ALL issues relating to the bond issue and club finances

[pony1982]

This may not be a bad idea depending what rate of interest is on the bond.

For those who don't know a bond, is a financial certificate which is issued by a firm and bought by an institution or a regular investor. Hence, people give them 600M and this is treated as debt. MUFC has to pay interest to these bond holders (monthly or quarterly). Each bond has a maturity date and when it does mature, they must pay the remaining interest and the full principal of the bond.

Now they are probably issuing a bond because they are struggling to refinance their loans. Hence, they will take the proceeds and pay off the bank loan and thus just have the 600M in bond debt. This can be advantageous if the interest rate is lower than the bank loan (so we pay less interest). On the flip side, it could have a higher interest rate and we could be paying more interest because they cannot meet their payments and are just looking to delay it.

Unfortunately, I don't know much about how interest is set or if a bank loan would be cheaper or bonds. Anyone a specialist about interest rates?

The interest rates are determined by the markets - much like an IPO for shares. So, a company like United (which is classed as high risk because it is in the football industry) is looking at anything between 8 and 12% interest on the debt. The institutions wouldn't touch the bonds if the returns were lower. What most companies do it refinance the debt from time to time, if they see conditions becoming more favourable (borrow at a lower rate to pay off higher rate debt), which is similar to what United are doing at the moment.

I see the bond issue as a good thing for the club and not all doom and gloom as the media are making it out to be. Think about it - we're paying down debt of around 20% (i dont know the exact number) and refanincing it at 8-10% or whatever the final number will be. This should hopefully improve our cashflow situation and seems like the sensible thing to do.

 

[ralphie88]

They were definitely counting on the individual TV deal. They didn't expect to have to push for it as it seemed like the EU etc would do it for them. And they were wary of the bad publicity. They knew it wouldn't happen immediately and assumed there was still a lot of room to milk United in other areas. They overestimated how much more they could generate from the existing streams.

I know no-one will believe me but I'm not just making it up. That came from a direct conversation with an informed guy.

Interesting. Well they were always going to have to have the EU's support. But if they thought that the EU were going to break the collective deal without a formal complaint from them (which was never made), they were very very badly mislead.

And there's not a chance the EU are going to break the collective TV deal now - if anything they're going in the other direction. The 2007 deal was the one they had to try and hit.

 

[pony1982]

even God can't save us now.

Anyone who wants to buy United is going to have to pay 1.2-1.5 billion, who is actually going to do that. I can't see it.

We are so royally screwed it's not even funny

Where did you get the 1.2 billion number from? Anybody who buys us will have to pay the value of the club. If the value of the club is 800MM and the debt is 600MM, then the Glazers get 200 and the club is debt free in new ownership.

 

[KingMinger22]

How do TV deals work in US sport? Individual or collective?


Is there any legal basis by which the Glazer's could force an individual TV deal?

If there isn't it will NEVER happen - and rightly so!

 

[mjs020294]

Where did you get the 1.2 billion number from? Anybody who buys us will have to pay the value of the club. If the value of the club is 800MM and the debt is 600MM, then the Glazers get 200 and the club is debt free in new ownership.

Well the debt is 700 million, and there will most likely be fees for early payment. The Glazers pumped 270-300 million of their own money into United during the buyout. Therefore the sales price would be in the region of one billion IMO.

 

[mjs020294]

How do TV deals work in US sport? Individual or collective?


Is there any legal basis by which the Glazer's could force an individual TV deal?

If there isn't it will NEVER happen - and rightly so!

Collective in the US.

 

[dhstriker]

God, the money United would be bringing in if the Glazer's had paid in cash. I understand why the average fan is so pissed about this, but the refinancing should work out will for United. It allows capital to come in for the Glazer's to pay off higher interest debts and replace them with lower interest. While interest rates are low, this could be a good time to refinance. Even when United was first bought there was always a plan to refinance. This talk of United having to sell their training ground or stadium is complete bullshit if you ask me. Refinancing is not a bad thing for a company that is consistently increasing revenue, but if United start losing market share, creditors will start calling their loans.

 

[theimperialinn]

I see the bond issue as a good thing for the club and not all doom and gloom as the media are making it out to be. Think about it - we're paying down debt of around 20% (i dont know the exact number) and refanincing it at 8-10% or whatever the final number will be. This should hopefully improve our cashflow situation and seems like the sensible thing to do.

You've got your sums wrong somewhere here.

500m is hedged in at 8% and 200m is the pik 14.25% debt.

That gives us an apr of 9.79%.

 

[gaffs]

Well the likes of Hublot and Suadi Telecom are not exactly household names. What happened to this 'global brand' they are trying to leverage off. Sounds like a load of old bollocks to me.

