Interesting comment from the CEO of one of the funds that held the PIK debt:
Manchester Utd. to Pay Off 220 Million Pounds of Team's Debt - Bloomberg
Manchester Utd. to Pay Off 220 Million Pounds of Team's Debt - Bloomberg
ALL issues relating to the bond issue and club finances
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I've thought that for a while. Interest rates as high as 16.25% (and higher) are usually used as an "insurance" for high risk loans. The fact the United business model is so stable it's a surprise that they didn't look to refinance these PIK notes earlier as there would surely be creditors willing to buy them for a much better interest rate than 16.25%?!
What're the most likely options that Glazers have used to raise this money?
If its their own money, then good.
I'll reserve judgement until its actually finalised though.
I'll reserve judgement until its actually finalised though.
The problem was that the Glazers couldn't refinance the PIK debt until the old £500m bank debt had been repaid. And when the credit markets shut down in the last quarter of 2008 it prevented the Glazers refinancing that bank debt until they were able to get the bond issue away in January of this year. With the bank debt and its restrictive covenants out of the way they were then able to tackle the PIK debt and its 16.25% coupon rate, which is what they've now done.
Well aside from United and Tampa Bay Bucks, they own: First Allied Corporation.
First Allied Corporation
I guess it is possible that they have sold some of their businesses or leveraged a loan against some of them?
Really? That's genuinely more interesting to you? Personally, after reading back on this thread, I believe people acting 'like a responsible adult' deserves some positive reinforcement. Your own comment there could be construed as just as petty, just wrapped up in prettier words.
Hopefully this time the thread can stay focused on the actual issue without it needing to revert to point scoring between personalities.
If the money is taken from other parts of the Glazier corporation (as in not anything related to United), and without taking up another loan, what does that mean for our total debt and what does it mean for our total expenses next year?
How much less interest will we be paying off next year, compared to this year?
How much less interest will we be paying off next year, compared to this year?
Doing the simple maths of the interest rates and the basic figures it looks like this:
£220m @ 16.25% = £32.5m / year interest.
£500m @ 9.00% = £45m / year interest.
Total £77.5m / year.
Although this year there was also a one off fee of £70m for the bond issue, I think.
So it will be £45m a year of our £100m (and growing) a year profits.
Not quite.
It was a £45million fee.
I think the main issue was that technically the PIKS have never been 'Manchester Uniteds' debt. That however is a technicality as it has been widely assumed that the Glazers would use Manchester United to pay for them/ if defaulted it would give the PIK funds a share of one of our parent companies.
So technically our debt would remain the same and our net debt may even increase (if cash reserves were used to pay off PIKS). But in real terms we'd have rid ourselves of a very expensive coupon that the Glazers would possibly have used the club to pay or alternatively used the club to pay the interest on and then rolled the capital up into our parent debt when they both became due.
Unless I've got it all wrong.
So, if debt doesn't increase, and interests don't increase, and if the money being used to pay down the PIKs is in fact non United money then we will have our interest expenditures reduced from 77,5 to 45 million?
Not really. The amount the Glazers can take out in dividends remains the same irrespective of the PIK debts being paid off or not. Man Utd's interest expenditures were never technically 77.5~m, but it was widely assumed that their dividends were used to pay for "their own" debt.
Dyslexic Untied;891662y8 said:
No because United never paid a penny towards the PIK's anyway. The worry was that the PIK's were going to have to eventually be paid off using club cash; that was the basis for anders' call to boycott; but it seems now that that never was the case.
hello 'big-financey-thread-mentalists'
long time reader - first time poster in here so go easy on me...
the main concern of the anti-glazers was that utd would be used to pay the PIK debt and so despite it never being directly linked to utd, its value and interest rates have always been rolled-up into any figures discussed in here. However the PIKs should never have really been considered should they (im aware many have taken this stance) so i fail to see how this news really changes anything. All the Glazers could ever take from utd was the 70m carve-out and 25m dividend right? this is regardless of whether they have the PIK loans on their heads or not, so whats changed as far as Man Utd are concerned now?
they have only ever been allowed to take 70m +25m per year before this and they can still take that amount now right?
i understand that its eases the fear of any defaults leading to seizure but i really dont see why this is such big news, it changes little as far as monies being taken from utd from what i can see.
unless we've been sold of course
long time reader - first time poster in here so go easy on me...
the main concern of the anti-glazers was that utd would be used to pay the PIK debt and so despite it never being directly linked to utd, its value and interest rates have always been rolled-up into any figures discussed in here. However the PIKs should never have really been considered should they (im aware many have taken this stance) so i fail to see how this news really changes anything. All the Glazers could ever take from utd was the 70m carve-out and 25m dividend right? this is regardless of whether they have the PIK loans on their heads or not, so whats changed as far as Man Utd are concerned now?
they have only ever been allowed to take 70m +25m per year before this and they can still take that amount now right?
i understand that its eases the fear of any defaults leading to seizure but i really dont see why this is such big news, it changes little as far as monies being taken from utd from what i can see.
unless we've been sold of course
interesting stuff this. Still waiting to hear how exactly they've paid it but it's good news.
Not just the basis for anders' call to boycott, Cider, but also the basis for the entire G&G campaign, the Red Knights attempt to de-stabilize the club, that media whore Keith Harris mouthing off and Drasdo and MUST not so subtly urging season ticket holders to give up their season tickets.
I mean there's even been parliamentary time given to discussing this issue ffs.
One or two people will be choking on their cornflakes this morning and one or two people have rather a lot to answer for.
David Gill wasn't lying and Fergie honestly doesn't see the value in adding to his squad at this point in time.
hello 'big-financey-thread-mentalists'
long time reader - first time poster in here so go easy on me...
the main concern of the anti-glazers was that utd would be used to pay the PIK debt and so despite it never being directly linked to utd, its value and interest rates have always been rolled-up into any figures discussed in here. However the PIKs should never have really been considered should they (im aware many have taken this stance) so i fail to see how this news really changes anything. All the Glazers could ever take from utd was the 70m carve-out and 25m dividend right? this is regardless of whether they have the PIK loans on their heads or not, so whats changed as far as Man Utd are concerned now?
they have only ever been allowed to take 70m +25m per year before this and they can still take that amount now right?
i understand that its eases the fear of any defaults leading to seizure but i really dont see why this is such big news, it changes little as far as monies being taken from utd from what i can see.
unless we've been sold of course
Essentially because we presumed that the Glazers had to take their maximum entitlement just to stay afloat (ie the £25m+ each year and the one off £95m), this would inevitably be to the detriment of Man Utd. Now the Glazers do not have to take the full dividend for any specific reason (although they still might).
The positive point that I see is that if United for instance didn't qualify for the Champions League for some reason, we'd still have some profitability if the Glazers didn't take a dividend. Whereas if they needed to take a huge dividend we'd be in a very precarious position.
But I thought we did, in interest? Or was that from other debt. No good with finance but at 40 something million quid interest fee was in there that wasn't related to the one off payment?
hello 'big-financey-thread-mentalists'
long time reader - first time poster in here so go easy on me...
the main concern of the anti-glazers was that utd would be used to pay the PIK debt and so despite it never being directly linked to utd, its value and interest rates have always been rolled-up into any figures discussed in here. However the PIKs should never have really been considered should they (im aware many have taken this stance) so i fail to see how this news really changes anything. All the Glazers could ever take from utd was the 70m carve-out and 25m dividend right? this is regardless of whether they have the PIK loans on their heads or not, so whats changed as far as Man Utd are concerned now?
they have only ever been allowed to take 70m +25m per year before this and they can still take that amount now right?
i understand that its eases the fear of any defaults leading to seizure but i really dont see why this is such big news, it changes little as far as monies being taken from utd from what i can see.
unless we've been sold of course
Yes, you're right; the amount that Glazers can take from the club each year remains the same irrespective of the standing order the PIK notes. But the Glazers have never taken any money from the club in this way, though they have had ample opportunity by now. The anti-Glazers such as anders and MUST have always assured us that this cash would eventually be taken, even going as far as to deem it to have already been taken in their scaremongering, propagandist calculations; hence all the panic and subsequent arguments on here. Anders advised everyone to boycott on the back of his predictions, many probably took that advice and gave up their tickets upon reading all the scary figures which he assured everyone would soon become reality. So this is big news for the fans and for the club; the big scare campaign can potentially now be put to bed for good. It's needless, pointless and harmful; good news then if we can see the back of it and not have to listen to MUST's tripe for another season longer.
