ALL issues relating to the bond issue and club finances

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andersred said:
I read that and thought "he either means the senior secured debt or he hasn't look at the cap structure."
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Well he must know about the PIKs because Bloomberg asked him to comment on the 20% PIK purchase:

“It’s a good move for the family, period,” said Stephen Schechter, founder and chief executive officer of London-based investment bank Schechter & Co. “They know the numbers better than anyone and the yield could be spectacular.”
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Whenever I see the word ''period'' I can't help but think back to B9's comments in the ''Liverpool to be sold'' thread last night. Off topic I know. Apologies.
 
"yield could be spectacular" - does this suggest to you that they will be maintaining the PIKs for the full money so that they can take, say, £100m straight to Glazer central and refinance the other £400m (assuming a zero paydown and that £500m is the final balance on the PIKs of course - it's purely for illustrative purposes.)
 
TheMancRedDevil said:
@ GCHQ & cider - I have just been for a bath because it's true, Eureka moments happen in the bath.

I feel a bit of an idiot now because of what I was saying earlier about the cashflow situation.

For some stupid reason, I was working on the basis that we have £200million to play with this season when it is actually the current cash balance of £163million PLUS whatever revenues we generate this next season (£290m?).

A grand total of around £450million - more than enough to handle the normal everyday running of the club, pay whatever the Glazers take AND leave a decent transfer kitty.

What a plank. :(
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Don't worry about it TMRD. Others could learn a great deal from your ability to hold your hands up when you've made a mistake. We're all human after all.
 
andersred said:
For what it's worth, deleveraging an LBO using cash flow and then releveraging to withdraw equity is the well trodden, textbook even, way of making money from LBOs. The only other way to pocket serious money is too sell....

I've written something similar on here before, but if they can use dividends to eliminate the PIKs, grow EBITDA at (say) 8% per annum to 2017 so it rises to £172m and refinance at 5x EBITDA (total debt of £864m) then they can repay the £520m bond and pocket £344m in a dividend recap.

That's the theory of LBOs.

Edit: TMRD you have pm
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Do you think they could increase EBITDA to £172m over the next seven years without keeping the playing squad in a healthy state? Less prize money, less matchday income, less sponsorship revenue, less overseas support, VERY pissed off fanbase with likely heavy boycotts; these will be the consequences of neglecting the playing squad. How do you expect they'll achieve such growth with a shit football team?

Surely any saving made by eliminating the PIK's would be negated by stagnation in growth through poor or non-existent investment?

Instead, keep the PIK's below £250m and keep the squad healthy through good investment and the sky is the limit for United as a commercial entity.
 
ciderman9000000 said:
Do you think they could increase EBITDA to £172m over the next seven years without keeping the playing squad in a healthy state? Less prize money, less matchday income, less sponsorship revenue, less overseas support, VERY pissed off fanbase with likely heavy boycotts; these will be the consequences of neglecting the playing squad. How do you expect they'll achieve such growth with a shit football team?

Surely any saving made by eliminating the PIK's would be negated by stagnation in growth through poor or non-existent investment?

Instead, keep the PIK's below £250m and keep the squad healthy through good investment and the sky is the limit for United as a commercial entity.
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It's a hard trick to pull off I agree (that's one of my major issues with the whole thing of course).

I was just pointing out that deleverage (i.e. PIK repayment) followed by releverage (dividend recap) is what the LBO textbook says you should do.

Whether they read the textbook I don't know. They didn't read the "Idiots Guide to not buying property at the top of the market" did they?
 
andersred said:
It's a hard trick to pull off I agree (that's one of my major issues with the whole thing of course).

I was just pointing out that deleverage (i.e. PIK repayment) followed by releverage (dividend recap) is what the LBO textbook says you should do.

Whether they read the textbook I don't know. They didn't read the "Idiots Guide to not buying property at the top of the market" did they?
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Something tells me then that the LBO textbook didn't have a chapter on football clubs.
 
andersred said:
I've written something similar on here before, but if they can use dividends to eliminate the PIKs, grow EBITDA at (say) 8% per annum to 2017 so it rises to £172m and refinance at 5x EBITDA (total debt of £864m) then they can repay the £520m bond and pocket £344m in a dividend recap.
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There we go then. PIK problem solved.

The problem I have had in discussions in the past is that people automatically assume that because the Glazers CAN take the dividends then that automatically means that they WILL.

When I have tried to say that they will only take money out after the squad issues are sorted, the argument back is that "they can't, they NEED to take that money. They have no other money of their own, the Buccs don't generate enough and FAG is on it's knees. The only possible way to pay off those PIKs is to take the money from United."

I assumed that because the possibility of refinancing them in 2017 was never mentioned that it mustn't be an option. That there was some technical/legal reason why it wouldn't be possible.

It does appear increasingly likely, however, that they will merely pay off whatever they can from the PIKs before 2017 but that it will be worked around the needs of the team, rather than the other way round.

Whatever is left of the PIKs at the end, will be refinanced one way or another. I would like to believe that this won't be added to United's debt burden but I wouldn't hold out much hope of that.

One thing that is also worth mentioning about the dividends that rarely seems to get mentioned is that the Glazers' div entitlement is not fixed at £25m. It increases as EBITDA increases.

On an EBITDA of £172, their entitlement would be in the region of what? £40million?
 
TheMancRedDevil said:
When I have tried to say that they will only take money out after the squad issues are sorted, the argument back is that "they can't, they NEED to take that money. They have no other money of their own, the Buccs don't generate enough and FAG is on it's knees. The only possible way to pay off those PIKs is to take the money from United."
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:lol::lol::D
 
datura said:
It doesn't mean it can be easily dismissed though. There are a number of options available to them which all merit discussion.
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We are discussing them.

My point is that anders' suggestion that they might eliminate the PIK's by 2017 by taking max dividends and starving United of investment, only to then re-finance for £864m (8x EBITDA, which will be £178m by then), pay off the £520m bond and pocket the £348m proceeds just seems ridiculous.

It's ridiculous because it assumes outstanding EBITDA growth in the face of zero investment. This textbook LBO tactic surely just wouldn't work in this case.

Anders said yeah, it'd be a hard trick to pull off.

I'll say! It'd be a bloody hard trick to pull off! In a similar way that trying to lose weight by eating nothing but ten pies and five packets of butter every day might be a hard trick to pull off. You'd die. You'd lose weight only once you'd died.

Discuss.
 
ciderman9000000 said:
We are discussing them.

My point is that anders' suggestion that they might eliminate the PIK's by 2017 by taking max dividends and starving United of investment, only to then re-finance for £864m (8x EBITDA, which will be £178m by then), pay off the £520m bond and pocket the £348m proceeds seems ridiculous.

It's ridiculous because it assumes outstanding EBITDA growth in the face of zero investment. This textbook LBO tactic surely just wouldn't work.

Discuss.
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This is why textbooks on "How to be a successful businessman" don't work.

If that was the case, we could all leave school at 10 and be millionaires by the age of 16 instead of plonking about reading Cider & Rosie and things like that.
 
ciderman9000000 said:
We are discussing them.

My point is that anders' suggestion that they might eliminate the PIK's by 2017 by taking max dividends and starving United of investment, only to then re-finance for £864m (8x EBITDA, which will be £178m by then), pay off the £520m bond and pocket the £348m proceeds seems ridiculous.

It's ridiculous because it assumes outstanding EBITDA growth in the face of zero investment. This textbook LBO tactic surely just wouldn't work.

Discuss.
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You seemed to be rather dismissive and set on your idea of stabilising the PIKs at c£250m.

I think Anders' suggestion was overly optimistic. My scenario is more prudent, it all depends on whether they want to extract money from the club as soon as possible. If so paying off the PIKs and refinancing is their quickest way of doing it and would be possible with spending on the squad too, especially if they structure the deals with spread payments.
 
GCHQ said:
What property did they buy at the top of the market?
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Properties plural.

The Moodys/REAL Commercial Property Price Index for Retail properties (aka the "CPPI") peaked in Q3 2007 up 95% from the end of 2000. Since then it is down 39.3% (to the end of Q2 2010).

