Newsletter #1602

Another cup game on Sunday, which saw us emerge eventual winners 4-2 against Scunthorpe, though not without a few worrying moments! Through to the last 16 of the FA Cup, we now face Stoke City at home.

Meanwhile, attention is firmly focused on the return leg of the Carling Cup semi-final this Wednesday evening. We have opinion tonight on just how the media are reacting to City’s upturn in fortunes both on and off the pitch and a look at just how in the red the Rags are.

Finally, a few chants to get you going on Wednesday and information for those London based Blues.

OPINION: MORE MEDIA LIES

‘Can you see them, talking about us, telling lies, well that’s no surprise’

The latest lie to come from Manchester United supporters is that Carlos Tevez only makes an effort against them. Yes, it’s preposterous isn’t it? I almost choked on my cornflakes when I heard so-called Telegraph journalist and Rag Jim White spewing this nonsense on Radio Five Live’s Fighting Talk last Saturday. Talk about sour grapes. Of course we know better and any football fan worth his or her salt knows that Carlos Tevez always gives his all and has scored 17 goals this season (12 in the League, 5 in the Cups) against all sorts of opponents. It’s a very impressive haul from the Argentine striker whose game is clearly much more than about goals. Is there a striker in world football that works harder than Carlos Tevez? I’ve yet to see one. OK he’s missed a few a chances that one would expect him to score, but he has more than made up for that with his industry and some spectacular goals. I’m absolutely in awe of his professionalism and work rate, not to mention skill.

So when he tells the truth about Gary Neville, people should take notice rather than criticise him. Most reasonable people would say that the words ‘idiot’, ‘tarado’ (moron) and ‘boot licker’ fit Gary Neville. Gary Neville is always saying things that he thinks Alex Ferguson would like to hear him say. That’s the same Gary ‘the Goat Feeder’ Neville (joke and figure of fun that he is to City fans) that is a serial offender when it comes to inciting crowds, and whom for some reason, escapes with little slaps on wrist. Only an idiot doesn’t learn! Anyone would think that the Football Establishment or indeed the plain old Establishment don’t want United to be seen in a bad light. The FA aren’t scared of United are they? No, surely not. Perish the thought. The FA certainly do a very good impression of being terrified of Ferguson. He gets a little slap on the wrist when he does a character assassination of referees, and we all know what would happen if another manager, especially those outside the top four, behaved in the same appalling manner that Ferguson does at times. Despite their terrible behaviour, the Establishment are happy to portray United in the best possibly light and shower them with honours, yet they are less than even handed with others. How is it that Bob Paisley, Bill Shankly, Brian Clough and Joe Mercer were never knighted? I think we all know the answer to that one.

We can expect the Rag journalists (Daniel Taylor, Jim White etc.) to be spinning stories against City and ignore serious foul play by United players (how is it Rio Ferdinand’s unpunished assault on the Hull player last Saturday has slipped by with barely a mention?). That’s what they do, though why their so-called quality newspapers allow them to get away with it is another matter. Certain journalists e.g. Paul Hayward in the Observer should know better than to peddle an inaccurate, disingenuous column entitled ‘Money – not love or lack of it – is driving force in life of Carlos Tevez’ (http://www.guardian.co.uk/football/blog/2010/jan/24/carlos-tevez-gary-neville-manchester-city-united). Let’s see: that’s the same Paul Hayward who has written for at least three national newspapers, and you can bet that he did very well for himself with each move. Far be it for me to use the word ‘hypocrite’. The fact is, and it is clear for all to see (though some like to tell us otherwise) that whilst Carlos Tevez has done well for himself, he really loves the game. Carlos Tevez is a class act: witness his lack of celebration against the fans of his former teams: West Ham fans will testify even if Manchester United fans won’t. The verve and passion that Tevez has for the game is obvious and those who peddle untruths about him, do their own reputations more damage with their untruths. They may find that people do not want to buy their newspapers and read their disingenuous untruths. Something for the editors of said papers to consider, surely?

Journalists should be focusing more on serious foul play and the actions of certain United fans, bringing weapons to football matches rather than getting the Rag spin machine into action to slaughter Carlos Tevez. There can be no justification whatsoever, under any circumstance, for anyone bringing darts and golf balls etc. into football matches.

