THE BREAKDOWN: Man United’s Spiralling Debt, FIFA Claim 99% Attendance Record & Why Has Serena Williams Returned (E25)

29:21It's going to be fascinating to see. They always say about Tiger, never write Tiger off. And I guess you can say never write Serena off. But then there came a point at which actually you did have to write Tiger off. Yeah. Well, he did win a Masters in the year. He did. but no again even golf you know golf can't you can at a later stage the physical intensity isn't the same as making your way around a court for potentially three hours in the women's game all true Charlie there's we're back here we're back we're back we're back on cricket back on cricket back on the England cricket team I feel like there was part of me that feared being a broken record but then there's another part of me where it's just such a long ongoing important story and in my head there's just just a wave of reporting and thought around this which just completely misses the really important points of what it is to be an elite sports person and what it is to have the responsibility of representing your country at a level where you encourage and have the right to have all these fans supporting you that gets missed within this reporting what's happened in the last week since we last spoke well what's happened in the last week is that england have now lost the second test.

30:26So before that, before the second test, Stokes and Atkinson, who had been out drinking late after the first test, were dropped for the second test. There were then one or two other, the wicketkeeper, Jamie Smith, his wife was having a baby. Ollie Robinson, as often happens, was a little bit injured. And lo and behold, suddenly England had to make four or five changes. Yep. Okay. Loaded debutantes. Two of the key changes being the ones who were on the naughty step atkinson and stokes what then happened in the test match was grimly predictable and predicted by us but not by most other people actually i have to say it could be a little bit smug on this which is england got absolutely bulldozed right lost by 250 lost by 250 runs at home to the fifth ranked test team in the world a terrible performance that can be linked directly to what had happened in and around and after the first test which in turn can be linked directly back to what happened after the Ashes debacle.

31:23So this has been a long time coming. A lot of sloppy thinking, a lot of flabby lack of action, a lot of crappy lack of leadership has ended up with an on-pitch outcome, which is where it always ends up. And look, I want to be really clear. We've had a couple of comments especially from one fan on Spotify, Sellers88 who for two weeks has left a nice comment for us. The first one of which was pompous pricks these two game one enjoy yourself jesus calm the f down well last week fair enough obviously everyone's entitled their opinion last week pompous again you know what your attitude ends up with alistair cook and joe root as captains i was like oh do you know what uh sellers you know let's let's look at that so alistair cook two ashes series wins in an away series win in india for the first time in 30 years joe root most wins as england test captain most runs by an English captain for one series win over India.

32:19Right now, I think I'd be taking that. And pompous was one thing. Maybe we are being pompous about this. No, we're not. We're not being pompous. We're just telling the truth. We're telling the truth, which is at elite sport level, detailing matters, leadership matters, and in the end, bad outcomes happen if attention isn't paid to these things. Now, this whole thing about alcohol, right? And I do not play elite sport, to put it mildly, right? But I am aware, even at the level of sport that I play at, that if I drink alcohol, it has an impact. So once every couple of years, I do a half marathon, just to prove to myself that I can, nothing more than that.

33:04And for about three nights, I guess, maybe four nights before doing the half marathon, I won't have any alcohol. Why? Because alcohol affects your sleep. Everyone knows it affects your sleep. this is not a complex sports science point it affects your sleep and if I want to run my half marathon in any kind of half decent shape I need to feel well rested on the day that means I need to sleep well for the few nights before going so and that's just the very small sacrifice that this very amateur non-elite sportsman makes same will be if I'm playing in a golf tournament one day I'll just say okay the night before I'll just be a little bit careful I don't want to go just have one maybe one maybe none you strike me as someone who swings better with a...

33:43Well, no, that's a different point. We'll come back on to that another time. The point is that even the most amateurish sports people do understand that alcohol has some level of impact on performance. I mean, this is sports science 101. In fact, it's not even as far as sports science. This is something that was very well known before sports science even became a thing. This morning I was reading an article about Josh Kerr, Britain's world-class miler, who was interviewed by the telegraph about what he is doing over the next two years to try and make sure that he has a chance of winning the mile at the olympics the 1500 meters the olympics next time yeah we're not talking about alcohol here the guy doesn't drink clearly we're going on to absolute micromanagement of his nutritional setup to make sure that every single thing that he puts in his body i can't remember what the exact quote is charlie you might have it there every little thing that he puts in his body has to be exactly what is optimized to give him the best possible chance and he says at the end of this article something like i want to make sure that when i retire i do so with no regrets yeah right that is a great attitude for a professional sportsman to have which is your what you know they always say you're a long time retired well just just to your point there just sample and timings are you know he's saying timing is so crucial i usually have a box of food with me wherever i go in case i get held up we push carbs super hard going into friday sunday and tuesday sessions we also hit protein particularly hard on tuesday afternoons and evenings to maximize recovery hard sessions every 48 hours in the six days before high carb days and mostly rice blah blah blah point being this guy is looking at a level of detail so much so that let's say he's stuck in a traffic jam he has to eat at a certain time to ensure that his body gets that food and that energy at the at the given time so that his training routine isn't impacted his recovery isn't in the article that we also read uh on the then the England cricket team, just to show you the level of information and detail, should we say, that the ECB feels it needs to share with these cricketers just to see if they can get themselves up to the same level.