These properties were purchased at or after the Q3 2007 peak for a total of $116m (of which $88m was borrowed):

Portsmouth Station
Spring Valley Town Center
Tower Square SC
Plaza on San Felipe
Preston Frankford Shopping Center
Stonecrest Park
Schoolhouse Plaza
River Plaza

They will all be in negative equity now of course. That's $28m of equity gone on those alone.
 
datura said:
You seemed to be rather dismissive and set on your idea of stabilising the PIKs at c£250m.

I think Anders' suggestion was overly optimistic. My scenario is more prudent, it all depends on whether they want to extract money from the club as soon as possible. If so paying off the PIKs and refinancing is their quickest way of doing it and would be possible with spending on the squad too, especially if they structure the deals with spread payments.
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I would still tend to drift away slightly from the suggestion that United is the Glazer's sole source of income. It may well provide the bulk of whatever is needed to stabilise the PIKs but I don't think it is beyond the realms of possibility that money from other sources could be used.

Whatever we say about the Glazers' other ventures, they have not required funding from United in order to keep them going so they must be standing on their own two feet to some extent - even if they're only making modest profits at the moment.
 
TheMancRedDevil said:
I would still tend to drift away slightly from the suggestion that United is the Glazer's sole source of income. It may well provide the bulk of whatever is needed to stabilise the PIKs but I don't think it is beyond the realms of possibility that money from other sources could be used.

Whatever we say about the Glazers' other ventures, they have not required funding from United in order to keep them going so they must be standing on their own two feet to some extent - even if they're only making modest profits at the moment.
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I never said it was in my post?

If they had significant free funds then they would have bought up more of the PIKs when the market conditions were so advantageous you would assume.
 
datura said:
Why not? Because they had no free funds or the PIK holders wouldn't sell?
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Well, the speculation now is that that funny little "loan" which came out of United for £10m was around the same time as they bought the PIKs and that that funded it.

If they were going to do that kind of thing, would an extra £10m to make it a £20m loan have made much difference?

It must be that they couldn't do it at the time.

In any case, I'd find it hard to believe that they couldn't find a few million in liquid funds to purchase more.
 
Is it definitive that they haven't paid down the PIKS? Ie would they have had to qualify the June 30 accounts necessarily for an intergroup transfer?
 
TheMancRedDevil said:
Well, the speculation now is that that funny little "loan" which came out of United for £10m was around the same time as they bought the PIKs and that that funded it.

If they were going to do that kind of thing, would an extra £10m to make it a £20m loan have made much difference?

It must be that they couldn't do it at the time.

In any case, I'd find it hard to believe that they couldn't find a few million in liquid funds to purchase more.
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A few millon quid might be hard enough to find considering that their empire is hardly flourishing
 
peterstorey said:
Is it definitive that they haven't paid down the PIKS? Ie would they have had to qualify the June 30 accounts necessarily for an intergroup transfer?
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Absolutely definite. Said on the conference call, not in the post balance sheet event notes.
 
TheMancRedDevil said:
Well, the speculation now is that that funny little "loan" which came out of United for £10m was around the same time as they bought the PIKs and that that funded it.

If they were going to do that kind of thing, would an extra £10m to make it a £20m loan have made much difference?

It must be that they couldn't do it at the time.

In any case, I'd find it hard to believe that they couldn't find a few million in liquid funds to purchase more.
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That's a whole lot of assumptions there!

The fact that they were able to buy some of them indicates that the potential was there to buy up more, it's churlish to reject it as a possibility out of hand.
 
peterstorey said:
Is it definitive that they haven't paid down the PIKS? Ie would they have had to qualify the June 30 accounts necessarily for an intergroup transfer?
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We won't know until the next accounts are published (end of Nov, I think) it seems.

EDIT: Or possibly end of January...

But no, we know nothing more about the state of play with the PIKs.
 
datura said:
That's a whole lot of assumptions there!

The fact that they were able to buy some of them indicates that the potential was there to buy up more, it's churlish to reject it as a possibility out of hand.
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Fair enough. We have Anders' word from an "unimpeachable" source that they bought 15%.