As we can see, the more desperate the United become, the nastier they get. How else can anyone explain the dangerous weapons that were seized from United fans and threatening behaviour from them last Wednesday? How else do we explain the nasty character assassinations that have been done on our club and its employees? Their odious club has been built on greed and arrogance and a disregard of the rules of football: a disregard of the rules of society; of having no regards or respect for other clubs. Character assassinations, arrogance and intimidating referees are their stock in trade. It’s brought them great ‘success’. Now their fans are being fleeced as their club is milked for what it is: the ultimate cash cow. I’d have sympathy for fans of other clubs (OK, maybe not MK Dons, but that’s another story), but, not this lot. They’ve made their bed. They can lie in it.

Hopefully City will be positive and get the result that we need at Owed Trafford. I’d take a backs-to-the wall, nail biting 0-0, but I fear that sitting back and inviting pressure will play into United’s hands. I’d like to see City be sensible but positive and prepared to hit United with pace. A team of Given; Richards, Onuoha, Kompany, Zabaleta; de Jong, Ireland, Barry; SWP, Tevez, Bellamy would give us a good balance between defence and attack. Dedryck Boyata has done well, but Nedum Onuoha has more experience and is less likely to be nervous. Zaba is a warrior who can do a job for us at left back. Ireland works hard but can pick out a pass as we have seen several times. With SWP and Bellamy either side of Tevez we would have plenty of pace and balance in attack, as well as a willingness to close United down. We have the players to at very least get a draw. Now they have to prove that they can do it to set up a final against Villa. Whatever team Roberto puts out, Come on City. Do the business this Wednesday.

OPINION: FINANCES IN THE RED

At this time of year I would normally comment on City’s finances but it’s a pretty pointless exercise at the moment as Sheikh Mansour’s investment rules out any meaningful comments on the recently released accounts. We’ve made a huge loss but we’re supporting a level of wage bill and player expenditure that is only sustainable from the income that regular success, at home and in the Champions’ League, will bring. So instead, despite this being a City fanzine, I’ll talk about our friends from Stretford (the biggest club on the planet, in case you didn’t know). They kindly allowed the rest of the football world to have a good laugh at their expense (without Gary Neville opening his mouth) when they announced that they were looking to raise £500 million from a sale of investment bonds. That caused a stir in itself but the real fun came when they issued the preliminary prospectus to underpin this sale. There’s been some discussion of this on the forums and it’s clear that many would like to understand what lies behind it and what it means for their financial future.

Just to explain their financial position to anyone who doesn’t already understand it. When the Glazers took them over, United were debt free but to finance the purchase, the Glazers had to borrow a considerable sum of money. They initially raised this in their own name but, as soon as they had control, re-financed some of this by borrowing against United’s assets and using that money to pay themselves back. Part of the purchase sum had been raised via something called Payment in Kind or PIK notes. These are not secured and accrue interest but that interest is added to the capital every year (or half-year) and not paid until a given event, which might be a fixed date, the company being sold or re-financed. Therefore the borrower is paying interest on the interest, making it a more expensive way to borrow. In addition,the rate of interest payable on these is generally high because PIK notes are seen as risky for investors as they may not get anything back.

After acquiring the club in 2005, the Glazers re-financed some of the debt in 2006, leaving them with a number of bank loans totalling £525 million and £138 million of PIK notes carrying hefty interest of 14.25%. To add to their problems, the PIK notes were in their own name rather than Manchester United’s. With the interest accruing on the PIK notes, they were paying the interest on the bank loans regularly but not on the PIK notes, as the interest payable was added to the capital. This was increasing the debt exponentially and if they ran their whole term to 2017, they would increase from an initial £137 million to a whopping £580 million. In addition, the bank loans were due for repayment between 2013 and 2016, £75 million in the first year and £150 million in each of the next three. Hence the doubling of ticket prices over the last few years.

