The Outsiders' Edge

(No time for intro, must get to story. Ben Halls can be found at http://www.thebenhallsblog.blogspot.com/ Check him out, he might be famous or something.)

No time for a fun and quirky entrance segway this week. Far too much to get done to go through the motions of foreplay. Have a quirky image to enjoy, and lets get down to business.

“I'm a chilling out naked kinda guy, I tried turning it on while standing underneath. Bad times...”

Manchester United And The Amazing Sinking Finances

Oh Malcolm Glazer, thou art one heartless bitch. Also, if you don’t like financial stuff just skip this  bit. I won’t take it personally, I promise.

One of the biggest stories of the last few weeks in the Premiership has been the financial state of one of English football’s, and probably the world’s, biggest clubs – Manchester United. When the Glazer family, who have done such a wonderful (sic) job of running the Tampa Bay Buccaneers, decided to expand their sporting empire to the Premiership, they chose Manchester United.

At the time, this move was met with a mixture of fear, dread and loathing by Manchester United fans who were all very angry at the fact the Glazer’s weren’t buying the club in the sense that Chelsea or Manchester City have been bought, where the owners had the cash lying around down the backs of their sofas. Oh no, the Glazers were buying the club by borrowing the money to buy it. That meant they took out a £500m odd loan out against the club and an extra £200m or so in personal loans, meaning that the day they bought the last share of Manchester United stock to take ownership, the club was in debt by about £700m. That is about $1.15bn.

Just take a second for those figures to sink in.

“The Manchester United Accountant on one of their more 'with it' days”

Manchester United owe around seven hundred million pounds. Or, if you make the lifestyle choice to be American, they owe one point one five BILLION dollars to various banks and hedge funds. That is absolutely staggering. That is unheard of. The club’s debt could buy an NFL franchise or pay one week of the Yankee’s payroll. It may even be enough to feed John Goodman for a month.

When the Glazers announced their evil plans to take United in 2003 (they completed the sale in 2005), there were fierce fan protests. There is even a football club called FC United that plays in the lower leagues of English football that was set up by disgruntled fans who vowed to give up the Red Devils. Anti-Glazer chants were sung in the stands and everyone who supported the club were all very upset indeed.

Then, things didn’t really change. Revenue went up on the business end of the club, the team on the field stayed at the top and won trophies and the worries were swept under the carpet. Consider it like a wife who finds a saucy text message on her husbands phone from another woman but then chooses to ignore it, taking ignorance over confronting the issue. Well, in the last few weeks the wife has found a few more messages, a thong in the car and a strange rash on her husband’s doodad. Metaphorically speaking, of course…

A few days ago, Manchester United released their financial figures for the last year and it painted a grim picture. Overall, the club made a profit of around £40m, not a bad achievement, but that was a very misleading figure. That profit included money from Ronaldo’s £80m transfer to Real Mardid. Without his sale, the club would have fallen another £40m into debt.

The reason that the club would have fallen another £40m into debt? The interest rates on the £700m\$1.15bn loans that the Glazers took out to pay for the club.

Please leave a comment at the bottom of this article if you know any good bounty hunters.

Let’s hugely simplify just what is happening to Manchester United here. Obviously, the intricate financial details that you have to put together to build up all that debt are a little bit more advanced than the scenario that I’m about to put forward but, hey, I ‘aint no banker, yo.

Let’s say that you wanted something, but couldn’t quite afford it. For the sake of argument, lets say you wanted to go on vacation with all your friends to Las Vegas, except you couldn’t afford on your current bank balance. So, lets say that rather than save up and buy your tickets, you just scrape together your spending money and put the flights on a credit card with the intention to pay them off gradually afterwards. Well, as we all know in Vegas you do dumb things so by the time that you’ve lost a few times at blackjack (“The dealer is showing a 6, double down baby!”), realised that your home game poker skills don’t stand up to proper rounders and drunkenly stuck a few bottles of whiskey on said credit card, you end up owing a lot. For the sake of maths, lets say you end up owing around $1,000.