35:39The ECB reportedly had to share the new rules on a WhatsApp group and part of that message said, it also recommended players to not drink alcohol the night before and during matches because of its negative effect on performance, but there was no outright ban. I mean, that's the kind of thing you tell a 16-year-old on a Friday night, the night before they've got a school match on a Saturday. Don't sneak out, don't go and do this because it's probably not going to help you with the game. These guys are playing for their country at the highest level of a sport. It's one of the most intensive exercises that you can do if you're a bowler.

36:11So, you know, probably the thing actually that causes more injuries than anything else or pretty much in sport. And if you're a batsman, you are dealing in 0.1 less than of seconds, right? And if you have alcohols, you know, it just impairs the speed of your decision making. It's why you can't drive when you had a drink. How long ago was football transformed in this way Charlie well in the 90s it was famous right for this type of behavior and so Arsene Wenger Arsene Wenger when Arsene Wenger came into English football in the late 1990s he transformed first Arsenal and then the rest of football by proving that teams would start to perform an awful lot better if they didn't go out on the piss all the time and if they were careful about what they ate right he changed the diets of players he got players who had previously been alcohol drinkers to come off the alcohol he prolonged the careers of players he turned Tony Adams at the end of his career into a player which no one even knew tony adams could be a ball playing center back who could step into the midfield who could pass around who was aerobically care this is so much to do with recovery um and the reason why i'm so aghast at all this is that i'm not a sports scientist but i have run sporting organizations and i know that even in non-premier league football clubs the amount of attention that goes into what the players eat what their recovery times are they're constantly being tested if a player you know is three days out from a match they'll be being tested during that time to see how they're recovering see what their sleep scores are all this type of stuff to make sure that when it comes to saturday over the previous two or three days they've had every opportunity to recover from the previous match and these are 25 26 year olds who are carrying no fat at all who in the prime of their career a 35 year old like ben stokes who's been injured pretty much constantly for the last few years and who's constantly trying to hold his body together.

37:55Now this all goes back to, I don't want to labour the point anymore, but this, uncovering where this has gone wrong, at the start of Brendan McCullum's career as England head coach, England cricket head coach, up until that point, Team England had had a nutritionist. So this was somebody who stayed with them, travelled around with them, in an attempt to try and control their diets and all this type of stuff. When McCullum came in, he got rid of this guy because the guy was telling the players they shouldn't have bacon sandwiches of course they shouldn't have bacon sandwiches no professional do you think josh kerr has bacon sandwiches that's a ridiculous thing you know so that was a decision that mccullum made from an entirely amateurish perspective with no sports science background whatsoever right at the start of his career right up my england team doesn't need to worry about what it eats and drinks right all goes back to there and the england cricket board instead of saying to him i'm sorry brendan you are the coach but you're not in charge of everything now this is a decision which is quite important when you're in charge of a football club because very often an incoming head coach or manager wants to have control of everything and quite often the fans go oh i want the manager to have control of everything it's a very very bad idea because they are not specialists in recruitment they are not specialists in sports science they don't actually really understand these things what they are basically is control freaks they want to control everything now what's happened here is that from that moment on nutrition and the uh what people are putting in what england cricketers are putting into their body has been put right to the bottom of the priority list and gradually everyone's pushed it a bit further and a bit further and a bit further and a bit further until the point at which the ecb has to say oh um just to remind you guys getting hammered during a test match ain't a great idea i mean as you say it's totally astonishing the thing that annoyed me is both sides apparent lack of accountability and when you say both sides you mean ben stokes and the ecb right so you sent me an article a very good article in the teller off you know the um well actually firstly it was titled from michael vaughan and i'm going to retract that i don't think it was a great article it was how can ben stokes ever trust the ecb again basically let's let's kind of bring a little bit of the victim culture here onto onto ben Stokes and then the ECB in a very good article that I did enjoy that you sent me the ECB there was a quote here that it said the governing body traveled its own journey of fury from captain breaking the rules he wanted imposed and expecting him to resign over the issue to recognizing those rules were not codified clearly enough but as far as the ECB is concerned it would not be in this position had Stokes gone to bed at an appropriate time so you've got Stokes feeling like he doesn't feel like he's been supported by an ECB you've got an ECB feeling like the captain has misbehaved and should have been in bed, which we agree, whether he saw it is irrelevant.

40:38He was in the club when he shouldn't have been. But the ECB can't hold their hands up in this situation because they made the call to keep going with this leadership. They made a call to keep going with Rob Key and Brendan McCollum and Ben Stokes. And this group of players, this leadership, have shown over the last few years how they operated. And this was a major issue over the Ashes at Christmas. It's been an issue before. It's been an issue even before McCollum actually came in. So we've known that there's been a problem with this type of behavior in England cricket. Now, when you make a decision to continue that going, albeit with the plaster, as you said, put over of, okay, we're going to drive a culture of change here, which, as you said, was really complete rubbish.

