TA: Manchester United s debt is concentrated on installment transfer fees, but La Jue seems to increase credit limit

Hupu August 6th News TheAthleticUK Football Finance reporter Chris Weatherspoon wrote a column to analyze how Manchester United can afford Sheshko.

Cunha's signing was confirmed before the end of Manchester United's fiscal year on June 30, which means that the total cost of signing him to £71.3 million should be included in the 2024-25 season for accounting reasons.

Plus £272.1 million spent in the nine months ended March 31, Manchester United hit a staggering £343.5 million last season - the third highest single-season record in English football history (although Liverpool may soon squeeze it to fourth).

This is the highest single-season spending in Manchester United history, but it is not surprising at all. Manchester United have spent more than £200 million each of the past three seasons to sign new players, but the returns recovered from player transfers have been minimal.

According to the third quarter report, Manchester United's transfer fee income of £66.3 million last season was the second highest player transfer fee income in the past decade; but net expenditure last season still hit a record of £277 million.

Assessing a club's ability to spend actually covers two different aspects: Profit and Sustainability Rules (PSRs) and the presence or access to actual cash.

In terms of the former, Manchester United's so-called PSR dilemma has rarely been mentioned recently. As TA revealed in June, partly because the club's PSR calculations are based on RedFootball Limited's performance, thus removing some large costs at the PLC level that are not within the scope of football activities. The specific data from last season are not clear, but...United States may still lose money due to increased business and game-day income (which offsets a significant decline in broadcast revenue), and a significant decline in wage expenditure, but at least under the £105 million PSR limit of at least three years, the losses are affordable.

Although Manchester United hopes to make huge progress in the Premier League, they will not have any broadcast revenue for European matches this year, and their continued high transfer expenses will not help reduce players' amortization expenses, which is close to £200 million a year.

Forecasting Manchester United's PSR space for the 2025-26 season is not easy (or stupid) because it requires estimating the financial situation of a club that is undergoing major changes for a full two years, especially in terms of spending.

Their biggest problems with available cash are amortization issues, and transfer fee installments issues. Manchester United's net transfer debt (installments owed to the club minus installments owed to the club) has surged in recent years, soaring from less than £100 million in June 2021 to £308.9 million at the end of March.

Manchester United has also recently invested more money in infrastructure, with the most obvious example of which has further compressed the club's cash reserves.

Even after Ratcliff's £238.5 million injected, the club's cash balance was still £73.2 million as of the end of March. By the standards of most clubs, this is still a considerable amount, but Manchester United is not most clubs after all.

They have a lot of debts to be paid.

Manchester United has held some revolving credit lines (RCFs, which are actually corporate overdrafts, used to supplement daily liquidity) for some time, but it was not until the impact of the new crown. Surprisingly, by the end of April, they had repaid £50 million in revolving credit lines.

This indirectly gives them additional room to borrow this summer. On April 28, after repaying £50 million, Manchester United had withdrawn £160 million from its three revolving credit lines, with the total limit (at least once) of which was £300 million.

So, if Manchester United wants, they can withdraw another £140 million by the end of April, although doing so certainly requires additional interest costs.

The activities since the submission of the third quarter report on June 6 are not clear and will not be confirmed until the club's full-year financial statements for 2024-25 are released. But on July 10, a new mortgage against Manchester United's entities was registered in the company's registry, with the mortgagor being Bank of America, which had previously served as the guarantee trustee of the existing £300 million revolving credit agreement.

A year ago, on June 28, 2024, a related mortgage was filed for Manchester United extending a £150 million revolving credit agreement to June 2027.

This new mortgage suggests that the revolving credit agreement may be extended further, or that United may have improved their borrowing capacity, using more funds than we know of at the end of April.

When TheAthletic contacted the club, the club declined to comment on the matter, simply saying that any changes in the nature or size of the revolving credit agreement will be detailed in the club's 2024-25 annual accounts, which are expected to be released in September. Manchester United also expects adjusted EBITDA (an accounting measure of operating performance) for the 2024-25 season to be between £180 million and £190 million, a significant increase from £147.7 million in the 2023-24 season, which should have translated into stronger operating cash flow last season.

Even now, if Manchester United wants to, they still have the ability to spend money. Cash management now needs to be more cautious than Old Trafford used to, but combined with recent moves and the club’s ongoing borrowing ability (if they want), this means they still have the funds available.