Clearly, their priority was to re-finance or somehow pay off the remaining PIK notes but the credit crunch in 2007 put a stop to that. The other problem they had was that the terms of the bank loans insisted that any capital repayments were made against those first rather than the PIK notes. Therefore, before they could even start repaying those, they would have to find over £500 million for the bank loans. The answer was to issue £500 million of bonds in order to do just that, which had the added benefit that they could defer payment of these later than the bank loans. The terms of the bonds are less stringent, thereby allowing them to use any surplus cash from United to pay off the PIK notes. Just to explain, a bond is simply another form of borrowing, usually paying a fixed rate of interest for a fixed term. At the end of the term, the bond holders are repaid the capital amount. So if I buy £100 of bonds paying 5% and redeemable in 5 years, I get £5 per annum and my £100 back at the end of year 5. The prospectus detailed all the terms and conditions and the fact that they were secured on the assets of the football club. So if for some reason United can’t pay the interest or capital, those assets have to be sold to provide these funds.

Among those terms and conditions were some clues as to what the financial future held for them. The first was that the Glazers could take a one-off payment of £70 million out of the club in the first year and other specified payments out in subsequent years. These could be in the region of £50-60 million per annum. So over the terms of the bonds the Glazers could end up taking something like £350 million out in dividends and charges, not forgetting the more than £300 million in interest payable on the bonds (as well as the £55 million it cost them to actually do the bond sale). As they currently generate about £90 million cash a year before player transfers, that doesn’t leave them a lot spare. It also means that the net proceeds of the Ronaldo sale, after buying Valencia and a couple of others, pretty well went to finance the bond issue. This rendered Ferguson’s assertion that he had the Ronaldo proceeds available to him as utterly laughable. But when does being economical with the truth ever bother the world’s greatest living hypocrite?

So at current levels of financial performance, they can get by but any player purchases will have to be funded by sales and further borrowings (they have an overdraft facility of £75 million) and it seems like net spend will be small at best. They have a number of key players coming to the end of their careers imminently (van der Sar, Giggs, Scholes and that horrible, rat-faced runt Neville) but also the manager that has made the whole far greater than the sum of the parts for the last few seasons. So it’s possible that this level of success might not be sustainable and this risk was acknowledged in the bond prospectus. The last team that staked everything on sustained success was Leeds and look what happened to them when it all went wrong. The bond terms also included a stipulation that certain profit targets had to be hit and failure to do so would constitute a default. There are exceptions to this however, one being if they fail to qualify for the Champions League in two non-consecutive seasons. Note the word non-consecutive; clearly failure to qualify in two consecutive seasons will not be an acceptable reason for missing profit targets. This would trigger a default and a forced sale of assets, leading to the sort of situation Portsmouth now find themselves in, their banks having withdrawn their credit facilities.

Last season’s CL brought them about £45 million in prize money as well as about £12 million in gate receipts. Plus there would a commercial benefit as well, probably via sponsorship income contingent on CL exposure. So of their £278 million turnover, over £60 million of that would disappear if they weren’t in the CL. As they can just about get by on current levels of income, losing that much would be pretty disastrous for them, presumably requiring asset and/or player sales to replace the missing cash. Clearly they can’t do too much of the latter without impacting their chances of reversing the situation.

The bond sale was successful but there was another interesting twist. The bonds were offered in two chunks, one in sterling and the other in dollars. Demand for the latter significantly outstripped the former and the amount allocated to the sterling bonds was reduced, with the remainder being offered at a discount, giving investors a return of over 9%. The dollar tranche was offered at something like 8.75%. This compares to the rate of just over 5% they were paying on the bank loans so it’s nearly £20 million more a year in interest. One possible reason for the greater enthusiasm for the dollar offering is that American investors, used to a much more level financial playing field in their major sports, have not appreciated that a somewhat different situation applies in European football and just how much success in the CL means to United’s finances.

So to summarise, they have taken advantage of both decent conditions in the bond markets and possibly the fact that Ferguson is still manager to act but it’s an act born more of weakness than strength. On the one hand, they now have 7 years breathing space before the £500 million is due for repayment, instead of just 3 years but they will pay a higher rate of interest than they do currently. Also it allows the Glazers to start shovelling cash out to meet their liabilities under the PIK notes but they have to hope that this (or any other factor) does not cost them their top four place. My belief is that the Glazers are so desperate for cash that they won’t care what state they leave United in as long as they meet those liabilities. It’s a very dangerous balancing act and could very easily end in tears.

But not from readers of MCIVTA I assume.

