Manchester United-Glazers: A Debt(ly) Combination

Manchester United's struggle with the Glazers and their debt seem to be evidence that foreign takeovers fail more often than not.

The situation is starting to look increasingly desperate at the world's biggest football club, as yet another year has revealed the poor financial health the team finds itself in.

The Glazers' released documents today which confirmed that the debt for Man Utd’s parent company, Red Football Joint Venture Ltd., now stands at a massive £716 million.

Reports that the Glazer brothers were making huge drawings for their own personal purposes only added to the ire amongst the Man Utd supporters.

Things are looking especially bleak for the Red Devils, as the Glazers are believed to be considering selling Old Trafford or the training ground facilities at Carrington.

And amidst all this chaos, voices from inside Manchester seem to suggest that the club may opt to sell some of its big names (like Wayne Rooney) to allow for more funds.

So how bad is the situation for the Glazers exactly?

Fact and Fiction

The first thing one needs to do is dispel the inevitably crazy stories which keep coming up in the media. The likelihood of the Glazers selling Old Trafford is almost next to nil, as the stadium holds a great significance in the history of the club.

Any such move is likely to lead to fans trying to bring down the Red Devils management, and the Glazers won’t be able to silence their discontent this time.

Similarly, Wayne Rooney’s links to Barcelona are the concoctions of the media trying to move this story ahead.

There is no one on the current squad who is more important to the team than Rooney. Sir Alex Ferguson would personally throttle the brothers if they start offloading players.

As for the debt levels, £716 million is an astronomical figure, but in football such figures have become common.

Around Europe, many of the top sides have debt in excess of £250 million. The Times revealed the debt levels of various clubs recently.

• Real Madrid —£609m
• Barcelona —£436m
• Internazionale —£386m
• AC Milan —£348m
• Arsenal —£300m (approx)
• Liverpool —£250m (approx)

Foreign Takeovers

If you look at United's and Liverpool's debt, it has almost entirely been incurred during the takeover bids launched by their respective owners.

The Glazers and Gillet & Hicks borrowed extensively to buy the majority controlling stake in the clubs and are now tasked with paying it back. Unfortunately for the club, this means that its financial module is overhauled because of the new management, and it now needs to cope with the added borrowings.

This season, one of the prime reasons why none of the Big Four bought heavily was in order to refinance their debt levels.

Chelsea have successfully paid off theirs. Arsenal incurred their debt due to building the Emirates stadium, but despite their reimbursements being regular, the debt levels are coming down slowly.

It is thus clear that a huge influx of cash may accompany takeovers, but in the long run, the club needs to pay it off one way or another. And on most occasions they need to really tie their purse strings to service the repayments.

A Domestic Model

There have been past examples in the Premier League where the owners' discomfort has resulted in the team's downfall. The last such instance led to Newcastle's relegation during the previous season.

Leeds Utd also experienced a severe meltdown: The owners were unable to repay the borrowings, and the team went from European semifinalists to third-division football in just over half a decade.

In such circumstances it looks like in club management tactics, England has fallen far behind its European counterparts. French champions Bordeaux boasts remarkable talent on their squad but have no debts weighing them down.

Even in Spain, the likes of Sevilla have managed to create extremely competent squads without the injection of foreign capital. The team has been founded on nurturing and spotting young talent.

It seems that English sides should think of returning to the days of developing talent, rather than waiting for wealthy owners to buy the club and throw money out of the window.

Because even if you, the fans, don't realize it at that time, that money being thrown around has to be repaid eventually.