Not in England there not.

There paying a fortune though for international exposure. Im sure there paying far more than the household names would, which is all that matters.

The household names dont consider sponsoring United for the prices they have to pay to be good value.

Look at Barca, they have signed a deal with Turkish Airlines - its all about tapping into the emerging markets.

 

[gaffs]

God, the money United would be bringing in if the Glazer's had paid in cash. I understand why the average fan is so pissed about this, but the refinancing should work out will for United. It allows capital to come in for the Glazer's to pay off higher interest debts and replace them with lower interest. While interest rates are low, this could be a good time to refinance. Even when United was first bought there was always a plan to refinance. This talk of United having to sell their training ground or stadium is complete bullshit if you ask me. Refinancing is not a bad thing for a company that is consistently increasing revenue, but if United start losing market share, creditors will start calling their loans.

They didnt have the cash!!!

They bought something they couldnt afford.

 

[EZee]

How do TV deals work in US sport? Individual or collective?


Is there any legal basis by which the Glazer's could force an individual TV deal?

If there isn't it will NEVER happen - and rightly so!

if there is ever a european super league i imagine that would have individual deals as i couldnt see real or barca giving up theirs...

but as for the premiership i agree that i cant see the majority of clubs voting for it as they would almost certainly loose money and only the top few clubs make more

 

[Rood]

They're not chumps, I just don't understand their plan? Growth has been beyond their original forecast, ticket prices have increased beyond original forecast, transfer spending has been less than original forecast to the tune of about £200 million... success of the pitch has to be beyond their expectations, because if we're planning for that level of constant success we'll be up shit creak... I just can't make any sense of it

Refinance of the debt was always an integral part of their plan but the global credit crisis definitely wasnt, which is why they have been forced to go with this bond issue.
However, things are nowhere near as bad as some people seem to think - if anything the financial situation of the club is set to improve. Also I do not agree with people who suggest that the survival of our club depends on continuing the amount of success we have in recent years - as long as we keep qualifying for the CL then we should be ok.

I reckon if the Glazer sold out today, even on a worst case scenario they would walk away with a small profit and on a mid to best case, they are set to make a few hundred million quid profit - so perhaps that might answer you question about what their plan was

 

[032Devil]

I see the debt has increased again.

Anybody here think it's a good thing? The worse it gets for the Glazers, the quicker it will force their hand (to sell)? Or I'm I being simple-minded?

 

[mjs020294]

I see the debt has increased again.

Anybody here think it's a good thing? The worse it gets for the Glazers, the quicker it will force their hand (to sell)? Or I'm I being simple-minded?

Incredibly!

 

[Crerand Legend]

I see the debt has increased again.

Anybody here think it's a good thing? The worse it gets for the Glazers, the quicker it will force their hand (to sell)? Or I'm I being simple-minded?

Sell to who? I fear the Glaziers paid too much and there will be no rush for others to do likewise. The Glaziers will not want to sell for less than they bought us for, hence we are in trouble

 

[032Devil]

Sell to who? I fear the Glaziers paid too much and there will be no rush for others to do likewise. The Glaziers will not want to sell for less than they bought us for, hence we are in trouble

According to reports, they want £1.2b.

They obviously believe that United is an attractive proposition.

It's all brinkmanship, isn't it?

 

[Donkey's Ears]

Interesting. Well they were always going to have to have the EU's support. But if they thought that the EU were going to break the collective deal without a formal complaint from them (which was never made), they were very very badly mislead.

And there's not a chance the EU are going to break the collective TV deal now - if anything they're going in the other direction. The 2007 deal was the one they had to try and hit.

I think that is definitely true. The chances of breaking the collective deal now are remote (in the short-term at least).

 

[KingMinger22]

Sell to who? I fear the Glaziers paid too much and there will be no rush for others to do likewise. The Glaziers will not want to sell for less than they bought us for, hence we are in trouble

Exactly what I was going to say!

No one has shown interest and I doubt they will at one billion!

The only way they could sell is to re-list on the LSE

 

[M13]

God, the money United would be bringing in if the Glazer's had paid in cash. I understand why the average fan is so pissed about this, but the refinancing should work out will for United. It allows capital to come in for the Glazer's to pay off higher interest debts and replace them with lower interest. While interest rates are low, this could be a good time to refinance. Even when United was first bought there was always a plan to refinance. This talk of United having to sell their training ground or stadium is complete bullshit if you ask me. Refinancing is not a bad thing for a company that is consistently increasing revenue, but if United start losing market share, creditors will start calling their loans.

Think of this from a matchgoing fan's point of view.