OPINION: SINGING THE BLUES I

Chant of the season! I had to laugh at the ingenuity of our fellow City fans last Sunday. A certain chant made me laugh out loud. It went:

U.N.I.T.E.D.,
That spells lots of debt to me,
With a nick-nack paddy-whack
Give a dog a bone,
Get Ocean Finance on the phone

Absolutely priceless, or is that debtless (in our case).

OPINION: SINGING THE BLUES II

For those lucky enough to have a ticket for Wednesday night, if you’re short of a song or two maybe you could try one of these:

To one of the Rags’ favourite tunes…

U-N-I, T-E-D
We know Fergie smells of wee
With a nick-nack-paddy-wack give the dog a bone
Send him to an old folk’s home

Alternatively, you could try a couple of verses for that old calypso carol favourite:

Long time ago in Manchester
Saw the two great rivals play
Blue and Red go head to head
On this, the derby day

Hark now hear, the City sing
United ran away
And we will fight forever more
Because of derby day

Now Carlos said, he’d be a Red
But moaning Fergie would not pay
Now he’s a Blue, through and through
Who shines on derby day

Hark now hear, the City sing
United ran away
And we will fight forever more
Because of derby day

Enjoy the game and sing a song for those of us watching on the telly.

REQUEST: LONDON BLUES

Further to Struan’s message in MCIVTA 1601, I have been working hard recently to bring all London Blues together.

We have adopted The City Pride, Farringdon Lane, Clerkenwell, EC1R 3AN.

If anyone London based, or visiting, wants further details please contact me on email or call 0754 077 3987.

RESULTS

23 January 2010

Manchester United    4 - 0  Hull City            73,933

League table to 24 January 2010 inclusive

                            HOME          AWAY        OVERALL
                    P  W  D  L  F  A  W  D  L  F  A  W  D  L   F   A  GD Pts
 1 Manchester Utd  23 10  1  1 31  8  6  1  4 22 11 16  2  5  53  19  34  50
 2 Arsenal         22  9  1  1 34 11  6  2  3 25 14 15  3  4  59  25  34  48
 3 Chelsea         21 10  1  0 34  8  5  2  3 18 10 15  3  3  52  18  34  48
 4 Tottenham H.    22  7  1  3 26  8  4  4  3 16 16 11  5  6  42  24  18  38
 5 Manchester City 21  7  3  0 26 14  3  5  3 16 16 10  8  3  42  30  12  38
 6 Liverpool       22  7  2  2 28 11  4  2  5 12 15 11  4  7  40  26  14  37
 7 Aston Villa     21  6  3  2 17  7  4  3  3 12 11 10  6  5  29  18  11  36
 8 Birmingham City 21  5  4  2  9  6  4  2  4 12 13  9  6  6  21  19   2  33
 9 Fulham          21  6  2  2 15  6  1  4  6 11 18  7  6  8  26  24   2  27
10 Everton         21  4  5  2 16 15  2  3  5 14 19  6  8  7  30  34  -4  26
11 Stoke City      21  5  3  3 15 13  1  4  5  4 13  6  7  8  19  26  -7  25
12 Blackburn R.    22  5  4  2 15 11  1  2  8  8 28  6  6 10  23  39 -16  24
13 Sunderland      21  5  3  2 18 13  1  2  8 12 25  6  5 10  30  38  -8  23
14 Wigan Athletic  20  3  3  3 10 13  3  1  7 13 31  6  4 10  23  44 -21  22
15 Burnley         21  5  4  1 14  9  0  1 10  8 34  5  5 11  22  43 -21  20
16 West Ham United 21  3  3  4 18 20  1  4  6 10 17  4  7 10  28  37  -9  19
17 Wolves          21  3  2  6  9 17  2  2  6  8 21  5  4 12  17  38 -21  19
18 Hull City       22  4  3  3 13 16  0  4  8  7 30  4  7 11  20  46 -26  19
19 Bolton Wndrs    20  2  4  5 16 23  2  2  5 12 19  4  6 10  28  42 -14  18
20 Portsmouth      20  3  0  7 13 16  1  2  7  5 16  4  2 14  18  32 -14  14

Heidi Pickup, editor@mcivta.city-fan.org

Editor: