Manchester United need to fund a £2bn stadium

Manchester United need to fund a £2bn stadium - here's how they will likely do it

Manchester United are to embark on an ambitious project to build a 100,000-seater new home on land adjacent to Old Trafford

An impression of how United's new stadium could look (Image: Foster + Partners/PA Wire )

For Manchester United, committing to building a new £2billion stadium will be transformative for the club’s future. At least, that is the grand plan for minority owner Sir Jim Ratcliffe.

Last week, hot on the heels of a round of PR from the 72-year-old British billionaire and founder of petrochemicals giant Ineos, Manchester United unveiled plans for a 100,000-seater new home that would be built on land adjacent to Old Trafford that the club already owned.

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Having seen competitive decline on the pitch, while matchday revenues have been in the hundreds of millions per annum for some time now, United’s Old Trafford home, where they have been residents since 1910, has fallen into decline, somewhat mirroring the product on the pitch. It has lost its lustre and its moniker of ‘The Theatre of Dreams’ hardly seems apt anymore.

A new stadium is a necessity for United, of that there is little doubt. While a redevelopment of Old Trafford was on the cards it still wouldn’t have been cheap, albeit half the cost of a new stadium, but it wouldn’t have afforded the club the chance to really maximise what they have, nor satisfy demand to the level that they would want to.

Ratcliffe sees this as a way to future-proof United, ensuring they leverage their massive appeal and turn it into something that can support the on-pitch spending that the club cannot currently engage in due to their continued absence from the Champions League impacting revenues significantly.

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But how will they pay for it all?

United are likely to find that when they go to market to try and raise debt they will be looking at interest rates of between 6% and 8%. With the club already having a £400million bond issue that has a maturation date of 2027 there is the potential to refinance that and issue fresh bonds to go alongside any bank lending that the club would look to secure. But there would still be several hundred million pounds worth of debt that would need to be raised for the project by Ratcliffe, either achieved through his own resources or through bringing on board new investors, although that might not be a preferable outcome.

A couple of years back, Tottenham Hotspur chairman Daniel Levy was quizzed by students at a Cambridge University Union address that the stadium plan may have been different for the club if they were raising debt in the current climate. As per the Spurs’ 2022/23 accounts, the most recently published from the club, more than 90% of £851.2m borrowings are at fixed rates, with an average interest rate of 2.79%.

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For United, the debt markets are not as kind as they were when Spurs raised theirs for the stadium build, which came in around £1billion, and finding ways to finance it will be more challenging.

The economic argument for why Manchester United needs a new stadium is an easy one to make, and the club’s lack of action in addressing the need for a new home sooner has seen them caught and surpassed by some of their rivals at home and abroad.

Earlier this month, UEFA published its annual European Club Finance and Investment Report that looked at the financial health of the game across the top levels on the continent. United remain one of the world’s biggest clubs, but they are being caught financially, and at a time when they are failing competitively they need to take some significant steps to futureproof themselves and ensure the decline isn’t terminal.

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The report showed that in 2009, United sat second when it came to matchday revenue, delivering €128million (£99million at today’s exchange rate), with Real Madrid having been top of the pile at €132million (£102.1million).

For United, in the intervening 16 years, the needle has barely moved, with the club dropping to fifth on the list with a sum of €129million. During that same period, Real Madrid stretched their lead out to €185million after redeveloping the Santiago Bernabeu.

With clubs having engaged in rebuilds or redevelopment across Europe, the likes of Liverpool, Paris Saint-Germain and Bayern Munich have doubled their matchday revenues, while Tottenham Hotspur’s new stadium build has seen them climb to sixth on the list, with gate revenue rising from €33million at White Hart Lane in 2009, to €123million at their new home in 2024.

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Chelsea, like United, have remained in situ at a stadium they have now outgrown, and they have also suffered a similar fate, dropping from fifth to 10th on the UEFA list.

