ALL issues relating to the bond issue and club finances
- Thread starter sammsky1
- Start date
- Status
I'd doubt it
Much of the stuff that's come out today has been discussed heavily in the past, and they managed to keep their heads thoroughly inserted into the ground then
Today means there's a lot more numbers to digest, and has helped a lot in terms of transparency. But I don't see much 'game-changing' about today's news. If you realise it's bad news today, you must surely have already known
Well it'll take a lot of analysis, but it looks like the the Glazers could be using club funds (from the Ronaldo sale amongst other things) to pay off about £70m of their personal debts under the PIKs.
Cheers for that - some light bedtime reading
No could about it, they have been
This is from someone who's got a ton of leverage finance experience. Warning: it doesn't make for pretty reading.
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Something didn't add up with the £500m bond issue by United. They are paying back £500m of debt that costs between 4% and 5.5%, and borrowing at about 9%, whilst leaving the 14.25% PIKs untouched - increasing their interest costs by about £20m a year. Very odd.
Now the PIKs are mentioned in the prospectus:
An existing PIK loan of the direct holding company of the Parent subjects us to certain restrictions Red Football Joint Venture Limited, the direct holding company of the Parent, is party to a payment-in-kind loan agreement. Neither we nor any of our subsidiaries are party to the PIK loan agreement. However, pursuant to the PIK loan agreement, Red Football Joint Venture
Limited agrees to procure the compliance of its subsidiaries with certain covenants contained in the PIK loan agreement. These include:
• restrictions on the incurrence of debt;
• restrictions on dividends and restricted payments;
• restrictions on disposals;
• restrictions on acquisitions;
• restrictions on transactions with affiliates;
• restrictions on granting security; and
• restrictions on sale of share capital.
(pg 21 in the prospectus)
So Red Football JV Ltd is the Glazer vehicle that sits atop the ownership structure. The idea of the deal is that the proceeds from the bond are loaned to Red Football JV, who then make a capital contribution to the actual football bit.
So the proceeds of the bond do flow through to the club, but what about the £146.6m of cash sitting on the balance sheet before the deal? Well with the Senior debt gone, the Glazers are free to raid the club's piggy bank (flush with all that Ronaldo cash) to pay down their horrid PIK notes. Which is exactly what they are going to do, to the tune of £70m (see the note below; top of page 30 in the prospectus):
£ millions Actual As adjusted
Cash and liquid resources(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146.6 116.6
Borrowings:
Senior credit facilities(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 507.0 —
Alderley Facility(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.7 7.7
MUTV loan stock(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.0 5.0
Notes offered hereby(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 500.0
Total borrowings(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 519.7 512.7
Capital employed(7)(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 447.8 847.8
Total capitalisation(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 967.5 1,360.5
So that'll leave about £46m of cash on the balance sheet. Not much of an arsenal to deploy in the transfer market when you take into account working capital needs. So they're looking to set up a £75m revolving credit facility for the football club - effectively borrowing at the club level to pay back the holdco's PIKs. But of course the holdco is not a guarantor of these notes - risk free for the Glazers.
On a consolidated basis, this makes little difference of course - so long as the credit line remains undrawn, it all nets out. But the more I look at the numbers, the more they look horribly, horribly wrong. page 13 of the prospectus
Pro Forma Financial Information and Ratios Data
At 30 September
(£ millions) 2009
Pro forma cash and liquid assets(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116.6
Pro forma gross indebtedness(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 512.7
Pro forma net indebtedness(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 396.1
Pro forma adjusted net indebtedness(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 466.1
Twelve months ended 30 September (£ millions) 2009
Pro forma interest expense(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46.3
Ratio of adjusted EBITDA to pro forma interest expense . . . . . . . . . . . . . . . . . . . . . . . 2.2 to 1
Ratio of pro forma adjusted net indebtedness to Adjusted EBITDA . . . . . . . . . . . . . . . . 4.6 to 1
(1) Pro forma cash and liquid assets represents total cash at bank and in hand of £146.6 million as at 30 September 2009,
adjusted to give effect to this offering of Notes and the application of proceeds as described in ‘‘Use of Proceeds’’.
Of our pro forma cash and liquid resources of £116.6 million as at 30 September 2009, we may, without restriction, make a
distribution or loan of up to £70.0 million to our immediate parent company, Red Football Joint Venture Limited, that may, in
turn, use the proceeds of that loan for general corporate purposes, including repaying existing indebtedness. See ‘‘Description
of the Notes—Certain Covenants—Restricted Payments’’.