41:15When this then happens, how you as the leadership in the ECB can hold your hand up and go, do you know what? We're really disappointed about this. We're really annoyed. We're sort of, well, no, you know what these guys are doing and you've understood how they've operated previously. The likelihood that they change like that is very, very slim. They would have no credibility if they did change like that. That was the problem. If you go back to February, when we first discussed this after the Ashes, I said, they have to go because they would have no credibility if they were actually going to make the changes to themselves that are going to need to be made here.

41:44The Michael Vaughan column was interesting because basically Michael Vaughan's position on this is nothing to see here, see no evil, hear no evil. I can't imagine any circumstances under which Ben Stokes should not be captain of the England cricket team until he's 70 years old. To paraphrase, that's his position, right? Now, it should not go unnoticed. There are wheels within wheels within these types of things. Michael Vaughan is very close friends of Neil Fairbrother, old teammates, right? Known each other an awful long time. Who's Ben Stokes' agent? Neil Fairbrother. So when we hear this, Ben Stokes can't trust the ECB anymore, where's that coming from?

42:20Well, it's the old boys' institute. I only ask the question. It's the old boys' institute. It is. It's the old boys' institute. And it's all see no evil, hear no evil. They're trying to make it impossible for anyone on a professional basis to question why this happens. Well, you know why? Because the minute you put the mirror up, they actually have to look at the behaviors. And this has been going on for a very, very long time. So sellers, you know, 88 on Spotify, I do ask the question because I'm a fan as well. You're a fan as well. You know, you said who cares when we won the test. Well, we've now lost the test because of these behaviors and we could well lose the series because of these behaviors.

42:54You know, is that the point when we start to care? for me personally you know Test cricket is my favourite form of cricket I love it and I've always absolutely loved the England Test cricket team and I love Ben Stokes for everything that he's done for it I love I love what we've seen in the last few years it's been really exciting in lots of ways but that doesn't mean that you can let everything just be accepted and go as as okay and form because it's not and now it's impacting the actual brand of that Test cricket team so the business for the ECB side is huge but big start right I ask this question Harry Kane has done a lot for England football.

43:27Yeah. Our record overscorer always behaved immaculately, keeps himself to the very highest standards. If Harry Kane decided to start going out on benders on a regular basis, do you think that the football establishment and the football media would go, nothing to see here, I think Harry should definitely carry on being England's main striker? Absolutely not in a million years. No chance whatsoever, right? Football is a here and now game. You have to be producing right now. And if you're not producing right now, see you later, right? Because it's an elite sport. And there are lots of other people who want those shirts, lots of other people who want those positions.

44:01And unless they're given the opportunity, you'll never know what they might have done. One thing that can be sure is they'll do better than somebody who's been drinking a lot. So that's why Harry Kane would not get away with that. I'm not saying he'd even want to get away with it because Harry Kane wants to extract the very last drop of talent that he has to have the best career he can possibly have because you're a long time retired, right? You know, Harry Kane and Ben Stokes are very similar ages. They're both going to be retired shortly, relatively shortly, and will then have 40 years to indulge in whatever they want to indulge in with no one criticizing them whatsoever.

44:30But while they are being paid by the general public to represent their countries, there's a standard. And to not even accept that the standard exists speaks to a culture that's totally rotten. Anyhow. Well, let's see what happens in the next test match because as we know, it's still a results business. So, I mean, he's back, right? He's back. So I love it to inspire a fantastic performance, great leadership and not a sulky interview. Charlie, there's a huge topic this week that we wanted to discuss. Has it been a bit chippy of us never to have discussed this before? Maybe, but I'd also say it's probably a bit of a compliment based on a lot of the football clubs we talk about end up having disasters.

45:09Manchester United, just to be clear. Manchester United is never irrelevant, is it? The last six months since we've started this show, Manchester United have started to move that way on the curve for once since Michael Carrick has come in. On the pitch. upwards on the pitch of course on the pitch and what we're going to talk about here is off the pitch it is because that's our speciality Manchester United off the pitch but you know the reason we're going to do it now actually is because one of our Melissa sent in a brilliant question on our substat recently and I'll just read out the question so you understand the structure of how we're going to approach this but Alistair Woods sent last week it was announced that Man United have refinanced some of their existing debt putting another 125 million dollars onto their overall debt leaving the outstanding club debt at 1.4 billion dollars could you and Charlie do a deep dive into a the history of the Glazer takeover how it was financed and how we got to the point where there is so much debt in the club b maybe explain the various types of debt and c look at the long-term ramifications of the club's current financial position compared to their always high revenues thought it was a really really nicely structured question and it we have wanted to do this for a while the fact that that debt restructuring did happen last week and also the fact that just yesterday there was a big announcement on the Manchester United acquisition of all the land that they require to build their new stadium it actually is the perfect time to do this and without club football we don't need to even really fall into a results discussion at all so what I'm going to start doing is just on that refinancing piece because that's really why it's relevant now so the restructured debt comes from a 425 million secured notes debt that they had within the club that was due next year.

