Why Manchester United might need more debt to rebuild Old Trafford – The Athletic

By Dan Sheldon and Mark CritchleyMar 14, 2024

Building a new stadium is expensive.

That is a key factor behind the Glazer family’s decision to sell a 25 per cent stake in Manchester United to Sir Jim Ratcliffe — the British billionaire and founder of petrochemicals giant INEOS — in February after a year-long negotiation.

The cost to rebuild Old Trafford has been estimated at £2billion ($2.5bn) and a task force has been created by the club to discuss, among other things, where that money is going to come from.

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As part of that, United fans are going to have to come face-to-face with a word that has haunted them ever since the Glazers completed their leveraged takeover in 2005: debt.

For those of you who need reminding, United were debt-free before the Glazers completed their takeover in 2005. The club now owe £653.3million and have spent £772.5m in interest charges, while the Glazers also took annual dividend payments — totalling more than £150m — between 2016 and 2022.

Old Trafford needs improving or replacing (Michael Regan/Getty Images)

But more debt being added to the club to fund a new stadium or the redevelopment of Old Trafford is a viable option and one that decision-makers will seriously consider.

Is that a worry? What does it mean?

Don’t panic, The Athletic has you covered…

What is United’s latest position on Old Trafford?

The potential redevelopment of the stadium has been a key theme from the start of United’s strategic review to find new sources of investment, which was announced in November 2022.

Both Ratcliffe and his rival bidder Sheikh Jassim pledged to transform the dated stadium during last year’s lengthy sale process, which ended with Ratcliffe agreeing a £1.3bn deal for a 28.9 per cent stake in the club and control of football operations.

It is still a good stadium but it has needed significant investment for two decades and has fallen behind other Premier League venues in terms of modernity. The roof is leaky, the chicken isn’t cooked properly and a club of United’s size and stature should have a state-of-the-art home.

While Ratcliffe has delegated United’s on-pitch affairs to other members of his INEOS team, he is said to be keen to take a leading role on Old Trafford’s future.

United last week announced the creation of a task force to explore “options for regenerating the Old Trafford area of Greater Manchester”, with the development of a “world-class” stadium at the heart of the project.

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The task force will be led by Sebastian Coe, who chaired the organising committee of the London 2012 Olympic Games. Other figures on the panel include Andy Burnham, the mayor of Greater Manchester, former United defender Gary Neville and Trafford Council chief executive Sara Todd.

The task force will work with the club to decide whether to renovate Old Trafford’s existing structure or build a new stadium entirely, and is aiming to report back with their recommendations later this year. 

Ratcliffe’s initial preference is for a new build. 

How much would a rebuild cost? Where would the money come from?

The cost of building a new Old Trafford has been estimated at £2bn — approximately twice the price of redeveloping the existing stadium and an amount that the club accepts will require support from funding partners.

Much has been made of the idea that public money may be used for the plans but it is far from certain that funds would be granted. Even then, they would likely be earmarked for the project’s wider regeneration aspects rather than the stadium itself.

Speaking to the Talk of the Devils podcast this week, Burnham highlighted how many new stadium developments across Europe have been “public-private partnerships”, citing the £15m public grant for Everton’s new stadium at Bramley Moore Dock.

Everton’s new stadium received some public money (Paul Ellis/AFP via Getty Images)

Yet when asked directly where the money would come from for the project, Burnham said: “It would have to come from the club and its owners primarily in terms of the stadium, if we’re just talking about the football element of this… That has to come from the club.”

On top of his purchase of a minority stake in United, Ratcliffe has also committed himself to a further $300m investment, with the money intended for Old Trafford’s redevelopment. The first $200m instalment was paid upon completion of his deal last month.

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The Glazers, on the other hand, have rarely, if ever, shown a willingness to invest their own money. In fact, given their history of taking out dividend payments, quite the opposite.

Where will the rest come from, then? United say a wide variety of potential private funding sources will be explored. And given the scale of the project and history of similar redevelopments, it is hard to see how that happens without taking on debt.

What is debt?

In its simplest form, debt is a sum of money that has been borrowed and needs to be repaid within a set timeframe, and usually involves interest payments on top. For example, if you borrowed £1,000, then you would have to pay back slightly more depending on the interest rates.