If this is true then, for one reason or another, they couldn't buy more.

I just find it hard to believe that they are scrabbling around for money all the time but I will accept that this is purely my opinion and based on nothing more other than the fact that Malcolm Glazer has been a business-man for something like 128 years and is worth (on paper) in the region of £2.2bn at last count.

Would another £10m be totally out of the question?

Perhaps the window of opportunity was small and they couldn't get their hands on liquid funds in the time-frame we're talking about?

I dunno...

Just thinking aloud mainly.
 
datura said:
That's a whole lot of assumptions there!

The fact that they were able to buy some of them indicates that the potential was there to buy up more, it's churlish to reject it as a possibility out of hand.
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I'd always presumed that they were able to buy the 15% because one of the PIK holders wished to sell their portion; must have been in a pretty desperate situation to sell them so undervalued, credit-crunch and all that, you know? Perhaps Glazers negotiated first option in case of sale or something? Anyway, just because 15% came up for sale doesn't mean that the other 85% was available too. I really doubt that they could have bought more, funds or no funds.
 
ciderman9000000 said:
I'd always presumed that they were able to buy the 15% because one of the PIK holders wished to sell their portion; must have been in a pretty desperate situation to sell them so undervalued, credit-crunch and all that, you know? Perhaps Glazers negotiated first option in case of sale or something? Anyway, just because 15% came up for sale doesn't mean that the other 85% was available too. I really doubt that they could have bought more, funds or no funds.
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Yes, that's it in a nutshell. Forced seller and buyer with no liquidity (and hence need to turn to the one group company that could advance them the cash), United.
 
ciderman9000000 said:
I'd always presumed that they were able to buy the 15% because one of the PIK holders wished to sell their portion; must have been in a pretty desperate situation to sell them so undervalued, credit-crunch and all that, you know? Perhaps Glazers negotiated first option in case of sale or something? Anyway, just because 15% came up for sale doesn't mean that the other 85% was available too. I really doubt that they could have bought more, funds or no funds.
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There may have been others in similar positions willing to cash in but the Glazers didn't have the funds to buy them. You don't know and neither do I, so it's all guesswork and you can't be definitive either way.
 
datura said:
There may have been others in similar positions willing to cash in but the Glazers didn't have the funds to buy them. You don't know and neither do I, so it's all guesswork and you can't be definitive either way.
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The last sentence summed up the entire thread
 
datura said:
There may have been others in similar positions willing to cash in but the Glazers didn't have the funds to buy them. You don't know and neither do I, so it's all guesswork and you can't be definitive either way.
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So let's go with the logical conclusion that a paper-billionaire has no money?
 
Crerand Legend said:
The last sentence summed up the entire thread
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It has actually moved on quite a lot in recent days, Crerand.

And here's the good news - we can afford to buy some players next summer! Yes, it is true. The Glazers can rape, pillage, and murder all they want but Fergie will still be left with a substantial transfer kitty!

Great news eh?!
 
TheMancRedDevil said:
So let's go with the logical conclusion that a paper-billionaire has no money?
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Don't be a fecking idiot and try to put words in people's mouths that they haven't said, it's the 2nd time you tried that tonight and I've already had the courtesy to answer you once.

I dropped out of this thread because of this type of rubbish and you're at it again when the discussion isn't about whether they have their own money or not and is actually quite interesting. If you have nothing of value to add, just read and take it in, you don't always have to post you know?
 
TheMancRedDevil said:
It has actually moved on quite a lot in recent days, Crerand.

And here's the good news - we can afford to buy some players next summer! Yes, it is true. The Glazers can rape, pillage, and murder all they want but Fergie will still be left with a substantial transfer kitty!

Great news eh?!
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Not really the grey area is still dominant, the murky world of Glazer finance as cloudy as ever. As for transfers nobody knows what if any players SAF would require but it will likely be from the credit facility and SAF will be no doubt telling us there is still no value out there. Transfers are not the most important thing anyhow the debt and its effect on the club for years is the big worry
 
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