Old trafford
Man United have the second highest net transfer debt in the Premier League at £308m
(Image: Copa/Getty Images.)
One of the key themes to emerge from the first two weeks of the summer transfer window, which momentarily closes this week ahead of the Club World Cup, is how Manchester United have been able to make significant moves.
At a time when clubs such as Newcastle United have made the Champions League and Aston Villa the Europa League, on the back of a season spent in the Champions League and having reached the knockout phase, those questions are understandable.
United, from the outside looking in, have been haemorrhaging cash and posted some pretty weighty pre-tax losses over the last three years totalling some £300m.
Those losses, though, were attributed to Manchester United Plc, the New York Stock Exchange listed entity, but as reported by The Athletic last week, the vehicle through which the club is assessed for PSR purposes is Red Football Limited, a UK domiciled company set up by the Glazer family shortly after the takeover of the club in 2005.
The losses attributable to Red Football have been far less over the last two years, sitting at £55.1m, well under the permitted £105m PSR cap and before any allowable deductions come into play such as investment in infrastructure, the women’s team, the academy and community initiatives.
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It isn’t really PSR that has made United cautious heading into this window. Yes, they have committed to a £62.5m deal for Matheus Cunha and are chasing the £50m purchase of Brentford’s Bryan Mbuemo, but the haggling over payment terms and how much get paid in cold, hard cash, and when, is a major issue for United, and that is why player trading will be so crucial to their summer plans.
United have the second highest net transfer debt in the Premier League at £308m at the end of March. Of that sum, £175m is due within one year, with £47m in receivables to come back the other way chipping at a £222m sum.
When transfers occur they are accounted for on the books through amortisation, which is the guaranteed sum divided by the length of a contract, capped at five years for amortisation purposes. That means a £50m deal, for example, shows up as £10m per year on the books and reduces annually by that figure until the book value is cleared, at which point clubs can sell players for pure profit.
But the actual physical process of transferring money can happen in various tranches, often in three or four instalments. For clubs willing to stump up more cash sooner there are usually better deals to be had.
Wolverhampton Wanderers, reportedly, wanted to have Cunha’s payments boxed in three instalments of £20.8m over two years, which would eat into United’s cash reserves significantly. Brentford will likely want to sort a similar deal for themselves to aid their own cash flow. It is essentially what keeps the transfer market moving.
But United’s cash reserved sat below £100m at the most recent showing, and with a business to run, heading into the summer where there is no matchday revenue to rely on weekly, something that brings in £5m-plus per home game for United, a sensible approach needs to be taken. Bills need to be paid, payroll met and other elements of the business need access to cash.
United have a revolving credit facility, as do most major clubs, and that is often leaned on to aid financing the actual payments of transfer deals. But that facility already had racked up £210m. There is £90m left of that, but United are wanting to drive down debt, and the cost of borrowing is not as cheap as it was.
That is why selling players is atop of the to-do list when July arrives. The club is sitting on a lot of profit of players, with the likes of Marcus Rashford and Alejandro Garnacho academy products set to leave who hold no book value. Their sale fee can be booked as pure profit straightaway, and the club would see cash arrive into their business through instalment payments. It is likely that they would drive a harder bargain when it came to Rashford and Garnacho on that front.
Other potential exits such as Jadon Sancho, Tyrell Malacia and Casemiro all have book value still, but limited, and that means that profit can be realised on those sales, sales that would generate further cash for United to put to work.
It is the unseen transactions that United are approaching with caution, knowing that they don’t have unlimited cash reserves to make deals with teams for their players. The talks with Wolves and Brentford around such matters should be instructive as to where Manchester United are at.
PSR isn’t really the issue, it is making sure there is cash at hand, and with no European football next season, meaning less home games that generate cash and no prize money that helps cashflow throughout a season, there will be less dry powder to put to work.
United are, though, one of the biggest cash generators in the game, and that will continue to be so into next season, but they will be mindful of not overcommitting ahead of some revenue streams that they had come to rely on closing.