46:44Secured notes is a loan right is a loan which is secured against your assets as opposed to a loan which is just a loan and we'll get into why there are secured notes in the club very shortly but that refinance debt now amounts to 550 million so it's gone from 425 million dollars to 550 million dollars at a higher interest rate of 5.3 percent now previously it was at 3.79 percent so they've got a longer runway to pay this off which was due next year but they are now paying more on the debt. The annual interest payment therefore rises by 10 million, which takes their annual interest payments to about just short of 50 million, I think 47 million pounds to be precise here.

47:23So following the refinancing, that now puts the club's total debt, the financial debt at 728 million pounds. United's outstanding transfer debt is 360 million pounds, of which 209 million pounds is due within the next year. So if we're being mean and looking aggressively at total United debt, it is over£1 billion currently. So the big question, therefore, and to Alistair's point, really, which is historical, is how on earth have we got here? How has a club like Manchester United suddenly got debts of over£1 billion? It's a good history lesson. Are you ready for it? I am. Most of you won't be surprised to hear it is a result of the Glazers' ownership.

48:08In the early 2000s, Manchester United was off the back of a decade of very strong performance. The Premier League had really had its first 10 years of being and they had been the main team as part of that. Alex Ferguson had done what he wanted to do. He'd come and push Liverpool off their perch. And the brand of Man U, the treble winners of 99, the class of 92, had done a great job of being the leading club in the country and potentially even in Europe. They were listed on the London Stock Exchange in 1991. One, Rupert Murdoch actually tried to buy them in 1998. You'll probably be able to tell me more about that if there was ever a huge amount of news around that.

48:43It certainly was. And what was the news and why that failed? Well, the reason it failed was effectively perceived conflict of interest between the main TV rights partner of the Premier League, then also owning the biggest club in the Premier League. Is that not just the biggest, most obvious conflict? Yeah, and it was stopped. Straight away? Yeah, stopped. Right, as in terms of him taking control. Yeah. But as you say, it was a quoted company, Charlie, which means other people were able to build up significant stakes. Yes. And there was a major sliding doors moment. So the biggest single stake that was built up around that time was by the Irish horse racing billionaires, John Magna and J.P.

49:25McManus. And they built up a stake towards 30%, just short of 30%. And the working assumption was that McManus and Magna, who are both billionaires would then just proceed to take over control of the rest of the club and at the time they were very close to Sir Alex Ferguson through their shared love of horse racing because Fergie's great passion outside of football is racing and they sort of brought Fergie into the fold a bit the Coolmore fold and either gave or sold him very cheaply a 50 % share in a young horse the horse was called Rock of Gibraltar and that horse went on to become a champion racehorse which was a lot of cool more horses do go on to do very very well but rocco gibraltar was epocally good and not only that but he went on to become an outstanding stallion and that makes a big difference because outstanding stallions as we'll discuss in our bonus segment this week are worth hundreds of millions of pounds not five or ten million pounds and when that became clear there was a dispute between magnum at manus and sir alex ferguson over whether he owned 50 of the horse's breeding rights as well as 50 of its racing rights and it was one of those read the small print son moments and effectively albeit they made a small out-of-court payment to fergie 2.5 million 2.5 million right they then retained full ownership and control of rocket water who went on to become one of the greatest stallions of all time and just put that into the point i mean small obviously 2.5 million pounds is a lot of money but if we're talking about the value of that horse you'd say it'd be about 300 million yeah it's incredible so the horse was worth you know at the time this much more than most premier league clubs yeah so fergie would have had 150 million castle sold for it's all yeah yeah so okay so so you've got this going on but in the background you have crucial it was really crucial because that falling out is what effectively led magna um and mcmanus to become persona non grata at old trafford because fergie was so powerful at that time at old trafford that it was clearly implausible that the people taking over the club would be in basically financial dispute against the god of old trafford fergie so their stake then rather than being built up to control their stake was then effectively sold and that then created the vacuum into which the glazers stepped well exactly so while all this was happening an american uh real estate billionaire called malcolm glazer was buying up small pockets of shares and by small pockets it started at 3 % it then went to 15 % and then by the end of 2004 it was at 30 % I think the first 2.9 % or something it was was 9 million invested and then it grew from there but you know this is a guy that so he bought the Tampa Bay Buccaneers in 1995 in the US so basically they were a failing NFL team at the time they won the Super Bowl I think in 2003 great sporting turnaround project but if you're a United fan you looked at how he had operated that club you would have been slightly concerned because he basically threatened the state with moving the NFL team if they didn't state fund a stadium.

52:27And guess what? They ended up funding the stadium. There was a tax piece that was put out and suddenly this new$200 million stadium popped up and was used. And maybe it was a slight insight into how the finances of Manchester United would look and would work. Other people's money. Other people's money. And that is the key, right? So they get 30 % at the end of 2004. McManus and Magni is then 28 % stake he buys, which takes them up to 57%. And therefore control. So in 2005, he manages to get hold of, well, I think another basically just over 18, 19%, which takes him above 75%. Now, the minute you do that, he can take it off the stock exchange.

