Sir Jim Ratcliffe has had something to smile about this week after Manchester United’s derby victory, but the latest reports coming out about Ineos could change his mood.
Ineos and Sir Jim Ratcliffe have cleared the Glazers as far as the ownership is concerned, but that’s hardly the bar for competence at Old Trafford.
Still, they are not the most popular people around due to the managerial fiasco and the flatlining revenues, in addition to growing debt.
Man United’s rivals are overtaking them in the financial stakes
What does Sir Jim need to do to fix this MESS?
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They have part-ownership of Man Utd, and the intention was to ultimately gain full control, but United in Focus spoke to GRV Media’s Head of Football Finance and Governance content, Adam Williams, who analyses the latest development for Ineos and how it could trigger another scenario.
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‘Big moment’ coming up for Sir Jim Ratcliffe and Ineos
One thing Man Utd fans didn’t really worry about when Ratcliffe gained part-ownership of the club was a lack of money.
He remains one of the richest people in Britain despite the worsening global economic situation hitting his petrochemical industry particularly hard.
However, the impact is finally starting to be felt at Ineos, as Williams explains that the Bloomberg report detailing the time for bond repayment/refinancing is a ‘big moment’ for Ratcliffe.
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He said: “Ratcliffe has been pretty illiquid for a while now. In layman’s terms, that means he is low on cash or assets that can be very easily converted into cash. They have a poor outlook from rating agencies.
“It was only last month that they got a £125m package from the Treasury to keep one of their UK plants open. That’s a measure of where Ineos are.
“Billionaires’ money is usually tied up in assets, not cash. So when there is a big moment coming up like this bond repayment or refinancing, it’s not insignificant.”
To put it simply, Ratcliffe is rich, but in terms of assets instead of cash, which is what will be needed to come through the ‘big moment’ explained above.
How Ratcliffe’s ‘big moment’ impacts Man Utd
Ineos and Sir Jim Ratcliffe’s financial situation has brought into focus the takeover clause the Glazers inserted during their deal with the Ineos chief.
The drag-along rights is the clause through which the American owners can force Ratcliffe to complete a full sale to a third party, in case he can’t buy out the Glazers.
Are you happy with Ineos and Sir Jim Ratcliffe?
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Considering the financial gymnastics he’s been trying to do of late, Williams says it’s a scenario that isn’t completely fanciful anymore.
He said: “I think Ratcliffe and Ineos are going to be reluctant to plunge more cash into that project in the short and medium term. They’re already £1.25bn deep.
“He is looking to sell Nice, which might provide some short-term relief, but as I’ve told United in Focus previously, I don’t think he’ll get more than £100-125m for them, including debts.
“I think the long-term implication here is also that we’re very unlikely to see Ratcliffe launch any attempt for a full takeover while the situation remains as it is. He’s too highly leveraged for that.
The longer that situation goes on, the more likely it becomes that the Glazers activate the drag-along rights and force Ratcliffe into a full sale of the club to a third party. Again, there is no sense that is in the offing at the moment, but it’s something that needs to be at least considered.”
The scenario above is a plunge into the unknown for Man Utd fans, as the sale to a third party will cause even more upheaval and changes at the boardroom level.
This was looked at just as a contingency measure when the deal was made official, but Ratcliffe’s worsening financial situation has made it a very likely option.
Never a quiet day at Old Trafford…
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