Manchester United: A case study on the dangers of 'public' sports teams

[ISiddiqui]

ManU went public (on the stockmarket) a while back and this led to amazing profits for the club, but now comes the downside. American Malcolm Glazer (owner of the Tampa Bay Bucs) is trying buy the team outright by a hostile takeover (he currently owns 28% of the club, which makes him the second largest shareholder). The problem? He can't pay for it himself and needs to borrow (right now from J.P. Morgan) around $450 million. How will he pay this back? That's right, by putting the club up for collateral and plunging ManU into debt. You get a perverse situation where the club will be finanacing Glazer's hostile takeover.

Of course this is not met with approval in all areas. ManU fans are LIVID! After all, ManU is highly profitable and debt free, but this sale will plunge them into debt, meaning they may have to sell off more players and not be able to make as many transfers are they are used to (can you say, bye, bye Christiano Ronaldo?). It would really doom ManU. Many former ManU players and now Ole Gunner Solskjaer, a highly popular ManU player, has come out against the takeover bid.

There have been pictures of Glazer hung in effigy at the stadium and death threats have found their way to Glazer.

The problem, of course, is that the Chairman of the club has to act in the shareholder's best interests, and a high buy price offer would HAVE to be recommended, usually. Though the Sports Minister has said the Chairman has to look at the present and future shareholders of the club's benefit. We'll see if the British ministry in charge of corporate fiduciaries sees it that way.

This seems to be a wake up call for those teams which are looking to go public. It may lead to great profits, but it may have some very bad consequences.

[Mr. Wednesday]

It seems to me that they should not be forced into an offer that would be financed by offering the club itself as collateral. That's just backwards.

[SackAttack]

But if Glazer can buy the team without having 100% ownership, and doing so would plunge the team into debt, how can accepting the "high buy price offer" be in the shareholders' best interests?

[SackAttack]

Dola,

Does that make Malcom Glazer the Frank McCourt of the EPL? :D

[tanglewood]

The board has already turned down his offer twice before because he had insuficient financial backing and look set to turn him down again.

Simply put, Glazer doesn't have enough cash. No matter how many times it's spelled out to him, it doesn't seem to sink in.

[Mac Howard]

But is it being a PLC that brings this about? While this takeover would be seen as a catastrophe, the catastrophe is surely that it would become a privately owned company with a owner disinterested in it's function as a soccer club - ie interested only in what profit he could make out of it. I don't think there's any shortage of sports clubs that have such owners these days that have never been a PLC.

Utd's problem is surely that it is valued at around 1.5 billion and this is far too high a figure for the traditional altruistic owner who only cares about the kudos that comes from ownership and not the financial returns. Even an Abramovic has to consider the returns he would receive on a 1.5 billion outlay and raise the financial aspect of the club up above the sporting aspect.

But it could all just as easily happen to a privately owned club as a PLC (Public Limited Company). Had Utd been privately owned then Glazer may well have had an easier time buying the club without all the scrutiny that comes from Stock Exchange rules.

[clintl]

Can someone please talk Steinbrenner into taking the Yankees public? This might be a way to solve that problem.

[SteelerFan448]

Good idea, Red Sox too.

[Glengoyne]

Barbarians at the Freaking Gates!!!!

[Crapshoot]

Glen hit the nail on the head- Glazer is essentialy proposing an LBO.

Man U is not run as the most efficient business in the world - because winning sometimes means more than profit- although the club is probably the best run in the world (or amongst). Glazer believes he can trim the fat and get a better operation- we shall see if it happens.

[SunDancer]

Glen hit the nail on the head- Glazer is essentialy proposing an LBO.

Man U is not run as the most efficient business in the world - because winning sometimes means more than profit- although the club is probably the best run in the world (or amongst). Glazer believes he can trim the fat and get a better operation- we shall see if it happens.

What would be "the fat"?

[Crapshoot]

What would be "the fat"?

Have you seen Gary Neville lately ? :D


Man U run as a pure business could generate a lot more cash than they do currently. More so, they could spend a lot less on transfer fees and spend the money on free transfers and save some cash that way. They are already expanding the stadium, but they could expand it further and put the club in some debt. Glazer is also likely to raise ticket prices (fairly inelastic demand)- which would hit most of the local Man U fans significantly in the wallet, as opposed to the Johnny Come Lately's that make up a lot of Man U's fan base.
There's plently of room to improve it as a pure profit maximizing entity.