53:07So he delisted Manchester United from the stock exchange. And at that stage, basically, it becomes pretty much exclusively the Glazers company the total purchase price yeah by the time he did it he basically got it all for 800 million pounds yeah but where did that money come from because this is the key so this really is what's known as a leveraged buyout and what that means is you use the assets of the company that you're buying to secure the loans that you take out to actually buy the club so as man united fans have had an issue with for many many years you basically manchester united bought itself and uh they then went from a debt-free organization to a significantly laden with debt organization you have different types of loans and that was used here and we're going to get back into our old friend the picks so there was about 260 million that was what we would call a traditional bank loan yeah about 270 million in picks so payment in kind loans that was from hedge funds not banks yeah and they were at a 14.25 interest rate and i'm pretty sure one of them was citadel so our friend ken griffin who's financing potches contract um that was the one one of the companies that did the pick notes and just be clear on pick notes we have covered on the show so a pick note is it's basically a recapitalization of interest onto total debt so let's say i have let's say i have a 200 million debt and it's a 10 interest rate that will then become 220 million but that's a 220 million total debt i'm not paying that extra 20 million and then next year i'm paying onto onto 220 so then And then next year after that,$242 ,000 and so on and so on.

54:43So it can be good in lots of ways if you have poor cash flow in the early stages. However, the total cost of the debt is hugely significant compared to traditional forms or should we say more basic traditional forms of debt financing. So they were 14.25 % when they got these picks. And they were pretty punitive because they increased to 16.25 % if it wasn't paid off in 2010. It's also worth saying the Glazers put in 270 million of their own money that was raised through sales of various assets. So you had 260-odd million of bank loans, 270-odd million of picks, 270-odd million of Glazers' own cash, and then the picks were paid off in 2010 at the cost of about 250 million pounds.

55:25However, the means with which they were paid off, no one really knows what was actually what lever was pulled to enable that payment to be made. But ultimately, Charlie, the bottom line is that sometimes in finance, particularly private finance, you have to watch the ball, right? So what do we see with the ball? What we see with the ball is the total amount of debt in Man United continually climbing, right? And that's despite the fact that they are the third highest revenue club in the world or the fourth highest revenue club in the world, whatever it might be. So in other words, the interest payments that are coming out of the club to pay the interest on the debt, let alone, forget, repaying all this debt, has to mean that effectively the club has been refinancing these loans.

56:09The loans have been being refinanced through the club. So what we're explaining here is how the club was bought. Yes, indeed. It's moved on and shifted. But then there's a cascade. So they have a form of revolving credit facility right now. They do. On top of all of this. On top of all of this. So revolving credit facility, meaning that it's much shorter term. They'll pay it off far more regularly. It's a 400 million facility. I think they'd spent 150 million of it as of May. Let's just try and explain what's going on here. Right. So watch the ball. All borrowing is borrowing. Right. And there are different terms used to describe different types of borrowing, whether it be a pick note or whether it be a corporate bond or whether it be a bank loan or whether it be secured or unsecured or whether it be a revolver revolving facility, which is basically means that it goes up and down depending on need, etc.

56:59but watch the ball the ball is the total amount of debt and the amount of interest on a blended basis which an organization is paying on that debt the total amount of debt that man united has now depending on where they are with their revolver in other words the revolving facility will sometimes be a bit more yep and then sometimes if they sell a player or something it'll be a bit less whatever it might be but i reckon that the total amount of the club owes on an average basis with their revolving facility being 150 to 200 million is about 1.2 to 1.3 billion pounds, including the revolving facility.

57:34Including, okay. Which you have to, it is still money which they owe. And the total amount of interest they're paying on that, I mean, it's quite hard to uncover when it comes to revolving facilities, because it goes up and down. But I'm going to say that it's about 60 million pounds a year, 55 to 60 million pounds a year. So that, in a way, is all that matters, right? The club owes all of this money in a variety of different ways to reputable institutions, their blended interest rate is about 6%, something like that, across the entire loss of it. So not horrific, but significant, right? And the total amount that they are then paying on that is 60 million on revenues of 700 million, right?

58:14So they're basically spending 10 % of their entire revenue. If you think about the advantage that United have over other Premier League clubs in revenue terms, they are basically spending their advantage on interest payments. So in the first year of ownership, the club paid£110 million in interest versus£168 million in revenue. That, the next year, was very quickly restructured to£60 million a year repayment. But it extended the loan terms, it raised the interest rates and obviously increased the overall debt. But that didn't bother the Glazers because what they believed they would do from day one would be massively increase the size of the revenue.

58:52and they almost doubled it in the first few years. They had a commercial team that was literally in single figures and then very quickly got up to 150, I think, people. They had commercially, they went from Vodafone paying 9 million to AIG paying 14 million a year to Aon paying 20 million a year. They had regional sponsorships where it was much more like licensing agreements where you'd suddenly be sticking their badge on things in far-flung countries. They had that kind of performance juggernaut on the pitch still going and this was important as well. In the first few years of Glazer ownership, man united were excellent it was the rooney and ronaldo time and they bought vidic and ever into the club and you had van der sara and they were winning champions leagues and premier leagues and ferguson was still there and then they listed on the new york stock exchange in 2012 and that they put basically 10 of the club back up and that brought in about 150 millions worth of cash and liquidity which they desperately needed at the time ferguson then leaves and this seems to be a really important moment where the fan base always hated the Glazers, right?

