Manchester United reveal their worst nightmares

The deepest, darkest fears of Manchester United’s owners have been laid bare in a 322-page document circulated among potential investors in their proposed £500 million bond issue.

It acknowledges the threats posed to the club by factors as diverse as Sir Alex Ferguson’s retirement, Uefa’s proposed “financial fair-play initiative”, the boundless spending of their rivals — and even terrorism.

The prospectus lays out United’s business strengths and their future strategy as the club look to ease the financial burden of the huge debts brought about by the Glazer family’s takeover in 2005.

But, as a warning to potential investors, United also acknowledge numerous risk factors that could affect the club’s financial wellbeing in the seven years before the bond would mature.

They are listed as a means of ensuring that investors are aware of the potential downsides of buying into United — the early indications, after the club’s “road shows” across Asia on Sunday and Monday, are that interest has been strong — but never before have such fears been recognised publicly by the club.

Ferguson and David Gill, the United chief executive, have always dismissed supporters’ concerns about the risks attached to the Glazer takeover, but the new document, seen by The Times, illustrates the precarious nature of success on and off the pitch.

For years, since Ferguson abandoned his planned retirement in 2002, the issue of the manager’s successor has been one that the United hierarchy has been only too willing to put off. Yet he is 68 and has maintained that he will not manage beyond the age of 70.

The firm expectation is that he will carry on next season, but, sooner or later, United are facing a moment that may take the club into a period of transition or, worse still, decline.

“We are highly dependent on members of our management, including our manager, Sir Alex Ferguson, and players,” the document reads. “Our ability to attract and retain the highest-quality players and coaching staff is critical to the first team’s success . . . and, consequently, critical to our financial performance.

“Any successor to our manager may not be as successful as he has been. A downturn in the performance of the first team may adversely affect our ability to attract and retain such coaches and players.”

Then there are the concerns about Uefa’s plans to introduce regulations by 2012 whereby clubs who operate at a loss could be excluded from European competition.

United should not fall into that category, but, after paying £41.9 million in interest on their debts in the past financial year, they required the sale of Cristiano Ronaldo to Real Madrid to turn a £31.8 million loss into a £48.2 million profit. Michel Platini, the Uefa president, has frequently voiced his distaste at United’s debts, last recorded at £699 million.

The document reads: “Uefa has proposed certain spending restrictions on clubs participating in the Champions League and Europa League competitions. There is a risk that … the ‘financial fair-play’ initiative could limit our ability to acquire or retain top players and … materially adversely affect the performance of our first team.”

Concerns are aired about the big spending of some of United’s rivals, which presumably means Manchester City and Chelsea in the Barclays Premier League and Real on the European front. “In the Premier League, recent investment from wealthy team owners has led to teams with strong financial backing,” the document reads. “Other European football clubs are spending substantial sums on transfer fees and player salaries.

“Competition has led to higher salaries for our players as well as increased competition on the field. The increase in competition could result in our first team finishing lower in the Premier League . . . and jeopardising our qualification for or results in the Champions League, [which] could materially adversely affect our match-day, media and commercial revenues and our overall business.”

The harsh economic climate is also mentioned, with confirmation that 16 per cent of United’s corporate and executive tickets remained unsold as at September 30, 2009.

Most terrifying of all is the threat of terrorist activity, whether at Old Trafford or on the team’s pre-season tours. Those fears increased last July, when a bomb killed nine people in hotels in Jakarta, Indonesia — including the Ritz-Carlton, where the United squad were due to arrive the next evening.

“We are one of the highest-profile sports clubs in the world, with a global fanbase,” the document reads. “Our first team regularly tours the world for promotional matches, visiting various countries in Asia, the Middle East and Africa. Some of those countries have a history of terrorism and civil unrest. As such, our club and our players could be potential targets of terrorism when visiting those countries.

“In addition, Old Trafford is an iconic stadium and a potential target for terrorism. We insure against certain acts of terrorism and other disasters and use security screening to protect fans and visitors.”

Many unhappy returns?
In the prospectus for Manchester United’s proposed £500 million bond issue, potential investors are warned of numerous risk factors that could affect their returns. These include:

Sir Alex Ferguson’s retirement “Any successor to our manager may not be as successful as he has been. A downturn in the performance of the first team may adversely affect our ability to attract and retain such coaches and players.”

Proposed Uefa regulations on debt “There is a risk that, in conjunction with increasing player salaries and transfer fees, the ‘financial fair-play’ initiative could limit our ability to acquire or retain top players and, therefore, materially adversely affect the performance of our first team.”

Big spending of United’s rivals “In the Premier League, recent investment from wealthy team owners has led to teams with strong financial backing. The increase in competition could result in our first team finishing lower in the Premier League than we have in the past and jeopardising our qualification for or results in the Champions League.”

Economic climate “Continued weak economic conditions may adversely affect our match-day and media revenues and could eventually affect our commercial and sponsorship revenues, each of which could have a material adverse effect on our business and results of operations.”

Threat of terrorism “Our club and our players could be potential targets of terrorism when visiting countries which have a history of terrorism and civil unrest. In addition, Old Trafford is an iconic stadium and a potential target for terrorism.” (The Times)