At a time when broadcast rights are showing some signs of plateauing in terms of value, something that has the potential to create major problems for clubs in the future, the need to reduce reliance on broadcast income and diversify revenue streams has become increasingly important for clubs, and for Manchester United that is no different.

In terms of growth, United’s stood at 21% over the course of the past five years when it came to matchday revenue. In comparison, Real Madrid grew 24%, PSG 46%, Arsenal 40% and Spurs 33%. United being absent from some seasons in the Champions League was impactful when it came to revenue due to the lack of games played and the revenue attributed.

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The building of a new stadium will form part of a wider, state-funded redevelopment of the surrounding areas around Old Trafford, although the Government has been clear that the football club will be getting no financial assistance and that taxpayer money won’t be used to take some of the financial strain. That was the hope of Ratcliffe initially, who had stated his desire to turn the stadium into “the Wembley of the North.”

There is absolutely no doubt that a new stadium of the size of the one being proposed, in an area of regeneration and for a football club that still has major pent-up demand for tickets and a global footprint. The additional matchday revenue and commercial revenue, as well as what can be derived from it being utilised during the week through hospitality spaces, in addition to concerts outside of the football calendar, means that it will likely be what Ratcliffe says it will be, and that is the best football stadium in the world, and certainly one of the most profitable.

But the issue around how to finance it, and how to meet the debt obligations that they will have, means that it won’t be without risk.

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United could do what has been done in Spain by Real Madrid and go to market to raise the debt from major merchant banks and funds. Recently, Everton refinanced their stadium debt under new owners, The Friedkin Group, for £350million with JP Morgan Chase & Co, at an interest rate of around 5%.

Real Madrid borrowed large amounts three times between 2019 and 2023 to fund their redevelopment of the Santiago Bernabeu, with the tranches of funding over a long period of time, around 30 years, and with the principal repayments (the repayment of the actual loan itself and not just interest) deferred until the stadium’s completion in 2023.

United already have a significant debt obligation and have a near £330million credit facility that needs refinancing in the not too distant future. Interest payments for the club on its debt totalled £36million last year, the highest in the Premier League.

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The club likely wouldn’t seek to borrow the money it needs in one go, rather several tranches, spreading risk and catching lower interest rates on the way down. However, on a £2billion build cost, and that seems ambitious given the cost of debt and materials, as well as the potential for unseen roadblocks that can ramp up the price, interest payments for the club, using a very favourable 5% figure, would be £100million a year, and that is before factoring in the principal repayments, the actual repayment of the capital over and above interest, which would likely be deferred until the stadium was up and running and able to aid cashflow.

The above seems the most likely scenario for United in terms of how they finance the new stadium. They could pursue a route like Barcelona did, which was to sell of portions of the ancillary businesses around the stadium and the earning power attached to other firms, such as Legends Hospitality, in a bid to raise the funds that way. But it is likely that United will want to have total control over revenue and maximise the opportunities long term. Barcelona were also on shaky ground financially at the time they engaged with their Nou Camp redevelopment, while United, while hamstrung when it comes to PSR, are still a club that should provide finance houses with enough confidence to lend.

The third option would be to finance by selling equity in the business. This seems unlikely, though. Ineos and Ratcliffe could pour more money in, but the Glazers would have little desire to dilute their position further it seems, while any additional investors would end up diluting the Ineos/Ratcliffe shareholding too, which isn’t likely to be of interest to Ratcliffe, a man who is spearheading this charge towards a new stadium.

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A new home for Manchester United will be transformational, of that there can be no doubt. But it comes attached with plenty of risk, and much of that is around just how much interest the club will have to pay before being able to realise the financial benefits of the new stadium.

That will be impactful for cash flow, which will have a knock-on effect when it comes to what United will be able to do in the transfer market, even though investment into infrastructure is an allowable deduction.

Returning the club to competitive success has always been the aim of Ratcliffe, he says, but in pursuing a new and ambitious stadium project the challenge won’t have become any easier for Ruben Amorim, although it is a project that United simply can’t afford to put off any longer if they want to avoid falling further behind their rivals.

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