[SunDancer]

Interesting Article from the NY Times

Fans Are United in Opposition
By JACK BELL

Published: February 15, 2005


t seems that whoever wants to buy Manchester United, the 20,000 members of Shareholders United are against it.

Manchester United, one of the top clubs in the English Premier League, has been the target of a takeover bid by Malcolm Glazer, the American billionaire who owns the Tampa Bay Buccaneers. United is a publicly traded company, and Glazer owns a 28.1 percent stake. Two Irish businessmen, John Magnier and J. P. McManus, control another 28.9 percent through their Cubic Expressions holding company. The fans collectively hold an 18 percent stake in the club, and many are members of Shareholders United. The remaining shares are owned by private and institutional investors.

"Before, we were just a group that shouted loudly and punched above our weight," Nick Towle, the chairman of Shareholders United, said late last week in a telephone interview from Manchester. "The vast majority of the fans are against Mr. Glazer. It is not personal and it is not because he's American. We, the fans, spend our money on tickets and merchandise, and we should have a significant voice and stake in the club."

Shareholders United became emboldened shortly after it was formed in 1998, when its protests helped rebuff an attempt by Rupert Murdoch's BSkyB to acquire Manchester United. Glazer bought a 2.9 percent stake in March 2003 and has slowly increased his holding. His first attempt to take over the club was rebuffed last October because it would have included too much debt, as was a second bid in December. Glazer's newest offer, of about $1.5 billion, or about $6 a share, and a reduction in debt, was not endorsed by the club's five-member board, which has reluctantly allowed Glazer and his representative limited access to the club's books.

Manchester United supporters, who fill the club's Old Trafford stadium week in and week out, have been vociferous in their opposition to Glazer. He has been burned in effigy, and some militant fans have made threats against him, his family and people who work for his financial advisers.

"Passions are running extremely high, but we are respectable and don't condone violence, intimidation or illegal activity," Towle said. "I think it is difficult for people from another country to understand the heritage and tradition. We don't want any tycoon to take over the club. Whatever their nationality, we're against it.

"If Mr. Glazer acquires the club, many fans have said they will no longer regard it as their club. If we withhold our support and don't buy tickets and merchandise, the club's income will be hit very hard. I don't think that people understand that the fans are a powerful market force. People like Mr. Glazer and the Irishmen only see it as a cash cow and an opportunity to exploit a brand. The heart of the matter is that we don't think being publicly traded is suitable; it is not the right way to approach the running of a club."

Ultimately, however, it is the obligation of the board of a publicly traded company to provide value to shareholders.

"From a hard-nosed financial viewpoint, you have to say £3 a share is a very good price," Harry Philip, the managing director of the consulting firm Inner Circle Sports, told the BBC. (The conversion is $5.66.) "But the dilemma is not only in addressing shareholder needs

Fans Are United in Opposition
By JACK BELL

Published: February 15, 2005


t seems that whoever wants to buy Manchester United, the 20,000 members of Shareholders United are against it.

Manchester United, one of the top clubs in the English Premier League, has been the target of a takeover bid by Malcolm Glazer, the American billionaire who owns the Tampa Bay Buccaneers. United is a publicly traded company, and Glazer owns a 28.1 percent stake. Two Irish businessmen, John Magnier and J. P. McManus, control another 28.9 percent through their Cubic Expressions holding company. The fans collectively hold an 18 percent stake in the club, and many are members of Shareholders United. The remaining shares are owned by private and institutional investors.

"Before, we were just a group that shouted loudly and punched above our weight," Nick Towle, the chairman of Shareholders United, said late last week in a telephone interview from Manchester. "The vast majority of the fans are against Mr. Glazer. It is not personal and it is not because he's American. We, the fans, spend our money on tickets and merchandise, and we should have a significant voice and stake in the club."