All of the money that gets spent on tickets (for every season ticket holder, in excess of £1000 per season) goes straaaaight to the banks for interest payments. Ticket prices are rising season on season and we're all being priced out to meet these interest payments. We're paying more and more money to go, all of the money is getting pissed up the wall, and we're seeing no return from any of it in terms of players coming in.

There's also the business side of it...we're effectively running at a loss, unless we sell players(!!!!), and we shouldn't be.

Then the cnuts are taking money out of the club for themselves.

And David Gill is being paid £1.8million per year.

 

[ralphie88]

Is there any legal basis by which the Glazer's could force an individual TV deal?

Would have to claim it was an anti-competitive agreement under Article 81 of the Treaty. It probably is, but with competition law in sport the Commission have shown they are willing to allow anti-competitive practices to continue if they are necessary for on-pitch competition (hence why anyone who says football is just a business are talking out their arse).

Since 2007, UEFA has been cosying up to the Commission and they've stopped their complaints against both UEFA and the PL. And we've seen collective deals being created (e.g. the Europa league and Serie A) - would have been unheard of a few years back.

It breaking the collective deal through legal action was the Glazers' plan, they've missed the boat.

 

[dhstriker]

Think of this from a matchgoing fan's point of view.

All of the money that gets spent on tickets (for every season ticket holder, in excess of £1000 per season) goes straaaaight to the banks for interest payments. Ticket prices are rising season on season and we're all being priced out to meet these interest payments. We're paying more and more money to go, all of the money is getting pissed up the wall, and we're seeing no return from any of it in terms of players coming in.

There's also the business side of it...we're effectively running at a loss, unless we sell players(!!!!), and we shouldn't be.

Then the cnuts are taking money out of the club for themselves.

And David Gill is being paid £1.8million per year.

What I meant to say about selling club assets is they are tabloid bollox. I can see where it looked like I didn't have a problem with it. I definitely see the match goers side of things, but think of this...if the Glazers effectively halve the interest on 500 mil, then they end up saving 35 million pounds on interest they would have had to pay and it makes the interest much easier to manage. United is a business and it would be irresponsible to run it like City, Chelsea, or Madrid. I can definitely see City or Chelsea being offloaded at some point by their wealthy investors and ending up like Leeds.

 

[ralphie88]

What I meant to say about selling club assets is they are tabloid bollox.

But the sale and leaseback of Carrington is (a) mentioned in the prospectus, and (b) has since been confirmed by Gill during the roadshows.

How does that make is "tabloid bollix" (sic)?

 

[mjs020294]

More bad news for the Glazers: it is looking like the American Football season will be canceled because a deal with the players on the CBA are unlikely. So basically they will have no revenue from the Tampabay Buccaneers for a full year.

 

[charlenefan]

Latest thing I've just read is that we're exploring taking a 75m loan to buy new players?

Anyone else heard this and is it true?

I honestly dont know what to believe anymore

 

[Crerand Legend]

Latest thing I've just read is that we're exploring taking a 75m loan to buy new players?

Anyone else heard this and is it true?

I honestly dont know what to believe anymore

That story has been about a week or so. Take it to be like an overdraught which would put at SAFs disposable to buy players and placate the fans. In my opinon SAF knows he dare no use it, its only for show

 

[robertsoncrusoe]

There is no way that they thought that they could break the TV deal - it is immposible and will never be done!

Not sure about the international TV deal but I imagine it is highly unlikely!



What is sure is that we have ONE worldclass player that people all around the world will pay to see. We had two but we sold Ronaldo.

Without buying new outstanding talents every few years, as we have always, the interest and revenues will fall substantially!

That quote from the Ford Marketing guy- he won't be saying that in four or five years if Fergie's gone and the team hasn't won regular trophies with top players.


What the feck the Glazer's were hoping for is immpossible to tell. They definitely were counting on moving the debt to far, far lower interest rates.


BAD INVESTMENT, basically, eh?

When did Ford ever get anything right- take a look at the crap they sell here!

 

[ralphie88]

Latest thing I've just read is that we're exploring taking a 75m loan to buy new players?

Anyone else heard this and is it true?

I honestly dont know what to believe anymore

Yes, it's in the prospectus.

 

[Rood]

You've got your sums wrong somewhere here.

500m is hedged in at 8% and 200m is the pik 14.25% debt.

That gives us an apr of 9.79%.

Where did you get the 8% figure from Impey? I thought it was fixed at 5%?

Latest thing I've just read is that we're exploring taking a 75m loan to buy new players?

Anyone else heard this and is it true?

I honestly dont know what to believe anymore

Yes it is true and it is not just being explored - it is definitely going to happen.

 

[robertsoncrusoe]

Oh, come on, surely you know that the Glazers have been very generous when it comes to net spend on transfers? It's been pointed out by many on here ad nauseum. I believe ciderman in particular even has a chart showing how generous they have been.

