Red Knights ponder their opening gambit in the battle for Man United

The takeover of Manchester United by the American Glazer family in 2005 was never popular with fans who feared their highly leveraged bid would lead the club to financial ruin and crimp its ability to hire star players. But five years later and United have won three straight Premier League titles as well as the Champions League, reinforcing the team's image as the most successful and popular in the world. As long as success on the pitch continues, United can rest easy that its humongous debts of £700m can be kept at bay. But critics argue that if its fortunes take a turn for the worse, it could forfeit vital media revenues and find itself subsumed by debt. Fears that United is sailing close to the wind with its finances are so widespread that a group of wealthy fans in the City are looking to wrest control of the club from the Glazers by tabling a bid. Headed by Jim O'Neill, the chief economist of Goldman Sachs, the so-called Red Knights are casting around for support and have received expressions of interest from foreign backers in the Middle East and Asia. They are prepared to spend millions of their own cash, but are also looking for an "anchor investor" to furnish about £600m. O'Neill is joined by Paul Marshall, founder of London hedge fund Marshall Wace; Mark Rawlinson, a partner at City law firm Freshfields; Keith Harris, boss of City broker Seymour Pierce and a former chairman of the Football League; and Richard Hytner, a senior executive of advertising agency Saatchi & Saatchi. Given that the Glazers have been at the helm for nearly five years, what has prompted the Red Knights to act now? The answer is that in January, the club restructured its debts by issuing a £500m bond with a prospectus that disclosed total borrowings of £715m. Some £200m is attached to the Glazers' holding company rather than the club and attracts interest at 14%. More importantly, under the terms of the bond, the Glazers are able take more money out of the club than anyone realised: the Manchester United Supporters Trust (Must) says that the family can extract about £130m in dividends and management fees over the next few years. The Glazers claim that the money can be used to put the club on a firmer financial footing. Someone close to the family says: "We know that debt is an issue and we intend to address it." But fans accuse the Glazers of risking United's future by taking a club that was relatively debt-free five years ago and loading it with hundreds of millions of liabilities. "The bond issue opened up old wounds and reignited concern about the club's financial structure," says a source close to the Red Knights. Anti-Glazer campaigner Andy Green said: "The worst fears of supporters and commentators who opposed the takeover have been proved correct ... the Glazer family are using the club as their personal piggy bank." His claims are rejected by the Glazers. As a symbol of opposition, Must has been encouraging fans to forsake United's traditional red colours and wear green and gold scarves, the colours of the club until 1902, when it was known as Newton Heath. The scarves were much in evidence a week ago at Wembley for United's Carling Cup final. Oliver Houston, a spokesman for the trust, said: "The Red Knights have our unequivocal backing. We have had a series of meetings with them and what is being proposed is very near the mark. Our objective is simple: we envisage a future where the supporters of Manchester United have a meaningful ownership stake in the club. We want to see new owners who share supporters' priorities and are committed to investing in the club's future." One sticking point is bound to be price, with United valued at anything between £900m and £1.5bn. United made a pretax profit of £48m in 2009, but the two Glazer holding companies that control the club remained in loss after interest charges on borrowings of £524m. Although the structure of any bid is a work in progress, O'Neill is understood to be working on a project that would give fans a decisive say in the club's future. That could be achieved by issuing new shares to supporters who could control as much as 25% of the club's equity, helping to propel United towards a collective ownership model that is the norm at rival club Barcelona. Critics of the Glazers believe that their indebtedness means the family is wasting millions paying interest from cash flow that could be used to invest in new players. Last week, United's chief executive, David Gill, moved to counter that perception by insisting there are funds available for manager Sir Alex Ferguson to use in the transfer market this summer. Gill maintains the £80m received last year from the sale of Cristiano Ronaldo to Real Madrid was still part of the club's budget. Gill said: "We are looking at players all the time. The money from Ronaldo is sitting there in the bank account." There is no doubt that a long drawn out takeover campaign is on the cards and little evidence that the Glazers, who own the American football team Tampa Bay