Mo Debt Mo Problems
The greedy Glazers are at it again. Last week Manchester United announced the club drew down £140M of the £150M available on their revolving credit facility. This action brings the total debt on the balance sheet to an eye-watering £660M! If you add in purchase obligations owed for unpaid transfers that number jumps to £890M!
Why should fans care?
Debt in certain quantities can be a good thing for a company, but when the amount of debt gets too large, it can really hurt the future outlook of a business, including one like Manchester United.
The most common way to see if a company has a healthy amount of debt is called a “debt to EBITDA ratio,” which shows total debt divided by how much cash a company earns annually.
In general terms, a debt to EBITDA ratio up to 3 is acceptable; a ratio of 4 to 5 indicates elevated risk.
And a ratio above 5 indicates significant financial difficulties and the strong likelihood that the company will be unable to borrow additional funds.weathlyeducation.com
As for Manchester United, the chart below breaks down the debt to EBITDA ratio for FY 2019 and FY 2020 Projected.
At the start of 2019, Manchester United was already at 4.9x — which is classified as risky — but with the extra £140M that ratio climbed to 6.3x overnight. What is even scarier is if you project out FY 2020. Manchester United is going to be hit hard financially as a result of the pandemic and they are running on fumes with a projected debt to EBITDA ratio of 14.1x! That ratio should be more of a one-off as long as things go back to normal with fans in the stadiums by 2021, but even in that case it is still expected to be in the very alarming 6x-7x range.
Between dividends and interest, the Glazers bleed approximately £40M out of the club every year and that is going to increase with the extra £140M they just added to outstanding debt obligations. At these leverage levels, fans have to be extremely concerned about how the greedy Glazers and their top clown Ed Woodward are running this amazing club into the ground financially. They are literally gambling with the future of Manchester United — the time to protest this ownership is NOW!