We'll await further details.
I think people have forgotten that while the Glazers are no Shiek or Abramovic, they do have their own personal wealth and lots of very successful business interest's.
They have been painted as a skint group of businessmen that acquired United through a hugely leveraged buyout when it is not impossible that they have the power to raise that sort of money by themselves, without creditors.
It's important not to get ahead of ourselves here though as it is perfectly possible that they have taken a loan out against one of their other business interests in order to clear this debt and they still could plan to take their dividend's each year to pay this loan off.
I can't wait to hear Fred's negative spin on this though
They have been painted as a skint group of businessmen that acquired United through a hugely leveraged buyout when it is not impossible that they have the power to raise that sort of money by themselves, without creditors.
It's important not to get ahead of ourselves here though as it is perfectly possible that they have taken a loan out against one of their other business interests in order to clear this debt and they still could plan to take their dividend's each year to pay this loan off.
I can't wait to hear Fred's negative spin on this though
is it posible that they could have sold off part of the club and we still dont know??
If they are that well off they wouldn't be in default on a number of loans for their american businesses.
But it's not really a good thing in the true sense of the word if they're borrowing just to meet a deadline that's coming up. It's just a debt from a different source isn't it?
I'm confused. What money?
And to be honest, Rooney doesn't have anywhere near that sort of influence. He' just a player.
There is supposedly a cash reserve. latest finance report?
The £164m in our bank account
Sorry these kind of things usually confuse me so bear with me, but isn't it possible for that money to used for paying off loans as well?
thanks for the responses guys
oh i agree, however i've never really worried too much about that as i always thought it extremely unlikely that they would look to harm their crown jewel (us) to keep the PIK wolves from their door, surely they'd have thrown their malls and the buccs at it first, their utd shares are far too valuable to risk.
I've always felt they'd maintain us to the fullest as a well run united could mean uber riches down the line in a sale or see gerneations of their family living the high life at little to no effort!
dont anyone get me wrong, i've never wanted the feckers here and the leveraged buyout should've been blocked right from the off, however i do think they've managed to align the finances quite well and united are reasonably healthy right now. I can't see them ever leaving without a nice fat cheque in their hands
oh i agree, however i've never really worried too much about that as i always thought it extremely unlikely that they would look to harm their crown jewel (us) to keep the PIK wolves from their door, surely they'd have thrown their malls and the buccs at it first, their utd shares are far too valuable to risk.
I've always felt they'd maintain us to the fullest as a well run united could mean uber riches down the line in a sale or see gerneations of their family living the high life at little to no effort!
dont anyone get me wrong, i've never wanted the feckers here and the leveraged buyout should've been blocked right from the off, however i do think they've managed to align the finances quite well and united are reasonably healthy right now. I can't see them ever leaving without a nice fat cheque in their hands
I think it's very very unlikely, by selling part of the club the Glazer's would be giving up alot of privileges of being the sole owners of the club which could be detrimental to their whole business plan.
Think everything in this article has been mentioned in this thread already since last night but this is from the Guardian
Manchester United owners Glazer family to pay off £220m PIK loan | Football | guardian.co.uk
The Glazer family are about to astound their critics by paying off their controversial £220m payment-in-kind notes without using money drawn from Manchester United. Co-chairman Joel Glazer has issued a 'voluntary free-payment notice' to the lending houses that stumped up the loan confirming it will be paid off in full.
Under the terms of the £500m bond which is United's responsibility, the Glazers could take £70m out of club funds to pay part of the PIK debt, which is lodged against the family. However, it does not appear this is the case, even if there has been no comment from United about how the money to pay off the PIKs has been raised.