Buccaneers, want to sell. A spokesman for the family says: 'Given that United is the most attractive sports asset in the world, why would we agree to a sale unless we were looking to exit from sport altogether." But O'Neill and the Red Knights won't be put off that easily and are banking on a groundswell of support from fans. Must's membership has rocketed since United's bond was launched in January – from 32,000 to 115,000. For fans, there is plenty to complain about: ticket prices keep rising, and corporate sponsors are being asked to shell out more to associate with the team, at a time when the economy is mired in recession. Season-ticket renewals have dipped by roughly 7,000 this season, and luxury-box usage has fallen about 16%. Duncan Dresdo, the chief executive of Must, says: "Our movement is growing because it presents an alternative view of how the club should be run and offers more grassroots democracy." The emergence of the Red Knights comes at a time when the first top-flight UK football club, Portsmouth, has crashed into administration with borrowings of £85m, highlighting concern that clubs across Europe are carrying too much debt. UEFA president Michel Platini recently warned that inflation in the transfer market "poses a serious challenge to the concept of financial balance in our competitions". In Britain, the sports minister Gerry Sutcliffe said that he was "worried about the sustainability of the game". Against this backdrop, the Red Knights are hoping to galvanise support for a bid that would be welcomed by both fans and the football authorities. Analysts say there are several ways a transaction could be structured. One would be to bring in a rich individual as part of the bidding consortium who could wipe out debts of £715m, pay the Glazers about £500m and commit resources to further develop the club. A condition of such a deal would be to sell shares to the fans with sufficient voting rights to allow them to block any future sale and have a say in the running of the club. An alternative would be to sell to 60 or so super-rich investors and spread ownership more widely among supporters and their wealthy backers. While there is scepticism in the City that a deal involving United is possible, financial analysts are impressed by the involvement of Goldman's O'Neill, who is far from being an ordinary economist. Over the years, he has become one of the world's leading commentators on global economics, having devised the acronym Bric in 2001 to underline the shift of economic power from the west to Brazil, Russia, India and China - a trend that defines modern, international economics. As the head of research at the world's most powerful investment bank, the financial media hangs on his every word, from the rise of China to the collapse of the US housing market. Henk Potts at Barclays bank, an expert on football takeovers, says: "Jim is an incredible operator with an enviable contacts book so I am sure that he is well positioned to bring in wealthy international investors who could support a bid for United." Gavyn Davies, O'Neill's predecessor who went on to chair the BBC, described him as "certainly the top foreign exchange economist anywhere in the world in the last decade". Business Week , the US magazine, described O'Neill as Goldman's rock star. A lifelong United supporter, O'Neill's London office is decorated with splashes of cherry red memorabilia from the club, where he was a non-executive director until the Glazers' £800m takeover. He still speaks with a Mancunian accent and has a dry, self-deprecating sense of humour and often irreverent manner. His father, who was from Moss Side, left school at 14 and was determined to give his son a good education. He was offered a place at a fee-paying school, but turned it down because football wasn't a priority and went to Burnage comprehensive. O'Neill's involvement in the bid puts him in an interesting position with his employer. Goldman Sachs may have been surprised by comments he made at the time of the bond when he said that United was over-leveraged, perhaps forgetting that the bank collected millions in fees from the refinancing as a member of syndicate institutions involved in the fundraising. Red Knights colleague Harris is a dealmaker behind some of the Premier League's biggest takeovers (see above). One of the more intriguing issues around the bid is the allegiance of United manager Sir Alex Ferguson, who has made statements in support of the Glazers in the past, but is also an old friend of O'Neill. As an employee of the Glazers he has to be careful what he says, but observers think that it is inconceivable that he would not have had advance notice of the Red Knights' meeting in London last Monday. Ferguson has said recently that he understands the supporters' concerns, but he has also insisted that the club is in capable hands and that financial issues at Old Trafford have never affected him in the transfer market. Last week Gill was adamant the Glazers retained Ferguson's support. "He [Ferguson] is very comfortable with what he's got," he said.