You get home from  your little trip and after several scalding hot showers to get the dirt off of you, you realise “Holy crap, I owe $1,000!” Its not that bad, you think, things will keep on ticking over the same way they always do. Except you forgot that the interest rate on the credit card means that you can only afford to pay that off, meaning the $1,000 doesn’t budge. Then with the interest building up, the $1,000 starts to grow, generating more interest. All in all, looking back that bottle of whiskey and drunken idea that you could somehow count cards seems more and more foolish.

That is the situation Manchester United are in. The interest rates on the loans, which are around 10% for the £500m bank loans and 16% for the £200m hedge fund loans, are crippling the club. They can barely afford to pay those off. Throw in penalties for not moving the sum, interest rate hikes on certain dates and the fact that any top club still needs to invest whatever cash it has in players and it means that Manchester United are broke.

Finally, the Glazers are starting to do something about it, though. They have recently raised £504m from private investors to clear some of the debts and cut the interest rate (the private bonds have an interest rate of about 8%, significantly less than the banks charge) which should alleviate some of the suffering, but it may be too little too late. Right now, there are two options for United on the road ahead

Option one is that a nice big rich group who have cash reserves buy them. They can clear the debts in one foul swoop, pay the Glazers a few hundred million quid in profit and have the cash reserves to buy players. There have been rumblings about even some of United’s wealthier fans doing this option, but the Glazers appear to be poo-pooing that option on site, saying they are in it for the ‘long run’. The ‘long run’ probably referring to the long run down the table to League One…

Option two is that the Glazers stay in control. United badly need player investment – namely, a new winger, goalkeeper, right back, striker and midfielder – but they won’t get it to the quality needed while still wrestling with £700m worth of debt, even at lower interest rates. More worryingly, Real Madrid and Barcelona are beginning to target United’s talismanic Wayne Rooney, reportedly offering around £70m for his services. If he has to go to help the debt problem…

No matter what way you look at it, United are in financial dire straights. United have got to now hope and pray to either a) keep winning on the pitch to keep the creditors at bay, or b) huge private investment. It is just that simple.

Lets see how Liverpool are doing, eh?

Right, enough of writing depressing things about Manchester United. Let’s check in on another team whose fortunes could be on the slide – Liverpool.

“There is an obvious reason for the similar poses between Rafa and the Manchester United Accountant.

Last time we stopped by Rafa’s merry gang of hop alongs, things weren’t exactly hunky dory. They were well out of the race for a Champions League spot, out of this year’s Champions League and generally looking miserable. Has anything changed?

Well, yes and no. Yes in the sense that they are playing a little bit better and are beginning to belly slide up the table a little bit. But, in a much bigger way, no – they are nowhere near where they should be and aren’t exactly showing the quality needing to break through.

Liverpool’s performances have been gradually getting better in the league, despite being unceremoniously dumped out of the FA Cup by Championship side Reading. When they beat Spurs 2-0 the other day, I would have said it was a proper turning point. Rather than a one off result, Rafa could have said “Look, we lost on the opening day to this team and struggled. Now we have beaten them, so we are that much better than we were. Let’s go forward with this.”

Instead, they drew 0-0 with relegation contenders Wolves in their next league game.

Currently, Liverpool are in 5^th place in the league and are just 3 points off of Spurs, who currently occupy that precious 4^th Champions League spot. However, on equal points with them in 5^th are Manchester City, who look absolutely rejuvenated under Mancini’s reign. City also have 2 games in hand, meaning that all of a sudden Liverpool could once more be 6 points off the Champions League pace. It is ridiculous counting Liverpool in the title chase at this stage as well  – they are 11 points off of 3^rd place alone.

Also just behind them are Aston Villa, one point back with one game in hand.