It is possible the Glazers could have sold a chunk of the club or sold off other business interests, which include their Tampa Bay Bucaneers NFL franchise, or they might have refinanced. More may become apparent later today when United are due to publish their results for the last quarter to bond holders. They are likely to be asked to address the issue in a conference call with investors.
Many supporters will remain sceptical about the news, which in theory confirms Sir Alex Ferguson's previous claims that he has a large transfer kitty at his disposal. Supporters opposed to the Glazers have always claimed that such talk was false, with the money being earmarked for the PIK loans, which are now attracting interest at an eye-bulging 16.25%.
Last month United reported losses of £83.6m, with more than £40m attributable to interest payments on the £500m bond issue, and accrued interest on the PIK loans.
Manchester United owners Glazer family to pay off £220m PIK loan | Football | guardian.co.uk
The Glazer family are about to astound their critics by paying off their controversial £220m payment-in-kind notes without using money drawn from Manchester United. Co-chairman Joel Glazer has issued a 'voluntary free-payment notice' to the lending houses that stumped up the loan confirming it will be paid off in full.
Under the terms of the £500m bond which is United's responsibility, the Glazers could take £70m out of club funds to pay part of the PIK debt, which is lodged against the family. However, it does not appear this is the case, even if there has been no comment from United about how the money to pay off the PIKs has been raised.
It is possible the Glazers could have sold a chunk of the club or sold off other business interests, which include their Tampa Bay Bucaneers NFL franchise, or they might have refinanced. More may become apparent later today when United are due to publish their results for the last quarter to bond holders. They are likely to be asked to address the issue in a conference call with investors.
Many supporters will remain sceptical about the news, which in theory confirms Sir Alex Ferguson's previous claims that he has a large transfer kitty at his disposal. Supporters opposed to the Glazers have always claimed that such talk was false, with the money being earmarked for the PIK loans, which are now attracting interest at an eye-bulging 16.25%.
Last month United reported losses of £83.6m, with more than £40m attributable to interest payments on the £500m bond issue, and accrued interest on the PIK loans.
The Glazers can take £95m of that. The big news is that they're not going to. Where this leaves anders and MUST is anyone's guess; they've fecked up big-time by the sounds of it.
If anyone think and expect Glazer or the club to announce how they are financing the payment of the PIKs, think again.
We all want the best for the club. This news sounds very optimistic...
Slight blow for the gold and green campaign
MUST response to news today that the Glazers plan to redeem the PiK debt:
"Now is the time for the Glazers to finally come clean and tell the truth about what is going on at Manchester United and what their plans are."
"What have they got to hide? No more secrecy. No more spin. Just tell the fans the truth."
--
MUST has prepared a series of questions that need answers. This will be released following the financial results presentation later today.
I'm wondering if that £165m is being set aside for transfers over the next 4 or 5 years, while the profits go to paying off the £500m bond.
If the £30m a year that was going on the PIK's interest payments was put into paying off the Bond, in 5 years time the Bond would be down to £350m and could be restructured to a lower interest rate again and even at 9% it would be down to £31.5m a year interest payments from the £45m it is currently.
If the £30m a year that was going on the PIK's interest payments was put into paying off the Bond, in 5 years time the Bond would be down to £350m and could be restructured to a lower interest rate again and even at 9% it would be down to £31.5m a year interest payments from the £45m it is currently.
yep, but feck me i want to know
why do you have to keep having a go at MUST, it´s more than a little boring and really has nothing to do with what we´re talking about,maybe it´s time to let your little crusade go?
Yup, and now themselves and their feck-up is the story. And to be quite honest I think they deserve it. They pulled the same trick as they did back in 2005. All too willing to point out the absolute worst case scenario without informing their fellow supporters of the other options on the table.
That's twice now they've fooled the fanbase. I'd suggest people shouldn't let it happen a third time.
Surely the repayments of the PIKs (and how/if it effects) the club would be of financial interest to the Bond holders - would the Glazers not be duty bound to inform them of what is happening?
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