Wintry conditions spared Manchester United the test of playing crosstown rivals Manchester City in a League Cup semi-final on Wednesday, as Britain dug itself out from its heaviest snowfalls in three decades. Next up for United (weather permitting) is a tough Premier League trip to overachievers Birmingham tomorrow, where Sir Alex Ferguson’s side will attempt to rebound from a painful start to the year.
But even snow can’t hide the fact that United are a troubled team, both on the field and off. The fast-approaching business end of Europe’s soccer season, when league titles will be won and lost, will show whether United’s recent shakiness is nothing more than an uncharacteristic dip in form or, as some are starting to suspect, the beginning of a longer-term and potentially corrosive decline that the club may be ill-equipped to arrest.
The biggest cause for alarm is the state of United’s finances.
Newspaper reports last weekend that the club’s American owners, the Glazer family, are considering raising funds with a £600 (US$963 million) bond issue were a stark reminder of the giant and growing debt that United are laboring under.
United insist, and outside experts agree, that the club makes enough money to keep its creditors at bay, at least for the moment.
But it hasn’t escaped anyone’s attention that Ferguson is still sitting on the bulk of the £80 million United received from Cristiano Ronaldo to Real Madrid this summer. The question is why? Ferguson clearly needs more talent. Dimitar Berbatov has not fulfilled the promise he showed when United paid £30 million for him in 2008. Nani is another disappointment and Michael Owen is no longer a sure goal scorer. That veterans Ryan Giggs, Paul Scholes and Gary Neville are still getting so many games is due not just to their amazing longevity but also because not enough talented youngsters have risen through United’s ranks — as those players once did — to permanently unseat them.
While still just two points behind leaders Chelsea, United have lost five of their 20 league games. That’s not a crisis but it is one loss more than in all of last season. After the humiliation of losing to Leeds in the FA Cup on Sunday, the first time that a Ferguson side has fallen to such lowly opposition in that competition, some United fans called for an end to his 24-year reign.
Ferguson says the Glazers are not stopping him from spending.
They don’t have to — Ferguson is doing that himself, being thrifty in a market which he says is over-inflated.
“Maybe it is the Scotsman in me but I believe in value, even when I am spending someone else’s money, and the asking price for players we were looking at just wasn’t realistic,” the Manchester Evening News quoted him as saying at the start of this season. “We don’t suddenly have to splash out to try and compete at the top.”
Coming months will prove whether Ferguson is right or being priced out of renewed success. Either way, United’s tightly held wallet is raising questions. Compared to big-spenders Real Madrid and Manchester City, United are starting to look like poor cousins.
Thanks largely to their 76,000-seat Old Trafford stadium, United are a moneymaking machine, with annual turnover of £257 million, according to the most recent accounts available. But interest repayments from the debts the Glazers took to buy United in 2005 more than swallow any profits. Those debts swelled to £699 million in the last accounts. With repayments, a pretax profit of £24 million in the year to June 2008 became a pretax loss of £44 million.
Interest payable on United’s debt — £69 million in 2008 — would buy a marquee player each season.
The concern is that the debts could eventually undermine United’s ability to continue financing winning soccer. Losing, in turn, could hit revenue, potentially starting a downward spiral. The retirement of 68-year-old Ferguson, when it comes, could also be a delicate financial time for United if his replacement proves unable to quickly match his success, especially in the lucrative Champions League.
“They can comfortably service the debt at the moment,” says sports industry financing adviser Harry Philp. “But there is a ticking time bomb ahead for them.”
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