Shareholders United became emboldened shortly after it was formed in 1998, when its protests helped rebuff an attempt by Rupert Murdoch's BSkyB to acquire Manchester United. Glazer bought a 2.9 percent stake in March 2003 and has slowly increased his holding. His first attempt to take over the club was rebuffed last October because it would have included too much debt, as was a second bid in December. Glazer's newest offer, of about $1.5 billion, or about $6 a share, and a reduction in debt, was not endorsed by the club's five-member board, which has reluctantly allowed Glazer and his representative limited access to the club's books.

Manchester United supporters, who fill the club's Old Trafford stadium week in and week out, have been vociferous in their opposition to Glazer. He has been burned in effigy, and some militant fans have made threats against him, his family and people who work for his financial advisers.

"Passions are running extremely high, but we are respectable and don't condone violence, intimidation or illegal activity," Towle said. "I think it is difficult for people from another country to understand the heritage and tradition. We don't want any tycoon to take over the club. Whatever their nationality, we're against it.

"If Mr. Glazer acquires the club, many fans have said they will no longer regard it as their club. If we withhold our support and don't buy tickets and merchandise, the club's income will be hit very hard. I don't think that people understand that the fans are a powerful market force. People like Mr. Glazer and the Irishmen only see it as a cash cow and an opportunity to exploit a brand. The heart of the matter is that we don't think being publicly traded is suitable; it is not the right way to approach the running of a club."

Ultimately, however, it is the obligation of the board of a publicly traded company to provide value to shareholders.

"From a hard-nosed financial viewpoint, you have to say £3 a share is a very good price," Harry Philip, the managing director of the consulting firm Inner Circle Sports, told the BBC. (The conversion is $5.66.) "But the dilemma is not only in addressing shareholder needs, but also those of the stakeholder-customers, and the offer might not be in their interests."

[ISiddiqui]

But if Glazer can buy the team without having 100% ownership, and doing so would plunge the team into debt, how can accepting the "high buy price offer" be in the shareholders' best interests?
Because the shareholders that would be selling would making like 3 times what the shares are worth. You have to balance the short term interests of the shareholders who'd make a KILLING with those who'd stick around. A lot of hostile takeovers work because if the board is looking out for the shareholders, the fact that the takeover-er is offering well above market value for the shares wins out.

[SunDancer]

Now,
The reasons that the objections is due to Glazer raising prices, and putting the team in debt-which would lower money for players?

[ISiddiqui]

I think its mostly due to debt (the supporters want a league title every year), but I'm sure ticket prices come into it as well.

[Logan]

Can anyone tell me WHY Glazer wants to own the team so badly?

No sarcasm intended...just interested. Does he see it as a way to make a killing in the future? Does he have some plan for the team?

[General Mike]

If Glazer wants to buy the team so much he should sell the Bucs.

[Glengoyne]

Can anyone tell me WHY Glazer wants to own the team so badly?
...
I'm guessing this is proof that CM/FM has reached the United States.

[KeyserSoze]

Easy. A company free of debt, with high incomes is a sweet.

If all go well, he will make millions. If all go wrong, hell, the club is the owner of the debt. So he will go clean of the affair. For him is a win-win situation.

I think that buying a company, and accounting this debt in his numbers must be illegal. The Man Utd will pass to be a free debt club to a heavy debt club with any real gain. No more actives ... nothing.

Also, for europeans, a club is more a feeling... a way of life.

[varacel]

While United maybe a good team now, they will need major reinvestment to keep at their current level. The heartbeat of the team (G Neville, Keane, Scholes, Giggs) have 2 years left tops, and the manager wont be around much longer then that. I know a lot of people try to claim success for United being such a wealthy club but to me it is down to what Ferguson has acheived on the field, and he is going to be a hard act to follow. I can see United dropping more into the pack battling to get into the Champions League, rather than challenging for the title.

[tanglewood]

While United maybe a good team now, they will need major reinvestment to keep at their current level. The heartbeat of the team (G Neville, Keane, Scholes, Giggs) have 2 years left tops, and the manager wont be around much longer then that. I know a lot of people try to claim success for United being such a wealthy club but to me it is down to what Ferguson has acheived on the field, and he is going to be a hard act to follow. I can see United dropping more into the pack battling to get into the Champions League, rather than challenging for the title.

