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Football and Goldmans: A funny old game

When Goldman Sachs chief economist Jim O’Neill decided to share his views with the wider world on Manchester United’s recent £500 million bond issue the result was pretty predictable.

Describing the football club as over-levered and saying that he was not a buyer of the bond, O’Neill was refreshingly frank – particularly as his employer, Goldman Sachs, was one of its underwriters.

Take up of the bond was subsequently poor and the price dropped to 93 almost as soon as it started trading. This can’t have gone down well at Goldman, particularly if the bond was less than fully placed.

While the market pondered the extraordinary situation whereby a Goldman partner had openly criticized one of its own deals, O’Neill popped up as a prominent member of the Red Knights, a group of wealthy United fans in the financial services industry who held a meeting to discuss the possibility of buying Man United, even though the current owners, the Glazer family, insist it is not for sale.

This prompted fevered speculation that O’Neill would be forced to choose between Goldman and the Red Knights – as his private interest in the club would be at odds with Goldman’s own relationship with the Glazers. Unconfirmed reports even suggested that the Glazers were so unhappy with O’Neill that they were considering refusing to do any more business with Goldman.

But wait! The emergence of the Red Knights bid has had a rather interesting effect on the bond’s performance – it is now trading back up at 99! That must be great news for anyone holding it – such as one of its underwriters or anyone they had sold it to, perhaps.