Liverpool, though, are still injury plagued with Gerard and Torres still picking up injuries regularly, with the later currently out for a month following a minor knee operation. If Liverpool do not qualify for this year’s Champions League they will have hell keeping those two stars at the club, and if they don’t it could be the start of a steady decline – Liverpool have been torrid without them.

Although I may make it seem this way, it really isn’t all doom and gloom for Liverpool. They have dragged themselves back over the last 8 games or so from a situation where a bottom half finish was more than conceivable to being back in the Champions League conversation. As a team, they have much more experience at that level than the likes of Spurs and Aston Villa and have a more gelled team than Manchester City. There is still a chance that they can avoid an internal apocalypse and qualify for next year’s premier European competition, but that is all it is – a chance.

Comings and Goings

There have been three important comings and goings so far since the last London Chronicles. Let’s have a little look shall we?

Owen Coyle boltin’ to Bolton

Former Burnley boss has Coyle has jumped ship back over to Bolton, this time to take on the club as manager. I really like this move for Bolton – they currently don’t have a lot going for them and those are the conditions that Coyle thrives under. His Burnley side, before they got promoted this season, were already feared after knocking out numerous Premier League teams in cup competitions. With him at the reigns, hopefully Bolton can pick up where they left off when Sam Allardyce left the club.

Eidur Gudjohnsen to Spurs

This move I can’t really understand, but who am I to second guess the genius that is Harry Redknapp? Spurs are pretty stacked at the striker position with Keane, Defoe and Crouch and have some talented wingers in Modric and Lennon. They don’t really need Gudjohnsen, who has always been a little bit over rated anyway. However, I suppose you could argue that if they really want to be a top 4 team they need top cover for key positions, and that was what the former Chelsea and Barcelona attacker will give them.

Robinho to Santos

This one broke literally as I was checking the Premiership table on the BBC website to see just where Liverpool were after last night’s games. Manchester City’s record signing – Brazilian striker Robinho – has left the City of Manchester stadium to go on loan at his former club Santos back home in Brazil.

“When asked about his move, Robinho said 'Baaaaaaaah! Waaaaaaah! Money money money money waaaaaaaaah!”

Although a few top European teams wanted him, I can understand Robinho’s move back to Brazil. That way he doesn’t end up playing for a potential rival and he is in the spotlight in his home country during a World Cup year. Also, as the move is only a 6 month loan, he could potentially be back with his head in the right place for next year’s campaign.

There is a much bigger story to this though. When Robinho snubbed Chelsea in favour of Manchester City and their newly acquired riches, his motivation was pure and simple – money. Nobody turns down Chelsea for Manchester City if they want silverware, or at least they didn’t at the time. Getting Robinho was important for City as it showed they had transfer market muscle. However, it never really worked out – he often sulked, underperformed and ran back to Brazil for ‘injury treatment’ whenever he got out of bed a little bit too fast.

Robinho was a mercantile player – not caring who he played for, just wanting the single biggest pay packet. There is nothing completely wrong with that – professional athletes have maybe an 18 year career with only about 10 of those years to make some serious wedge. You can’t blame them for wanting to make the most money to live off of that they can.

Still, they rarely work out and can often be very expensive mistakes for clubs. Once the honeymoon period of being paid £100k a week wears off, and somehow it does, they are often left at an uncompetitive club and the amazing drive that pushed them to become elite athletes kicks in in a major way. They become all uppity, sulky and end up kicking up a fuss.

Although nothing will stop clubs like Real Madrid, Barcelona, Manchester City or Chelsea from trying to gazump other team’s transfers by offering more money to club and player, hopefully the continued failure of players like Robinho will strongly discourage it.

Also, although slightly small in newsworthiness, is the fact that Sol Campbell is back with Arsenal after 3 and a half seasons (or so, I think…). Although this is a landmark occurance as it is the first time Wenger has re-signed a player he has let go, an honour not even Patrick Viera can claim, it has been an open secret in football for months. Since the Notts County Experiment came to a shuddering halt and Sol left after one game, he made it clear lower league football or MLS (sorry, Senior Elevation) wasn’t really of interest to him. He has been training with Arsenal to keep his fitness up and so it is a natural step he returns to the club to offer some much needed experience and leadership to a young team.