Rooney, Ronaldo and Ferdinand will become the new 'core' of the team (Ferdinand is already their second most important player behind Keane, arguably more importnat, look at their form over the last two seasons with him in the side and out of the side) if Ferguson can add a quality central midfielder to eventually replace Keane in the next two seasons (not easy of course), then they are set for the future IMHO.

[ISiddiqui]

Yep... money can conquer all :D. If that isn't enough, they'll just get some people who will make it enough :D.

[rkmsuf]

Let's make a play for the Packers!

[varacel]

Rooney, Ronaldo and Ferdinand will become the new 'core' of the team (Ferdinand is already their second most important player behind Keane, arguably more importnat, look at their form over the last two seasons with him in the side and out of the side) if Ferguson can add a quality central midfielder to eventually replace Keane in the next two seasons (not easy of course), then they are set for the future IMHO.

All 3 are quality players. They also have a lot of young players who don't look good enough at the moment but may get better (Miller, Fletcher, Djemba Djemba). I still feel that it will take a lot of investment to replace Neville, Scholes, Keane and Giggs. Plus while there are players of similar ability available dont discount the effect the loss of these players will have on team chemistry.

[Mac Howard]

I think too much is made about the demise of these four players - to begin with there's almost four years difference in their ages and they will not all fade simultaneously. Keane is the oldest and is set to retire at the end of next season (though Alex is apparently trying to persuade him to sign an extended contract because of his current form). Neville isn't important - Wes Brown, currently in his mid twenties, is as effective as Gary already. Scholes is a "lazy" player with little reliance on physicality and is currently playing the best football of his life and could well be around for 4 more years. Giggs, who does rely on pace, is probably the next to go after Keane but is showing no signs of slowing down yet.

But bear in mind that Utd have been buying one very expensive player a year for the past few years (Veron, van Nistelrooy, Ferdinand, Rooney and the failed attempt to get Ronaldinho) since the feed of quality players from the youth squad has ceased and you can see these players being replaced one at a time with players of a similar standing. What's more the lack of home-grown youth players is being replaced with quality youngsters like Ronaldo, Rooney, Kleberson (pity they failed to get Robben) along with others that might make the grade like Miller, Bellion, Fletcher, Howard, Spector etc.

When Alex goes, and no sign of that yet, then he will certainly leave his successor a quality squad and, providing someone like Glazer doesn't come in and kill this, there will clearly be further quality additions to improve it still further.

As Utd's overtaking of Arsenal (who would have predicted that in November?) illustrates, Mark Twain's comment about his death being somewhat exaggerated applies to current comments about the decline of Utd with the ageing of players and manager. The squad has been rebuilt even over the last two seasons and their current position despite an appalling injury season (six of their seven striking players out this weekend again) says much about the depth and spirit of the squad. This squad of players with merely two or three additions should be good for another successful dynasty.

The biggest danger to this is someone like Glazer who will ignore the footballing neccessities in order to maximise the financial returns and who, if his business plan fails, will make Leeds' decline look like a teddy bears' picnic :rolleyes:

[ISiddiqui]

Good analogy. I can't imagine a ManU fan who wouldn't be furious if Glazer takes over. He'd take a financially secure club into a one in debt Hell.

[Mac Howard]

It's a classic case of "If it ain't broke don't fix it". Utd are arguably the most successful sporting organisation in the world. Glazer thinks he can milk the fan support for even more money. If he does, so what? If he doesn't, the club could collapse in a mountain of debt ($600 million even in this latest bid and $500 million preference shares).

We don't need it. Utd is necessarily a business but first and foremost it's a football club and we don't need an owner that just doesn't get that and will risk everything for a few extra bucks.

[ISiddiqui]

Frankly, I think if he gets the club, the fan protests will be severe and cause him to make far less money than he thought he'd be getting. Especially if he raises ticket prices.

