ManU is only slightly ahead of Liverpool in terms of finances, and will eventually fall into the same vicious cycle. If I understand the situation correctly, United posted a pre-tax profit of ~£40million including the £80million from the Ronaldo sale and that's with making it about as far in every competition as United could possibly go (and not spending much money), and thereby maximizing profits. So next year, not only with no Ronaldo to sell, but with likely a pressing need to buy players, and perhaps without a major championship; United are going to be in the red and it is going to get more and more difficult to strengthen the squad, which translates into lost profits, which makes it more difficult to strengthen the squad, etc., etc. This recession might be tough for many clubs right now, but it is a correction after all, and football will likely be better off for it in the long-run.
BTW Draft,how many United bonds are you queuing up to buy? Going to make a dent in the $800 million issue?
Not true at all. These club finances are deliberately constructed to be confusing, but United are light years ahead of Liverpool. United are the most valuable football team in the world because they generate the most operating profits, also known as EBITDA. United's EBITDA was actually £91M for the FY ended 6/30/09. That does not include one penny of the Ronaldo sale. The operating profit is essentially recurring revenues (matchday revenues, media revenues, commercial revenues) less recurring expenses (player and other staff salaries, travel, Old Trafford operating expenses, etc). Player sales and purchases are not taken into account for that figure.
The figures on this are fairly reliable since clubs post these figures to the press:http://www.forbes.com/lists/2009/34/soccer-values-09_Soccer-Team-Valuations_Rank.html
United are 185% the value of Liverpool. It basically comes down to revenues but mostly operating margins. United revenues are/were "only" 154% of Liverpool's revenues. United operating margins however are/were 320% of Liverpool's margins. That is essentially how sporting clubs are valued.
Liverpool have not posted their FY09 (ending 6/30/09) results yet as far as I know, but going back to FY08 for an apples to apples:http://av.r.ftdata.co.uk/files/2010/01/Man-Utd-consolidated-income-statement-2007-2009-large.jpghttp://www.liverpooldailypost.co.uk/liverpool-fc/liverpool-fc-news/2009/05/30/liverpool-fc-in-profit-but-debt-almost-doubles-92534-23746629/
United had a total turnover of £257M. Liverpool only had £159M. That places United at 162% of Liverpool's revenues so the actuals are 8% to United's favor compared to the Forbes estimates.
The ownership structures of these clubs are very confusing.
Here is United's:http://av.r.ftdata.co.uk/files/2010/01/Man-Utd-corporate-structure-and-financing.jpg
Liverpool FC also has at least 1 parent company:http://www.accountancyage.com/accountancyage/news/2243576/liverpool-fc-owners-debts-pile
Liverpool can't pull off a bond issue like United will. If Liverpool could, they would have done it or would be trying it to refinance their debt. As it was, they had to use the Alonso proceeds to secure a short term refinancing of their debt last year. It should be coming up again soon since the term on that round was 6-12 months. The kicker is Liverpool will never come close to matching United's revenues without a new stadium (and theoretically being able to attract 35K more fans per match at United prices), but Liverpool have concerns as a going entity with their ability to service their current debt with their current revenues. There is no possible way any lender will give them more £££. The only way they can build a new stadium is with an infusion of fresh capital. That would dilute Hicks' & Gillett's equity, so that is why they refuse to accept new partners on reasonable terms.
United are basically refinancing so they can get out from the terms on the primary bank loans and have more latitude to service the secondary PIK notes which are not secured against the club:http://www.timesonline.co.uk/tol/sport/football/premier_league/manchester_united/article6984328.ece
None of that is a good thing for United and the supporters, but it is a totally different thing that "concerns as a going entity." United have been able to comfortably service their secured debt. Liverpool have not.
On the other hand, Liverpool's perilous financial condition could make them more likely to be bought that United, so in a strange way it could work out better for Liverpool if a white knight comes along. It is probably more likely than United being saved.
This is pretty complex stuff. I spent a few hours today reviewing the debt offering prospectus. I used to be an accountant and a stock broker so I am interested in this kind of mind numbing reading from a past life. Here are some links that summarize as well as an actual place to register and download the prospectus:http://ftalphaville.ft.com/blog/2010/01/11/123486/football-finance-man-utd-edition/
The Glazers have taken a bit of £££ out of United:http://www.guardian.co.uk/football/blog/2010/jan/12/manchester-united-glazers-debt
Operationally though United remain the at the top of the financial heap. Their losses are not the kind Platini is talking about when he threatens to ban teams from the Euro Cup. Clubs like Chelsea and citeh post massive operational losses in contrast to United's £91M operational profit. They would be banned, not United. Furthermore, neither have the stadium United has or the global brand to maximize commercial revenues. Chelsea are already near the end of a player cycle. They will require a massive infusion of capital or borrowing to replenish their aging squad. The transfer prices and wages paid by clubs like citeh, Chelsea, Madrid, etc are unsustainable because they don't have the revenues to support them.
I don't like the Glazers and it is sickening to think of the players (or a new stadium for a small club like Liverpool) they could have bought with the £225M to £300M in interest payments they've siphoned off the club the past several years, but I don't see an exit for them until they are finally faced with repaying the principal amount. This latest refinancing pushes that date back another 1.5 years to 7 total and they could always refinance before then, so who knows what will happen.
The only club in England with a better overall model and long term financial outlook than United is Arsenal IMO.