I bet you $50 that less than half of the people who clicked on this page are still reading

To quote the prophet Springer, now time for my final thought.

At my day job, as unfortunately I don’t just hang around Elevation HQ drinking beer and playing some serious MW2 the whole time (or at all…), I cover an awful lot of gambling news stories. Three this year alone have caught my eye for all the wrong reasons.

1)      The Chinese Football Association head being questioned over corruption, and investigators saying that if they punished everyone involved with soccer corruption then it would put the country’s football industry out of business.

2)      Gilbert Arenas and Javaris Critterton pulling guns on each other over a poker debt.

3)      Wolves calling in not one but two gambling addiction experts to work with their squad.

Now, I’m not one of these sorts who harp on about the evils of wealth. I love money. If I had a chance, I’d have all the money I could get my grubby little mits on. I enjoy being able to buy shit, go places and do stuff. I would very much like a new car, a new house, three more holidays a year and trophy wife. However, I sadly only have just about enough to live on.

*plays world’s smallest violin*

Anyway, you know who does have an awful lot of money? Footballers. And not just the £75k a week sorts. What people don’t quite realise is just how much money athletes have. A few years ago, I was working in the marketing department for an investment property firm and one of the sales guys ran into our little corner of the office that was full of Spongebob Squarepants posters and LolCats print offs (go into your marketing department at work and it will be very  much the same) absolutely over the moon because he had gotten a sales meeting with a League 1 footballing side. We all looked at him a little bit sideways, until he pointed the following out.

Even in League one, the 3^rd tier of English football, wages of £1,000 a week for squad players and £5,000+ a week for decent players are not uncommon. That is sweet FA when compared to Cristiano Ronaldo’s £200k a week or Rio Ferdinand’s £125k a week, but in the real world terms £5,000 is still an insane amount of money. That is a wage of £260,000 a year. Chuck on bonuses and players are realistically, even at that level, bringing in around £300,000 a year. Sure, that isn’t live-off-it-the-rest-of-your-life scratch, but you would be hard pushed to find a regular job where 21 – 34 year olds are paid £300k.

Anyway, I’ve gone off the point a bit. A lot of footballers have a lot of money is what I’m trying to say. And, despite the expectations placed upon them, footballers are human. Any human with a lot of disposable income does one of five things with it – drinks it, smokes it, snorts it, injects it, gambles it.

The first four of those aren’t exactly options for top calibre footballers, but the last one is. Like it or not, hush hush or not, football has a massive gambling culture attached. From the famous England national team ‘poker schools’ to players and managers owning race horses, injured players sitting at home gambling all day to those who can’t stay away from the tables, it happens. Worryingly, an awful lot of players also bet on football.

I’m not attacking gambling here either – I love poker and blackjack, perhaps too much – but trying to make the following point. Currently, all these young guys who have more money than god and a playboy lifestyle. This can all too easily lead to corruption – as in the China case, or even Italian football as seen a few years back -, to to inter squad problems – as documented by Arenas and Critterton – or to addictions, as shown by the amount of gambling addiction specialists brought in by some clubs and the need for clinics like Sporting Chance in London, which does admirable work treating gambling addictions amongst pro athletes anonymously.

Finances in football are at a stage where even lower league players in major markets are amongst some of the highest paid of the population. I’m not saying that they should be prohibited from gambling, it is plain wrong to tell people how they should spend their money, but already this year I’ve seen three shocking sports gambling stories. Surely, it is time for FIFA\UEFA\The FA to start looking in to the gambling culture in their sport, not leaving it up to clubs and flimsy regulations like “Oh, yeah, offer them help if they need it.”

Until next time, take care of yourselves, and each other.