[Mac Howard]

The opposition to his bids by fans and the Utd board of directors have caused him to say he won't increase ticket prices or sell and lease back the Old Trafford stadium. He intends, I think, to make much of this extra money, not from the 67,000 fans who turn up at OT every week, but from the millions of fans around the world who he believes are not being exploited sufficiently. But these fans are fickle fans, glory hunters mainly, who will switch as quickly to another club as quickly as changing their hairstyle. Already, here in Australia, this season has seen Fox Sports show a preference for Arsenal and Chelsea matches as a result of Utd's poor start to the season. Many of these fans will switch their loyalty to the clubs they get to watch.

So Glazer's plans could fail, not because of any flaw in his financial calculations, but because of failure on the field of play - success can never be guaranteed and "failure" merely means not qualifying for the Champions League as Leeds found out. The tv money disappears and the fans abroad switch allegiance and Glazer still needs to service his debt. That's when his promises on ticket prices, sale of the stadium and/or players will be worthless.

On a purely personal basis, and this should apply to USA fans as well, Glazer will quickly move Utd out of the Premiership agreement with Fox for televising EPL and CL games and switch to exclusive ppv. Watching Utd, even on tv, will become a very expensive hobby - all to service a debt that Utd currently do not have.

We just don't need this sh*t! Go play with some other club, Malcolm :mad:

[ISiddiqui]

The opposition to his bids by fans and the Utd board of directors have caused him to say he won't increase ticket prices or sell and lease back the Old Trafford stadium. He intends, I think, to make much of this extra money, not from the 67,000 fans who turn up at OT every week, but from the millions of fans around the world who he believes are not being exploited sufficiently. But these fans are fickle fans, glory hunters mainly, who will switch as quickly to another club as quickly as changing their hairstyle. Already, here in Australia, this season has seen Fox Sports show a preference for Arsenal and Chelsea matches as a result of Utd's poor start to the season. Many of these fans will switch their loyalty to the clubs they get to watch.
I have to agree with you. If Glazer's goal is to tap the overseas market, he's not going to be happy. With Abramovich willing to spend as much as it takes and Arsenal being probably the most exciting team to watch, I think that strategy won't work that well. Yah, ManU have an exciting future star in Christiano Ronaldo that they can sell t-shirts with, but if they go into massive debt, Christiano Ronaldo could be the first transfer casulty. The overseas fans ARE very fickle and will back the 'star'. When Beckham moved to Real, they just bought Real shirts instead of ManU ones.

That's the problem with Glazer. He doesn't understand English football. That's apparent with his persistent attempts to purchase the club with the fan reaction against him. He also has no idea of the overseas market either. It all adds up to ManU dying a horrible death in the EPL if Glazer takes the club.

[SunDancer]

The soccer business is quite interesting.

[Anthony]

On a purely personal basis, and this should apply to USA fans as well, Glazer will quickly move Utd out of the Premiership agreement with Fox for televising EPL and CL games and switch to exclusive ppv. Watching Utd, even on tv, will become a very expensive hobby - all to service a debt that Utd currently do not have.



has this ever happened before in soccer to lead you to think Glazer would do the same thing? and doesn't MU already have an agreement with YES (yankee's tv channel) to have their games broadcast? so this wouldn't necessarily affect watching MU games in the USA, right? (not that i watch soccer anyway).

i'm partial to Arsenal, if i have to pick a team. when i read John Lydon's (Johnny Rotten of the Sex Pistols) autobiography a while ago he kept mentioning Arsenal. i thought it was the name of a gang. i've liked them more ever since i found out about the EPL (althought how can you like a team more if you don't even follow the sport). i guess it's like me and golf, where if i had to pick a favorite golfer i'd say John Daly, but i can't watch more than 5 minute of the game without searching for the remote.

[Anthony]

I have to agree with you. If Glazer's goal is to tap the overseas market, he's not going to be happy. With Abramovich willing to spend as much as it takes and Arsenal being probably the most exciting team to watch, I think that strategy won't work that well. Yah, ManU have an exciting future star in Christiano Ronaldo that they can sell t-shirts with, but if they go into massive debt, Christiano Ronaldo could be the first transfer casulty. The overseas fans ARE very fickle and will back the 'star'. When Beckham moved to Real, they just bought Real shirts instead of ManU ones.