Even when football clubs are concerned, debt is not necessarily a bad thing, although being over-reliant on it with high-interest rates is bad.

When debt is added to a club to build new cash-generation engines for the future, such as a new stadium, it is often viewed as a shrewd investment. Tottenham Hotspur are a good example of this, even though their £1.2billion stadium cost about four times the initial projection of £300m.

Is the club going to be saddled with more debt?

When United released their results for the second quarter of the financial year on Tuesday, their debt was listed as totalling £773.3m, not including money owed in transfer fees.

But late on Wednesday night, a more detailed filing to the US Securities and Exchange Commission revealed that on 28 February, United paid off £120m worth of debt on their revolving credit facility — bringing their total debt down to £653.3m.

Is that Ratcliffe’s influence? The Glazer family have certainly never seemed eager to pay down United’s debt previously so long as the club can keep up with its interest payments.

But those have been getting more expensive. While around half of United’s debt is on a fixed interest rate of 3.79 per cent, the rest is subject to variable rates. Last year, United paid £32m in interest compared to £20.6m the previous year.

United’s debt is one of the reasons cited by anti-Glazer fans why they want them to leave the club (Stu Forster/Getty Images)

Now that the era of low interest rates is over, taking on yet more debt to finance building a new stadium will likely be costlier than it was five years or a decade ago.

Despite that, neither United sources — who spoke to The Athletic on the basis of anonymity to protect relationships — nor those close to Ratcliffe are ruling out taking on debt to finance Old Trafford’s regeneration, so long as it is affordable on top of the club’s existing debt burden.

At least, as of a few weeks ago, that debt burden has now been lightened slightly.

GO DEEPER

Explained: Football is awash with debt – but not all of it is bad

Didn’t INEOS say no new debt would be added to United?

When INEOS launched their bid to buy Manchester United in February 2024, they said that money would not be leveraged against the club to complete any purchase.

Their initial plan was to acquire all of the shares owned by the Glazers — 69 per cent — as opposed to the 25 per cent shareholding that was signed off last month, and they stuck to their word regarding not borrowing money against the asset to fund their investment.

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However, the water is somewhat muddier in regards to rebuilding Old Trafford.

Adding debt to the club’s balance sheet is one of the options being considered by the newly created task force.

External funding can also come via other sources if it is a large-scale regeneration of an area, which may not necessarily be linked to borrowing. Media City in Salford, for example, has private investment partners who would usually aim to make a profit on their stake down the line.

Neville, who sits on the task force, has an ongoing project in Manchester — St Michael’s Development — which secured funding from KKR, a global investment firm, so it is not uncommon for private investors to get on board when it comes to developing real estate.

Why is new debt not necessarily a bad thing?

Understandably, debt at United is a toxic word due to how the Glazers leveraged money against the club and adding to it is likely to send a shiver down the spine of many United fans.

But when debt is used against an infrastructure project, it is often viewed as a different scenario. 

Tottenham Hotspur’s stadium, which cost £1.2billion and opened in April 2019, is considered to be the best venue in the Premier League due to its myriad offerings that make it a year-round venue as opposed to just where Spurs play their home matches.

To fund the rebuild, the club borrowed £637million, taken out in multiple instalments, from Goldman Sachs, Bank of America Merrill Lynch (now Bank of America) and HSBC. 

According to Swiss Ramble, a respected football finance analyst, and as per the club’s accounts for the 2021-22 season, more than 90 per cent of their debt was stadium-related. The average interest rate was 2.81 per cent.

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When Arsenal opened the Emirates Stadium in 2006 at a cost of £357million, they borrowed £260m from a consortium of banks, led by the Royal Bank of Scotland. 

A UEFA report released in February highlighted how Tottenham make more money per match than any other Premier League club and are only behind Paris Saint-Germain and Barcelona in the rankings.

Spurs generate just under £5million every matchday when gate revenue and money spent by fans is taken into account. The next Premier League side on the list is Arsenal, who earn around £4.2m on a matchday.

In comparison, and according to UEFA’s report, United generated £3.2m per matchday, despite having a larger capacity than the Emirates and Tottenham Hotspur Stadium.

This shows what is possible if United were to commit to a rebuild, even if it was partly financed by debt, as you would expect the club to start clawing back the money over the long haul.

(Top photo: Michael Regan/Getty Images)

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