 

[robertsoncrusoe]

While United’s new bonds aren’t rated, analysts such as Jonathan Moore at Evolution Securities Ltd. in London say the company would probably be in the B category, the second-lowest sub-investment grade. Bonds of that type yield about 9.77 percent on average, according to Bank of America Merrill Lynch’s Euro High Yield, B Rated Index.

 

[711]

While United’s new bonds aren’t rated, analysts such as Jonathan Moore at Evolution Securities Ltd. in London say the company would probably be in the B category, the second-lowest sub-investment grade. Bonds of that type yield about 9.77 percent on average, according to Bank of America Merrill Lynch’s Euro High Yield, B Rated Index.

What category would it be if we had a decent pitch invasion then?

 

[dhstriker]

More bad news for the Glazers: it is looking like the American Football season will be canceled because a deal with the players on the CBA are unlikely. So basically they will have no revenue from the Tampabay Buccaneers for a full year.

That won't happen

 

[ooeat0meoo]

What are the chances that the Glazers will not be able to attend any of the matches because they are so despised? - Waiting to see someone throw tomatoes or eggs at them whilst perched in their luxury box.

 

[B Cantona]

That won't happen

Knowing nothing about this... Why not?

Baseball and hockey have had their lockouts after all

 

[mjs020294]

That won't happen

That is not what I was listening to on the way home this evening. Apparently the owners want to claw back $1 billion from the CBA. The players currently get 65% but they want to reduce it to 47%, and the owners are being hard-nosed.

According to player and owner insiders a deal is unlikely, and a shutout is very likely.

 

[theimperialinn]

Refinance of the debt was always an integral part of their plan but the global credit crisis definitely wasnt, which is why they have been forced to go with this bond issue.
However, things are nowhere near as bad as some people seem to think - if anything the financial situation of the club is set to improve. Also I do not agree with people who suggest that the survival of our club depends on continuing the amount of success we have in recent years - as long as we keep qualifying for the CL then we should be ok.

I reckon if the Glazer sold out today, even on a worst case scenario they would walk away with a small profit and on a mid to best case, they are set to make a few hundred million quid profit - so perhaps that might answer you question about what their plan was

Things are a lot worse than I anticipated. With the Ronaldo sale stripped out I would have expected to see a decent improvement on last years loss but instead we lost £27m more. What costs are going through bar the interest that are outweighing the increased turnover?

According to reports, they want £1.2b.

They obviously believe that United is an attractive proposition.

It's all brinkmanship, isn't it?

That story broke in the NOTW.

It was a proposed bid rather than what the Glazers were asking for.

But the sale and leaseback of Carrington is (a) mentioned in the prospectus, and (b) has since been confirmed by Gill during the roadshows.

Without wanting to sound like a Glazer stooge the prospectus outlines that Carrington will be sold inter-group. It's not going anywhere. The media are scaremongering.

Where did you get the 8% figure from Impey? I thought it was fixed at 5%?

It's in the prospectus. The drop in interest rate gave way to a £35m hedging liability which remains unpaid. They are looking to tie this in with the refinance.

 

[theimperialinn]

Latest thing I've just read is that we're exploring taking a 75m loan to buy new players?

Once the bond goes through the senior debt shrinks from £500m to £75m.

This facility will be used us working capital and to fund any players transfers required.

 

[REDMULLERS]

Can some bright spark enlighten me regarding these two interrelated issues:

1) TV deals - I understand that the Spanish clubs negotiate their own TV deals. Is there an opportunity over the next few years for Utd to 'break ranks' with the PL and do the same.

2) If Platini pushes ahead with his desire to clamp down on indebted clubs - could that signal a breakaway move on the part of the big clubs towards a European Super League.

I am not advocating either course of action - just trying to understand how the Glazers hope to significantly increase income over the next few years.

 

[ralphie88]

1) TV deals - I understand that the Spanish clubs negotiate their own TV deals. Is there an opportunity over the next few years for Utd to 'break ranks' with the PL and do the same.

No. United would need 13 other clubs to agree to change the rules. And they won't because it would probably only be United and Liverpool that would make more money from an individual deal. Back in 2005, the Glazers could have put in a complaint to the European Commission, claiming the collective deal was illegal under Art.81 of the EU Treaty. However in more recent years the Commission appears to have changed its view on this and has backed collective deals (eg the new Europa League deal and the pending Serie A deal).

 

[ralphie88]

Without wanting to sound like a Glazer stooge the prospectus outlines that Carrington will be sold inter-group. It's not going anywhere.

It opens the possibility for the Glazers to sell United without the training ground if they feel it would make them more money.