That's the problem with Glazer. He doesn't understand English football. That's apparent with his persistent attempts to purchase the club with the fan reaction against him. He also has no idea of the overseas market either. It all adds up to ManU dying a horrible death in the EPL if Glazer takes the club.

i'm sorry, but in case you don't know - Glazer is a billionaire. you don't wake up one day and become one overnite (unless you're Mark Cuban). i'll give someone in his situation the benefit of the doubt and say i highly doubt he would get into a venture like this without knowing the market and without knowing the pro's and con's of such a deal. the guy has billions so i assume he has some of the best financial advisors/analysts money can buy. i'm sure he has all bases covered.

[SunDancer]

i'm sorry, but in case you don't know - Glazer is a billionaire. you don't wake up one day and become one overnite (unless you're Mark Cuban). i'll give someone in his situation the benefit of the doubt and say i highly doubt he would get into a venture like this without knowing the market and without knowing the pro's and con's of such a deal. the guy has billions so i assume he has some of the best financial advisors/analysts money can buy. i'm sure he has all bases covered.

Mark Cuban became a billionaire overnight? His business was built over seven to eight years before he sold it.

[ISiddiqui]

i'm sorry, but in case you don't know - Glazer is a billionaire. you don't wake up one day and become one overnite (unless you're Mark Cuban). i'll give someone in his situation the benefit of the doubt and say i highly doubt he would get into a venture like this without knowing the market and without knowing the pro's and con's of such a deal. the guy has billions so i assume he has some of the best financial advisors/analysts money can buy. i'm sure he has all bases covered.
So what? Trump is a billionaire, but he goes into bankruptcy every 10 years or so. Just because you make billions doesn't mean you know the ins and outs of every business, and sports is one of the toughest businesses.

Oh, and ManU is on Fox Soccer Channel, not YES network. There was no deal for US broadcasts in that manner.

[Anthony]

Mark Cuban became a billionaire overnight? His business was built over seven to eight years before he sold it.

he became a billionaire when Yahoo bought his internet radio. that's the way the media spins it.

[SunDancer]

he became a billionaire when Yahoo bought his internet radio. that's the way the media spins it.


Yahoo did buy his internet radio. But not sure what that means. The google gus became multi-billionaires went they went public, buts it not like they setup the day before.

Actually, Manchester United is broadcasted on YES Network, but its through the Manchester United's own network and on tape-delays.

[Anthony]

Oh, and ManU is on Fox Soccer Channel, not YES network. There was no deal for US broadcasts in that manner.

hmmm, i guess you're right. i just checked the YES network website and no mention of MU games. coulda swore i saw some MU games on there once or twice. :confused:

[Anthony]

Yahoo did buy his internet radio. But not sure what that means. The google gus became multi-billionaires went they went public, buts it not like they setup the day before.



ahhh, i see, people were taking my "become a billionaire overnite" part literal.

Actually, Manchester United is broadcasted on YES Network, but its through the Manchester United's own network and on tape-delays

there ya go. i knew i couldn't have imagined it. still, no mention of MU on YES website. just Yankees/Nets.

[Mac Howard]

>i'm sure he has all bases covered.

I wouldn't suggest he's a fool at all, HellAtlantic, and that's precisely the problem.

Making money out of the Asian and the current (very limited) USA market clearly has risks associated with it. He needs a backup plan if it goes wrong. What is that backup plan? Utd's assets!:

1) a sellout crowd of 67,000 every single match. Considerable room for improvement in income from here by raising ticket prices

2) A stadium (not a real estate expert myself) but probably worth up to a hundred million. The fear is he'll sell it and lease back if he needs the money.

3) Utd have a squad of players worth around 150 million pounds in transfer fees.

4) They have a yearly player wages bill of 77 million pounds. Interest repayments could be covered by letting players go and damaging the squad

5) Utd currently appear on tv because the club is currently included in the Premiership's contracts with Fox for league matches and ESPN (whoever represents them) for FA Cup matches. He could withdraw from that and sell PPV rights for Utd games and bring in much more. I believe a couple of Italian clubs already do that.

The worry isn't what will happen if he makes a success of the business, it's what happens if it doesn't work out or if the success is not sufficient to service a 300 million pound debt and 250 million pounds of preference shares (which he has undertaken to buy over a period).

