Sir Jim Ratcliffe’s $1.3billion minority investment in Manchester United is finally complete and the INEOS-led era is officially under way.
As part of the deal, Ratcliffe will also invest a further $300million (£238m) in the club by purchasing newly issued shares.
This $300m investment will eventually see Ratcliffe’s stake increase to 29 per cent, while the money itself is intended to be put to the redevelopment of Old Trafford.
That much was confirmed by the 241-page filing to the U.S. Securities and Exchange Commission (SEC) published on Boxing Day, which outlined the terms of Ratcliffe’s deal.
Sir Jim Ratcliffe is investing his money into Manchester United (Valery Hache/AFP via Getty Images)
However, the SEC filing also said that the $300m may be used in the club’s “ordinary course of business”, opening up the possibility of the funding being spent in other areas if deemed necessary.
So how will his $300m investment be used? Could it be spent in the transfer market if needed? And does it affect United’s concerns over financial fair play (FFP) compliance?
How will the $300m investment work?
Ratcliffe’s $300m investment will come in the form of two cash payments — $200m upon completion of the deal, with a further $100m to follow before the end of the year.
Even those close to INEOS concede that $300m will not be enough to carry out all of the improvements required to restore United’s home to its status as English football’s leading club stadium.
Plans drawn up in 2022 included options to redevelop the existing Old Trafford site or build an entirely new stadium, with the cost of the latter estimated at somewhere between £1.2bn and £1.6bn.
Renovating the existing site would be cheaper but it would also involve temporarily reducing Old Trafford’s capacity and losing matchday revenue.
United’s matchday takings were £136m last season (around 21 per cent of their total income). That is comfortably the highest in the Premier League, with Tottenham Hotspur’s £106m (from the 2021-22 campaign, as Spurs have not yet published their 2022-23 accounts) next on the list.
If plans for a bigger, better Old Trafford are to become a reality, further funding will be required — possibly through the club taking on yet more debt if Ratcliffe is not willing to dip his hand in his pocket again.
Parts of Old Trafford are in disrepair (Alex Livesey/Getty Images)
But at least some of the $300m can already be put towards the planning, consultation and other initial work required before embarking on an infrastructure project of this scale.
Ratcliffe is thought to view the Old Trafford question as a major priority and is ready to draw on INEOS’ experience in delivering major infrastructure schemes for what will be a legacy-defining project.
It emerged this month that Ratcliffe has aspirations of creating a ‘Wembley of the North’, rivalling the 90,000-capacity national stadium.
Ratcliffe hinted at his bold plans for Old Trafford in meetings with supporters held in Manchester last month, when he shared his vision of the site becoming a club campus and community hub by making greater use of its surrounding land.
But until any such plans are finalised and the bulk of redevelopment or rebuilding work is under way, the vast majority of the $300m will be sitting safely in United’s bank account and can, if necessary, be put to use elsewhere.
Could some of the $300m be spent in the transfer market?
Yes. “Unless there’s a specific covenant in the financing or the funding provided by Sir Jim, then they can,” says Kieran Maguire, a football finance expert and academic at the University of Liverpool.
“Ultimately, the money is going into a pot and how that pot is used is determined by the executives of the club.”
While United are waiting for infrastructure work to begin, they can dip into this additional $300m in cash as and when required — to pay wages, to settle debts or to sign players.
United’s cash reserves stood at more than £300m in 2019 but were hit hard by the Covid-19 pandemic — falling to a low of £52m the following year.
Paying for a player like Michael Olise using the new money is possible but unlikely (Justin Setterfield/Getty Images)
That has meant that much of United’s spending in the years since has come on credit, with the club’s borrowings jumping from £511m before the pandemic to £733m at the start of this season.
“United have got an outstanding £364m in instalments for players that they signed in previous windows. That’s going to be a drain from a cash flow point of view,” says Maguire.
Ratcliffe’s investment will suddenly make the balance sheet look a lot healthier and give the club greater liquidity when meeting spending commitments, whether that be in the transfer market or not.
However, there is a sense of caution against the idea that this is a $300m transfer war chest for the summer window, or that it is ultimately intended for anything other than infrastructure.
When all is said and done, INEOS executives are expecting the $300m to have gone towards the redevelopment or rebuilding of Old Trafford rather than on improving the squad or for any other purpose.
And so while some of Ratcliffe’s cash could go towards players this summer if necessary, it would have to be recovered and redirected towards its original purpose in future.
Does Ratcliffe’s $300m help United’s PSR?
United have been one of the more vocal clubs regarding their compliance with the Premier League’s profitability and sustainability rules (PSR) recently.
Erik ten Hag and football director John Murtough have publicly stressed the importance of staying within the spending rules. PSR was cited as the reason they did not sign a backup striker during the January window.
Under PSR, Premier League clubs cannot lose more than £105m over a rolling three-year period.
In addition, clubs who lose more than £15m over three years have to cover those losses with something called ‘secure funding’ — defined in the Premier League’s rules as an equity investment by the owners of the club — or they will be in breach.
As a payment for shares that increase his stake in the club, the $300m fits the definition of secure funding perfectly. If United’s PSR is over the lower £15m threshold on the 2023-24 test, it could be used to cover losses of up to £105m.
But will United need Ratcliffe’s money to do that? Probably not.
Ratcliffe would likely have to spend more to completely revamp the stadium (Matthew Peters/Manchester United via Getty Images)
It has recently emerged that the Premier League’s definition of secure funding is broader than thought. For example, cash that a club already has in the bank — before any new investment like Ratcliffe’s — is deemed ‘satisfactory’ by the Premier League board and can also be used to cover PSR losses.
And surprisingly, despite the rules explicitly stating secure funding cannot come in the form of a loan, an unused overdraft with a bank would be considered ‘satisfactory’ too.
According to United’s most recent financial statements for the first quarter of 2023-24, cash reserves stood at £81m ($102m). The club also has a ‘revolving credit facility’ — in other words, an overdraft — that they can spend a further £40m ($51m) on.
That would be more than enough to cover PSR losses up to the £105m limit, even without Ratcliffe’s investment. And in that respect, Maguire says that the $300m has “zero impact” on United’s PSR position.
“The Premier League say you can use an overdraft,” he says. “Given that Manchester United have an overdraft, they are not constrained in terms of not being able to get to this £105m limit. It’s a cash injection rather than the PSR injection.”
So what is likely to happen with the $300m?
Ultimately, exactly what the SEC filing says.
The intention for this cash injection to be spent on the redevelopment of the stadium has never changed and that is what Ratcliffe wants to see the money go towards.
Until that rainy day when a plan is in place to fix Old Trafford’s leaking roof, much of the $300m will sit on the balance sheet, painting a rosier picture of United’s finances and giving the club greater liquidity when spending on aspects of club business.
But even if some of it finds its way into the transfer market, it will need to be replenished by the time spades are finally in the ground.
(Top photo: Oli Scarff/AFP via Getty Images)
