amortisation and exceptional charges of £46 million ($82.07m; €66.86m) for the eleven months to June 31. This, however, is 20% below its year-on-year earnings of £58.3m.

Not good news for clan Glazer, who also own US National Football League team, the Tampa Bay Buccaneers. The family snatched Man-U in a highly leveraged £790m hostile takeover amid high-octane opposition both by fans and the UK media.

To fund their bid the Glazers borrowed £265m from J P Morgan, secured against the club's Old Trafford stadium and squad of players. Plus a further £275m via high-interest PIK (pay in kind) loans from US hedge funds that offer investors a 12% yield and squeeze a higher percentage from borrowers.

The PIKs are likewise secured against the Glazers' assets including Man-U and cannot be unloaded during year one.

When hyping their bid for the club, Glazer and his family made much of their plan to achieve a fifty per cent rise in club revenues over five years and a trebling of operating profits. But the club's latest figures suggest this is a distant dream.

Nonetheless, Man-U still trumpets itself as the globe's richest soccer club. A claim robustly refuted by Real Madrid of Spain.

Data sourced from Financial Times Online; additional content by WARC staff