How the Glazer family are indebted to borrowing at Manchester United
The amount the owners are taking out of Old Trafford is causing rising concern among United supporters
The most striking revelations in the 322-page prospectus launched by the Glazer family last week to seek £500m in new bond loans for Manchester United were the five short paragraphs detailing the millions of pounds the family is personally taking out from the Old Trafford football club. Their borrowings, in particular, have prompted United supporters and some financial observers to question whether the Glazers have many businesses of their own which are currently making money, or much other access to cash.
In the section of the prospectus which provides the statutorily required biographies and "principal outside business interests" of the directors, three of the brothers, Avram, Joel and Bryan Glazer, have no other interests noted except at United and the Tampa Bay Buccaneers, the family's NFL franchise.
Earlier this month the Buccaneers finished bottom of their division after the Glazers, according to consistent reports, spent from the NFL's centrally distributed revenues $30m (£18.3m) less than the permitted maximum on players' salaries.
Darcie Glazer Kassewitz, a non-executive director of Red Football Limited, one of the companies the Glazers have formed to hold their shares in the club, is listed only as co-president of the Glazer Family Foundation, which assists charitable causes tied closely to the Tampa Bay franchise area. Only two brothers, Edward and Kevin, are listed with another outside business interest, as "officers", unspecified, of one of the family's long-term private companies, First Allied Corporation.
Between 1 July 2006 and 30 June 2009, the date of the most recent annual accounts released with the prospectus, Glazer-affiliated companies were paid £10m in "management and administration fees" and in June another Glazer company, SLP Partners, was given a consultancy agreement worth up to £2.9m a year, which will end if the bond scheme is fully taken up by lenders. To replace it, according to the document, United "expect to enter into a management services agreement" worth up to £6m a year with "one or more entities related to our ultimate shareholders [the Glazer family] for administration and management services". On page 115 of the document lies a further £3m the family will have a right to be paid out of United "in respect of services provided by directors, officers or employees" of the holding companies.
Most eye-catching were the personal loans, £10m in total, taken out of United on 19 December 2008: £1.66m to each of Malcolm Glazer's five sons and one daughter, who are directors of Red Football Limited. The loans carry an annual interest of 5.5% and are repayable on demand after five years.
Until the Companies Act was revised in 2006 it was illegal in England, punishable with a fine or even imprisonment, for a director to borrow money (above £5,000) from his company. That no longer applies but it is still highly unusual for a company of Manchester United's size and prominence to see directors personally borrowing money from it. In the Premier League it is absolutely exceptional; no directors at any other club have borrowed money from it. Indeed it is the opposite in most cases; the owners are lending millions to their clubs personally.
Keith Harris, the merchant banker at Seymour Pierce who has advised on four Premier League club takeovers and is a long-standing critic of football club purchases financed with heavy borrowing, said: "You would not expect directors to be borrowing money at a company of United's size and, although it is now allowed legally, it is generally still frowned upon because it does not create a good impression of the directors' governance of the company."
In the week since the prospectus was launched containing those disclosures of the millions the Glazers have been paid – on top of the £460m United have become liable to pay in interest, professional fees and interest rate hedges since the family's 2005 takeover – the family's spokesman, who also speaks for United on financial matters, has declined to explain why the fees and loans were taken out. This week he again declined to comment when asked what other businesses the Glazers are currently involved with, besides United and the Tampa Bay Buccaneers, to discuss how First Allied Corporation is trading or what cash and assets the Glazers currently have.
When the Florida-based family emerged to buy United, in the teeth of opposition from supporters' groups and the board, including the current chief executive, David Gill, who warned of the "significant financial strain" the debt-soaked plans could place on the club, the family were described as billionaires, with interests in property and industry, as well as the Bucs. Some in football who did not heed the warnings believed so wealthy a family would put money into United, not take out £22.9m in fees and loans while transforming England's richest club to its most debt-laden, by loading on to the club itself the borrowings they took out to buy it in the first place.
Malcolm Glazer, now in his 80s and reported to have suffered a stroke, was a classic American self-made man, working his way relentlessly to buying and selling major companies after taking responsibility for his family's watch parts business at 15 when his father died. When he and his own six children took over United in 2005, the family still had significant holdings in Zapata, a company listed on the New York Stock Exchange, which in turn owned the fish oil firm, Omega Protein. Zapata sold Omega on 1 December 2006 for $29m and last summer the family sold their holding in Zapata itself, to a hedge fund, Harbinger Capital Partners, for $74m.
The business culture in the US for private companies is much less transparent than in the UK, where accounts, directors and significant transactions are all required to be publicly available via Companies House. Without the family making some information public voluntarily it is not possible to see how the First Allied Corporation, a private company which invests in property, mostly shopping malls, has been faring. The company is registered with the New York Department of State, giving an office in Rochester, New York, as its principal address and Malcolm Glazer as the chairman or chief executive officer. A spokeswoman for the department said that in New York law there is no requirement for the company to file details of any other directors or annual accounts.
Some in this vacuum of information, considering the only facts which are publicly known – sales of the other Glazer holdings, the downturn in property values, the highly borrowed method of financing the United deal, plus the fees and loans taken out of Old Trafford – are asking whether the family have ready sources of funds other than Manchester United and the Bucs.
"We do not know because the owners of our great club so rarely say anything," said Nick Towle, chair of the Manchester United Supporters' Trust, which has always campaigned against the Glazers' debt-introducing takeover. "Certainly we have been proven sadly right when we warned that these people would provide United with not one penny to spend, if they took over, but instead take millions out."