59:55And they always hated them because they saw their club ultimately paying for other people's exploits. However, they were winning on the pitch. And we've just been talking about how valuable that is. The minute you stop winning on the pitch, you lose the icon that's been there for 25 years and you hate your owners, it starts becoming a slight problem for you. We sat down with Peter Kenyon not long ago last year. Peter Kenyon is the former CEO of Manchester United. And this is a direct quote from our conversation with him. He said, the downfall of United was the success of United in that they didn't have a succession plan.

1:00:24You don't let two people, Ferguson and David Gill, the chief executive, that have influenced United for a period of years, leave at the same time. It's a joke. You talk about a business, what business would let their two key employees walk out the door the same day? Right. So first of all, what Peter says is true, obviously. The lack of succession planning for these two very powerful figures who, between them, ran the club, effectively. Gill ran the business side ferguson around the football side ferguson didn't really coach so much he was almost more like a modern day sporting director he controlled the academy he controlled recruitment he controlled the man management the players contracts and all that type of stuff then he always hired brilliant head coaches to work underneath him peter is of course right that gill and ferguson ran that club and to let them both leave pretty much at the same time without any particular of particularly high level succession planning around it was clearly a mis-move.

1:01:15There's no doubt about that. But I see something slightly bigger going on here, which is that this 1.1 billion of debt that Manchester United has accrued in the last 20-odd years, let's call it. There are other clubs who have accrued very large amounts of debt during that time by building a brilliant new stadium, which is going to see them through for the next 30, 40 years, Arsenal and Spurs. And they have acquired that debt on repayment mortgages, right? So they then take five, six, seven years after the stadium has been built, seven, eight, nine, ten years, gradually paying down that debt. The interest payments reduce and reduce and reduce until you get to the point where Arsenal are at now, where you're out in the clean booze sea with a beautiful revenue-generative stadium and no debt.

1:01:57And suddenly, you can then puff your chest out and you can play all the shots in the world, and that's when you become Premier League champions and the whole thing flies. Spurs, by the way, on that. So it's 850 million was their debt facility. They got it at 3%, which was extraordinary. So they're paying 25 million on it a year, basically, while generating huge 700 million also and being pretty average on the pitch. So this 1.1 billion has not been, it's not constructive debt, right? This is debt that's been piled onto the club without the club itself, the infrastructure or the main infrastructure piece of the club having been improved and therefore without the club having reached its full revenue potential, which is what we're about to get onto in terms of the new stadium project.

1:02:40Full revenue potential is an important point because one thing we have highlighted is that despite them being poor on the pitch, they have managed to maintain still a very strong business. So they did their record year of revenue, which was actually£666 million the year they finished 15. Yes, indeed. But ultimately, the problem is that during that period of time, the clubs who would be deemed to be competitors to Manchester United, which are Arsenal and Spurs, but also Real and Barca and PSG, right? they've all been generating revenues and bringing in external investment in the case of PSG from the Qataris they've been generating revenues to push on everything they do to the next level what United have been doing is they basically during that crucial 20 years when everybody else has been pushing on to the next level they've been ladenning up the the club with huge amounts of debt that doesn't actually relate to anything that's improved the state of the club Just to really endear the Glazer story, I should say, which I forgot, they are the only owners that have taken dividends from the club in that time.

1:03:44So the Glazer siblings, because Malcolm died in 2014, the Glazer siblings have taken£150 million of dividends from 2016 to 2022. So Charlie, that was the point I was making earlier on about watch the ball, right? Which is that whether some of this debt is held in a holding company and then is financed through dividends being taken out to pay the interest payments of repayments or whether it's inside the club. overall it all adds up to the same thing so the ball is 1.1 billion of debt 60 odd million a year in interest payments without having actually addressed the core piece of infrastructure which you need to get right to to maximize your match day revenues to then enable you to really punch your weight in a medium term kind of way otherwise the problem is you then keep on accruing more debt because your revenues aren't as high as they should be so i was just looking you know you said that last season was a pretty quiet time everything fine nothing to see here etc etc despite the fact on the pitch despite the fact that jim ratcliffe had actually enacted a fairly tough cost-cutting drive in between july and december 2025 so the first half of last season they actually added 25 million to their operational losses think about that now that's often i know people say that's because they've had a very bad wreck on the transfer market over the last five years so when that's all true and that's all fair but it all speaks to this sort of general dilapidation of the business as a whole without seeing any benefit for that you know so it's not like they've allowed the business to dilapidate a bit but at least they're debt free no they've been piling on debt and the business has been dilapidating which means that they're now in this quite extraordinary situation where they need to build a new stadium right because old Trafford is way past its sell-by date.

