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Funny story about him. He isn't a journalist. He sells tellies in John Lewis and pretends to be a journalist. 

Immobile rumoured to replace Suarez at Barca. Not sure if this rumour has legs. Lazio say Immobile is not going anywhere.

£40m for Willy and £55m for Nilly. 

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2 hours ago, cymrococh said:

Medium is a site where anyone can post essays.

Yeah, I meant the Football Bureau of Investigation. There seems to be an article in The Athletic that says something similar, but it's behind a wall and I'm not a subscriber. Anyone who cares to paste it? https://theathletic.com/2090726/2020/09/25/manchester-united-65m-covenant-finances/ 

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29 minutes ago, Foxtrot said:

Yeah, I meant the Football Bureau of Investigation. There seems to be an article in The Athletic that says something similar, but it's behind a wall and I'm not a subscriber. Anyone who cares to paste it? https://theathletic.com/2090726/2020/09/25/manchester-united-65m-covenant-finances/ 

here you go 

30 minutes ago, Foxtrot said:

In the small print of File Number 001-35627 lodged at the US Securities and Exchange Commission is a clause that does, on the face of it, in these straitened times, threaten to have some bearing on Manchester United’s approach to signing players.

The document explains the fundamentals of United’s finances and, for those who know where to look, spells out the extra insurance that lenders have over the club’s debt repayment. United owe £175 million on a loan from BofA Securities (formerly known as Bank of America Merrill Lynch) and have £330.8 million outstanding on “senior secured notes” — effectively bonds to investors. The half-a-billion-pound deficit is a legacy to the Glazer family’s leveraged buyout.

To obtain that money at modest interest rates, United agreed a specific caveat with lenders. According to this “covenant”, the club’s profit must not dip below £65 million in a rolling 12-month period, as taken every quarter. EBITDA stands for “earnings before interest, taxes, depreciation and amortisation”.

So every three months, when United announce their accounts to investors, the total for the previous year needs to be at least £65 million, or the banks have a legal right to act.

Think of it as football’s spin-off to Speed, the 1994 blockbuster. Except, it is Ole Gunnar Solskjaer at the wheel of the bus rather than Sandra Bullock and the consequence for failure to stay above 50mph is not as explosive.

The clause was reported this week by the Football Bureau of Investigation on Medium.

Kieran Maguire, a lecturer on football finance at the University of Liverpool and author of the Price Of Football blog, says such terms are normal for commercial loans.

“If you look at the way the market normally lends, there will always be caveats,” he says. “Any other business, nobody would blink. But it is rare for English football clubs.

“Most in the Premier League are privately funded — Roman Abramovich, Shiekh Mansour, Fosun, Tony Bloom – and many find it hard to get traditional loans because half are at risk of relegation. Banks don’t want to be lending in those environments.

“Manchester United are different. They are as copper-bottomed an investment prospect as you could expect. They have regular cash flows; quite an attractive proposition. But the covenants are there as protection.

“Just in case Man United go a bit mad in terms of spending money, these act as penalties for poor use of cash as far as the lenders are concerned.”

That kind of control from across the Atlantic sounds unpalatable to anyone who believes clubs should prioritise the interests of their supporters over shareholders but — to continue the Speed analogy — the bus has long since left the depot on that one.

The question now is whether the covenant has any meaningful impact on how United act. It is important to note here the £65 million EBITDA does not include transfers — given it is before amortisation, which is how player acquisitions are recorded in the books — but wages do come into the equation. Though Jadon Sancho’s prospective transfer from Borussia Dortmund stalled over salary for a number of weeks, a resolution has been found, so it would be incorrect to say the clause weighed in the minds of chief executive Ed Woodward and chief negotiator Matt Judge.

United’s wages are the highest in the Premier League at £332 million annually (Manchester City’s are £316 million, Liverpool £310 million) but their wage to turnover ratio of 54 per cent is third-lowest in the division (Wolves’ is 53 per cent, Tottenham Hotspur’s 39 per cent) and with Alexis Sanchez now off the accounts, there is flexibility.

That comfortable balance between revenue and salary is the mode for how the Glazers themselves want United run, rather than as a special observation to the banks, but nobody at the club denies the £65 million figure is a consideration amid this pandemic.

Typically, there is a remote chance United break the clause. In the past decade, the lowest EBITDA the club posted was £92 million in 2012. Last season, it stood at £186 million.

(Chart courtesy of Kieran Maguire)

But at the start of lockdown, sources said the club estimated a hit of £115 million. Match-day revenue alone is down £4 million for each game held behind closed doors and that is before the broadcast rebate comes into the equation. On the flipside, United’s Champions League qualification ought to generate a boost of £100 million.

The unknown, of course, is how long fans will be kept out of grounds and in those circumstances, a glance in the rear-view mirror is inevitable.

There is a get-out to any breach. A pass will be granted in a season when United do not reach the Champions League group stage but it can only happen twice — in non-consecutive years — before the loan is due for repayment in 2029 or the bonds mature in 2027.

The doomsday scenario if United did fall foul? The banks would be entitled to call in their money and bankruptcy could follow.

The reality is somewhat different. It would not make sense to blow up the bus, Bullock and Keanu Reeves. At interest rates of between two and four per cent, United make the banks money.

The club also have good relations with their lenders and a resolution would be expected. When United broke the covenant on their payment-in-kind loans in 2010, the response was a rise in the interest rate, from 14.25 per cent to 16.25 per cent.

United also have the same £65 million covenant on the £150 million revolving credit facility taken out with BofA Securities at the start of the pandemic. They have drawn down £140 million for use on cashflow, rather than transfers, but there are some close to the club who note Premier League rivals are working differently.

Tottenham and Liverpool both attempted to use public money to furlough staff — before fierce criticism prompted U-turns — and are now making multi-million-pound signings regardless. Spurs have gone further, utilising the government’s COVID-19 business rescue scheme for a £175 million loan. Though the money is not going directly on recruitment, the breathing room it provides to enhance Jose Mourinho’s squad is undeniable.

An abuse of taxpayer funds that may be, but there are other fans who will look at United’s caution in context of the £65 million covenant and decide it goes too far the other way.

“Our financial structure has supported strong and consistent investment in the team over many years and we remain committed to this approach,” said a United spokesperson. “We are continuing to explore options for strengthening the team but we would be irresponsible to ignore the huge economic impact and ongoing uncertainties created by the pandemic.

“Our covenants are based on earnings before amortisation and therefore exclude spending on transfers.”

United would point to a net transfer spend of €175 million since last summer — the highest of any European club — as evidence the clause has no material effect on their recruitment.

Only time will tell whether that changes as the pandemic continues to have an impact.

(Photo: Matthew Ashton – AMA/Getty Images)

 

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8 hours ago, Barnesy_10 said:

Absolutely amazed Koulibaly hasn't gone anywhere bearing in mind the amount of top teams that need a decent CB. 

 

Not sure how genuine this is, (& I'm sure some of you may have seen this elsewhere already), but lets see how this plays out

IMG-0f6838e325649cb50015bed8faf1ed75-V.jpg

Edited by Kop_on
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