His risk is limited, he can always use the clubs assets if his business ideas fail. But Utd gain little if he succeeds and lose everything if he fails. We don't need that risk. This morning's news is that Utd have again topped the world list of income for soccer clubs - 177 million pounds for 2004. The club is debt free, making more money than any other soccer club in the world, a world class stadium (about to be improved further), a world class squad of players and enormous success on the field of play.

We do not need the debt or the risk.

[andy m]

i would love it if glazer bought man u. love it.

[BreizhManu]

Man Utd's Future ?

http://uk.sports.yahoo.com/050217/3/94ys.html

German champs Borussia Dortmund peer into the abyss

<small id="yspartclsrc">Thu 17 Feb, 1:28 PM</small>

DORTMUND, Germany (http://uk.sports.yahoo.com/fo/germany/) (AFP) - Six-time German champions Borussia Dortmund, Germany's only listed football club, said it was teetering on the edge of financial collapse, barely four and a half years after going public. "The earnings and financial situation of Borussia Dortmund has become life-threatening," the ailing football club said in a mandatory filing to the German stock exchange.

The news came a week after president Gerd Niebaum announced he was quitting as a result of Borussia Dortmund's financial difficulties. The 95-year-old club, which run its business year from July to June, said it had run up a preliminary operating loss of 27.2 million euros (35 million dollars) in the six months to December.

And Borussia Dortmund -- German champions in 1956, 1957, 1963, 1995, 1996 and 2002, European cup winners in 1966 and Champions League winners in 1997 -- warned it could end up 68.8 million euros in the red for the full year ending June 30, 2005, if restructuring measures were not implemented.

Together with accumulated losses of 73.3 million euros from previous years, that would mean the club would have a total shortfall of 142.1 million euros, equivalent to 79 percent of its paid-up capital.

In view of its "very tight finances", Borussia Dortmund's management was in "constant and constructive dialogue with creditors about how to overcome the current bottleneck on a sustainable basis," the statement said.

It had therefore asked auditors RoelfsPartner to draw up a restructuring concept.

As part of the package, which the auditors insisted would put the club back on even keel if fully implemented, Borussia Dortmund intended to defer rental payments to the Westphalia stadium where it plays home games and put a moratorium on debt and interest payments at least until 2006/2007. The club, which has already cuts for players and staff, said that without the restructuring, its debt could rise to 134.7 million euros by mid-2006.

One of the main factors contributing to the club's woes was the sale of its Westphalia stadium in a complicated sale-and-lease-back deal.

Borussia Dortmund wants to buy back the stadium, which costs 17 million euros to lease each year, but has not yet found an investor to put up the necessary money.

Earlier, business daily Handelsblatt said British bond broker Stephen Schechter had ended talks with Borussia on a possible bond sale to finance the stadium deal, citing a "breach of confidence".

While the majority of creditors had already agreed to the restructuring, three creditors had not yet given their approval and the football club was continuing to negotiate with them, Borussia Dortmund said.

One ray of hope came from Florian Homm, the club's major shareholder with a 26 percent stake, who said he would be willing to make funds available.

"It is about the survival of Borussia Dortmund and if it does come to liquidation there is money available," Homm told magazine Capital. "But that is only for the worst case scenario."

And the club's president Reinhard Rauball also said he was not giving up hope.

"There can be no talk of insolvency. We'll draw up a restructuring programme to save the club," he told the mass-circulation daily Bild.

But time is pressing. Without proof of its liquidity, the club's licence could be withdrawn. And Borussia Dortmund must submit its documentation for the coming season to the German DFL football league by March 15.

"We're watching developments with great concern," DFL spokesman Tom Bender said.

Politicians made it clear that the club could not expect to bailed out with public money.

Borussia Dortmund "cannot disappear from the Bundesliga. But we can't use public money to pay the footballers' million-euro wages," said North Rhine-Westphalia's sports minister Michael Vesper.

Borussia Dortmund shares plummeted on the stock exchange in the wake of the news and were showing a loss of 0.64 euros or 24.15 percent at 2.01 euros in early afternoon trade, after earlier hitting an intraday low of 1.87 euros.

In the club's initial public offering (IPO) in October 2000, the shares had been issued at around 11 euros.