1:05:28They will either have to significantly redevelop Old Trafford or build a new stadium. They have decided correctly, in my view, to build a new stadium almost adjacent to Old Trafford, rather like with White Hart Lane. The problem is, is that unlike Arsenal and Spurs, who started their big new stadium projects from a position of very low levels of debt, they are starting this new stadium project already laden up with vast amounts of debt. Let's just imagine that this new stadium is going to cost one and a half to two billion. 2 billion is the projection from people inside let's just say it's 2 billion because these things have grown very much more expensive in the last 5-6 years as Real Madrid found out as Real Madrid have been finding out Spurs got low interest rates and they got in just before COVID before there was a lot of inflation in building materials they got the perfect timing this is not the perfect timing where you've got high inflation on building materials and high interest rates so let's just say it's 2 billion so let's just say to keep the numbers round that you add 2 billion of debt for the new stadium onto one, one and a half billion of debt they're carrying right now.

1:06:29So they end up carrying three to three and a half billion of debt. Ratcliffe bought his minority stake at a valuation that would suggest that Man United might be worth four and a half billion. Is that about right? Yeah. Right. So in theory, you'd have a 4.5 billion enterprise with a three to three and a half billion debt pile, which in theory would be solvent. But I wouldn't be comfortable with that if I was a lender? Because I'd be saying, okay, the current valuations of football clubs are based off a level of TV rights revenue which is not certain going forward, right? As we've seen in the French League where people assumed that French clubs would carry on getting very high TV rights, it is not certain over the next five to ten years that TV rights will stay at the same level.

1:07:13Absolutely not certain at all. It's a big talking point in the industry right now. What would happen if at both Champions League level and at Premier League level, if you just started to see TV rights revenue you just come down a little bit. 20 million here, 20 million there for each club, right? So let's say Man United's TV rights goes from, media rights goes from getting 150, 160 million a year down to getting 100 to 120 a year. Still a lot, by the way, but 50 million less. What does that then mean for the overall valuation of the club? When you're talking about a five to six times multiple, it wipes a billion off the valuation.

1:07:42Suddenly you've got a club that's actually worth the same as its debt pile. So just look at the shape of this entire thing. And I think, do you know what? I'm just going to leave you with this question. I think what is needed here is a big new injection of equity. I think they need to get the Glazers out. I think they need to have a substantial injection of equity to come in alongside Ratcliffe so that this new stadium is not being built entirely with debt. But they're going to be ring-fencing this new stadium. I know. And so what that means, so that means creating a separate entity, it protects the club from the costs of the new stadium to the extent where - I wouldn't say that, Charlie.

1:08:17I would say it protects the lenders to the new stadium from the possibility of there being a sort of cross-toxification of the two things. Because if you're a lender to the new stadium, what you want to know is, right, if I'm lending you a billion, when that new stadium starts to kick off revenues, I need, that's mine, right? The extra revenue is, you're going to be paying that to me. I don't want you spending that on players. Yeah. So they've got a challenge in the sense where, but they could raise equity in the stadium. So as a separate entity, and that's going to be, I would imagine something that Ratcliffe in particular you'll be very keen for.

1:08:50However, what that brings in is, so again, just sorry, just without overcomplicating it, you create a separate financial vehicle that then you don't laden Man United's existing 60 million or so interest payments with then the interest payments that would accrue from the stadium being built. The likelihood of that is, of course, that then in the eventuality of a sale, or let's say you get your 4.5 billion, if Ratcliffe's buying in to the club at a 4.5 billion valuation, they've got 3.5 billion's worth of debt, and then they don't get to realise the full value of the deal at sale because actually the key asset in here has different ownership who will get financially incentivized at sale again from a business perspective ring fencing that fine may get the stadium built but it hampers where that money goes down the line and don't get me wrong like you know that that stadium could be brilliant but the minute you start employing a financial model like that the expectation on the stadium will be to commercialize the hell out of it fans lost their nut when Ratcliffe came in and season tickets went up and it was like 66 pounds for a pensioner and a child well this new stadium in a new model like this that they're having to finance in this way will be exactly the same if not more plus then the hospitality piece that come around it a la Bernabeu plus then probably a naming rights deal and how much of the revenue from that new stadium gets translated into the football club and that's your really important question because if you're looking at the Bernabeu it's a it's a it's a great case study in comparison because the Bernabeu was built or rebuilt should we say redeveloped over the last few years and the total facility um the numbers are quite incredible.

1:10:13The social facilities, 1.1 billion euros, it actually starts at about 550 million euros and had to go up to 1.1 billion because, as you said, the cost of goods in doing this and the timeframes were just so far out of what they were initially expected to be. And the first two refinancings, they did at relatively good interest rates. And so it was cheap-ish debt for them. The third one, however, was pretty punishing. And they got Sixth Street, and Sixth Street, the US fund, the capital firm, private equity firm, and Legends, which is a big kind of events business. So they basically came in and for some of that financing have taken 30 % of the revenues generated from non-footballing activity.

1:10:53So anything that the Bernabeu holds that wouldn't be classed a football match, percentage goes to those lenders. So the question really was, okay, like how did they get here? Glazers laden the club with debt to buy the club and then have basically serviced it terribly throughout their time, ensuring that that number is still huge 20 years after purchase. There's different types of debt that they've employed to do that. And then what's the real impact of it now? Well, if you're looking at the big, big move that Man U have to make as a football club to put them up here, back up to the top with those biggest clubs, i.e.

