January 27, 2010

Arguably the world’s most popular soccer team, and therefore arguably the most popular team in the world, Manchester United now has a new official airline.  Turkish Airlines has inked a deal to pay Man-U roughly 2.7 million pounds per year over the next three years.

2.7 million pounds a year, that’s it? For Manchester United?

Under the terms of the deal the airline will fly the team’s players and officials to relevant matches, tournaments and training camps as United’s official carrier.

The English champions said on Wednesday they were more than US$1 billion (RM3.4 billion) in debt.

Debts at parent company Red Football Joint Ventures Limited hit £716.5 million (RM4 billion) in the year to June due in part to high interest payments, its accounts showed.

Accounts for the holding company showed the debt had risen by £17 million in the year. Net interest for the period was £68.5 million.

The debt figures overshadowed profit of £6.4 million for the financial year, compared to a loss in 2008 of £42.7 million. (via The Malaysian Insider)

Oh…guess that helps to explain a lot.  Of course, news like this is even more depressing considering that they recently refinanced £504 million of the outstanding £716.5 million debt.

So essentially, you have a situation where the most popular soccer club in the world is on the brink of bankruptcy.  How bad is it?  Manchester United would have actually reported a £31 million loss but for the sale of star forward Cristiano Ronaldo.  Furthermore, they’re actually still in the process of trying to refinance even more of their outstanding debts.

Without the sale of Cristiano Ronaldo, Manchester United, who announced pre-tax profits of £48.2m today, would have been reporting a loss of £31.8m.

The figure for the year up to 30 June 2009 includes the record £80m fee received from Real Madrid for the sale of Cristiano Ronaldo and also £41.9m paid out in interest on a huge loan of £509.5m. The club’s turnover was also up to £278.5m from £256.2m a year ago.

The figures were released on a morning when United officially confirmed their intention to raise £500m through bonds in order to refinance their debts. While United are at least in profit once more, the figures merely emphasise what a drain on resources their debt position has become.

The situation without the sale of the Portuguese clearly is unsustainable over the long term, hence the refinancing plans of the club’s US-based owners, the Glazer family.

“Manchester United today announced that it will be seeking to raise approximately £500m aggregate principal amount from an offering of senior secured notes due 2017,” said a United statement. (via The Guardian)

While that news was less than pleasant, it is good to know that Man U. is trying to secure sponsorship deals so as to provide additional revenue.  Of course, one does have to wonder if  Manchester United, a global entity, couldn’t have maybe shopped around a bit and secured a better deal than £3 million a year.

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