Competition: Predictions for 2024

So here we are, crystal balls at the ready, testing our predictive powers on the year ahead.  What will 2024 bring?  Some of the big unknowns for this year are rather obvious "known unknowns", of course, but please address yourselves nonetheless to the following questions:

• UK GE:  date (month);  and number of Labour MPs after the GE 
• US Presidency: who wins?
• Size of V. Putin's share of the Russian vote (as announced)
• By how much, and in what direction, will the FTSE100 change between midnight UK GE polling day and the end of 2024?
• Length of Sam B-F's gaol term upon sentencing (note: zero is a number).  Extra point for size of the fine in USD
• Where will Man Utd rank in the Prem at the end of the '23-4 season, and who will be manager?

Go for it!

ND

Manchester United in worse financial position than Ireland, Greece

Sadly, there are not many places for the poor citizens of Greece or Ireland to seek solace these days.

Perhaps a small ray of sunshine can be that they can console themselves that they are not alone in having delivered themselves into a structured finance mess.

Although given Irish predilections for supporting Manchester United, perhaps the news out today of Man U's £80 million loss will be a source of yet further woe.

However, Man U are in a terrible financial straight, saved by a canny re-negotiation of debt earlier this year, the underlying issues are still pretty gruesome. To translate into the Sovereign arena it looks like this:

                        % debt GDP/Revenue        % Deficit 2010     Interest rate on debt
Ireland                           80                                 30                          6.5
Greece                          113                               12                          7.81
UK                                73                                10                          2.9

Man Utd                        182.4                          28.4                        8.75

Of course, Governments tend to be able to raise money easier than corporates, but nonetheless I think the above shows the scale of the challenge they have, trying to keep total debt down when it is eating 40% of revenues can only be achieved by selling players.

As a Leeds fans I can only convey my deepest sympathies....:o)

The curse of Debt: Manchester United

In these past few months, the debt position of the UK has been a much discussed subject. But of course the UK national debt is but a part of the overall debt structure of the country which includes all the private company debt as well.

During the recession some companies have been doing better than others in managing through these difficult times.

One outlier appears in the press today with its results announcement. This is Manchester United, the most successful UK football club of recent years.

Man U has reported a profit today of £41 million, but this alone is less than half of the money they sold Cristiano Ronaldo to Real madrid for. On a like for like basis, their loss is actually £31 million, compared to £13 million last year.

Why is this? Well turnover is up so perhaps they have been investing in the club infrastrucutre? But no, the extension to Old Trafford has been finished for a couple of years.

The real story is one of leverage finance. The owners of Man U bought the club borrowed  a huge sum of money and then mortgaged the club to pay back their loan. As such they have put only a sliver of equity into the business. Now Man U is sitting on at least £600 million of debt, some of it apparently at rates of up to 14.25%; equivalent to borrwing on a credit card.

What is staggering really is that man U have been in the Champions League final twice in the past 2 years  and won the Premier League. They can be no more successful in any meaningful way. Therefore with alll the prize money collectedrecently, their revenues are not going to shoot up skyward from here. Indeed a bad year in the Cup (go Leeds!) and the Champions League and their revenue will fall. Plus they do not have a Cristiano Ronaldo to sell every year.

Now the club are going to try and re-finance by selling a bond that will allow them to re-pay the most expensive debt (with a ncie fee for early repayment no doubt). Good money for the banks involved too.

This is sensible, but having to do this shows how far the clubs finances have been stretched by the use of excess leverage finance by its owners. The need for the bond issue is actually quite urgent to fix the finances; Somehow I doubt Man U will be paying any £80 million transfer fees itself in the near future.

Even with a new interest rate at about half of the current one, the club will still be making debt payments of about £30+ million a year - over 10% of its revenues (which are themselves likely to fall).