1:11:26Stadium, the financial structure of that club is going to seriously prohibit the ability of them to do this as effectively as possible for not just the now, but for the future of the club. That's exactly right, Charlie. Exactly right. The necessity of ring fencing the new stadium into a new entity is because they're carrying 1.1 billion of debt. If they were currently debt free, as they probably should be, given that they haven't had to spend much money on capex in the last 25 years. And it's been a time when Man United has made an awful lot of money. They should be entering this period of building a new stadium in a financially strong position.

1:11:56In fact, they should have been building up a cash pile over a period of time, you know, put 30 million pounds every year into the account to make sure that by the time that You come to it, you've got a good equity slug in there to say, right, bang, we're going to do this. And we're going to do this with a mixture of equity and debt. The one little asterisk I'd enter on this, Charlie, is that it's part of a broader regeneration project, right? So this is quite a large geographical space, right? It's not just let's knock down Old Trafford and let's build another stadium in its place. They've been buying up various plots of land adjoining Old Trafford to give them a sort of like a park, effectively, a larger space.

1:12:31and the vision which has actually been put in place with the man who would be prime minister andy burnham is for a broader regeneration piece dare i say it not dissimilar to what happened with man city um and the etihad now the question for me is which we don't really know at the moment is how does the regeneration piece which includes the building of a lot of new residential and and various other more commercial types of real estate how is that going to or is that going to benefit this project? In other words, is the club, as did happen a bit with Man City and the Etihad, going to receive effectively a financial benefit from being part of a regeneration scheme?

1:13:09And could that be used as part funding for the stadium? We just don't know this yet. It's not been made clear. Yeah. So there are some unknowns. There are quite a lot. I mean, I think the things that we do know is it's going to be very hard for them to build that stadium without employing the financial model that we've just described, even if these things exist. Yeah. Because that scale of debt on top of their existing debt is unfeasible. You can't manage it. It'll be well over 100 million a year of interest and the club would not support that and continue to try and compete at the top level. So thank you, I think, to Alistair for getting us to talk about it.

1:13:42Thank you very much. It's a huge topic. And look, most likely one that I'm sure will keep cropping up because I'd imagine now the land has been got and the wheels will start to move into motion a little bit more. Some of that will be clear. And who knows, if Andy Burnham does make it into Prime Minister, then maybe we'll get a better insight on that project and the motivations that they've got. And I would just keep an eye on the equity ownership of the club as well. There's just something about the shape of this whole thing that makes me think that I don't think the Glazers will want to be a part of this.

1:14:10Well, if you look at this now - It becomes like a very long-term thing now. I was going to say, like now you look at it and you're going, okay, so we have to go through all of this. There's more restructuring. There's more ring fencing. There's another entity that comes in. Are we just better to cut and run now? But from an investment perspective, coming into it, if I'm an investor coming in here, I'm coming in with some pretty hard terms. Knowing the work that needs to get done, I am 100 % not giving you near your 4.5 billion right now for that. So, and bearing in mind, the big challenge they had with Shade Jashim and with Jim Ratcliffe in the first place was that they priced the club at over 5 billion when they were going out to market at the time Jim Ratcliffe invested and that was a huge blocker.

1:14:52So it's just whether they've softened their stance. anyway fascinating stuff I think and yeah lots in there Charlie I enjoyed that right well thank you very much Charlie for those of you who are engaged with our subs attack which quite a lot of you now quite a lot of you now and again if you're not why yes we are about to embark on a bonus segment which actually having just discussed how in the case of Manchester United the coming together of the top end of horse racing and football ended up in in a bit of a mess it's happening it's happening again but in a totally different way and we will be discussing that in a bonus segment over on our Substack Brilliant Thank you guys See you next week Thank you as always for joining us where it felt like a lot of ground was covered There are of course some very important running stories that constantly require attention but a fresh look at United and the 20 years plus of Glazer ownership in the context of how it hampers them moving forward is fascinating My takeaway is that while it maybe doesn't hamper them hugely day to day the long term ability to invest in the club's future is a huge problem created by the original leverage buyout and the continual refinancing strategy.

1:16:00We'd love to hear your thoughts on it. Thank you again and we'll see you on Substack for those of you who have joined us. Otherwise, we'll see you next week. This show has a number of ambitions. Education sits at the heart of it. No one does a better job or has a better success rate of providing the tools to access the opportunities to work in sports than the global institute of sport gis's goal is to democratize access into the sports industry a sector that has historically been a closed shop laying out a few stats they have industry-leading graduate success 79 of gis graduates are working in sport within six months 99 secure employment within six months gis is about outcomes it's all about a global immersive learning experience you can study online with flexibility to fit your busy lifestyle or on campus at world-class stadium venues including london's wembley stadium miami toronto sydney brussels learning in the very locations where elite sport happens flexible work placements and projects with clubs and organizations around the world integrated into your studies it's the world's number one sports education network ranked number one university for getting a job in sport by sport business magazine there's a real industry access a powerhouse network of 50 plus sports industry partners including the premier league the fa and other global giants an unrivaled global community of mentors executives and guest speakers offering real world insight and opportunity if you want to take your sports career to the next level visit www.gis.sport we'll have some exciting plans to share on our work with them in the coming weeks so please stay tuned