(2) Pro forma gross indebtedness of £512.7 million represents total debt of £519.7 million as at 30 September 2009, adjusted
for the Notes offered hereby of £500.0 million and the repayment of our existing senior credit facilities of £507.0 million.
Pro forma gross indebtedness excludes any liabilities relating to our interest rate hedging agreements to hedge the interest
costs on our existing senior credit facilities, which we will crystallise as at the closing date of the offering of Notes. The
mark-to-market value of these hedging arrangements as at 6 January 2010 was a liability of approximately £35 million and we
expect that we will make aggregate payments to such counterparties to reduce the liability by approximately £8 million.
Pro forma gross indebtedness assumes that the £75 million new revolving line of credit is undrawn.
(3) Pro forma net indebtedness is pro forma gross indebtedness minus pro forma cash and liquid assets.
(4) Pro forma adjusted net indebtedness represents pro forma net indebtedness excluding £70.0 million of cash that we may,
without restriction, distribute or loan to our immediate parent.
(5) Pro forma interest expense represents interest expense on gross indebtedness for the twelve months ended 30 September
2009 after giving pro forma effect to the offering of Notes, the implementation of the new revolving credit facility, the
repayment of our existing senior credit facility and the crystallisation of the ‘‘other creditor or liability’’ owed to our hedging
counterparties.
Pro forma interest expense was calculated on the basis of certain assumptions as to interest rates. Pro forma interest expense
has been presented for illustrative purposes only and does not purport to represent what our interest expense would have
actually been had the repayment of our existing credit facilities, the issuance of the Notes and the crystallisation of the
hedging liability occurred on the date assumed, nor does it purport to project our interest expense for any future period or
our financial condition at any future date.
A 1⁄4 percent increase in the assumed interest rate on the Notes would increase pro forma interest expense by £1.3 million.
They're claiming that the Net Debt/EBITDA is 4.6x, and interest cover is 2.2x (safe as houses!) So I've made a few adjustments to make it all a bit more realistic:
For the EBITDA numbers they've used the 12 months to 30 Sept 2009 - a period that includes an extra home game - to arrive at £98m. Taking instead the 12 month number to 30 June, adding a bit for inflation, then taking a bit off for the FA Cup knockout (we got to the semis last year), I reckon £89m looks more realistic.
Now they also entered into a pay fixed, receive LIBOR swap with a notional of £450m at 5.08%. They reckon the NPV of this swap is £35m currently, and they hope to pay back £8m. Then they'll put the remainder on the balance sheet as a liability and amortize it out. However this hasn't been included in the above numbers - you either need to add it to the BS or the interest expense. I've added it back into the interest expense, as they'll have to pay it out like interest.
For some reason they've also excluded current liabilities - I've added this back in, less the swap (I'm not sure if this is classified as current or not - happy to be corrected - I'm also not sure about the net non-current assets).
Anyway - I've come up with this:
Adj EBITDA:
Glazer numbers 98
Adjusted numbers 89
FA cup revenue lost, 1 less home game
Interest Expense:
Glazer numbers 46.3
Adjusted numbers 61.9
Add back swap payments
Cash after 70m paid to RFJV Ltd.
Glazer numbers 46.6
Adjusted numbers 46.6
Gross Debt
Glazer numbers 512.7
Adjusted numbers 560.5
Adding current liabilities, less swap
Net Debt
Glazer numbers 466.1
Adjusted numbers 513.9
Potential Net Debt
Glazer numbers 466.1
Adjusted numbers 588.9
adding the 75mm revolver
Interest cover
Glazer numbers 2.2
Adjusted numbers 1.4
Net Debt/EBITDA
Glazer numbers 4.6
Adjusted numbers 5.8
ADJ Net Debt/EBITDA 6.6
Which looks a whole load more scary to me. Investors would want a whole load more than 9% for this bad boy.
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Something didn't add up with the £500m bond issue by United. They are paying back £500m of debt that costs between 4% and 5.5%, and borrowing at about 9%, whilst leaving the 14.25% PIKs untouched - increasing their interest costs by about £20m a year. Very odd.
Now the PIKs are mentioned in the prospectus:
An existing PIK loan of the direct holding company of the Parent subjects us to certain restrictions Red Football Joint Venture Limited, the direct holding company of the Parent, is party to a payment-in-kind loan agreement. Neither we nor any of our subsidiaries are party to the PIK loan agreement. However, pursuant to the PIK loan agreement, Red Football Joint Venture
Limited agrees to procure the compliance of its subsidiaries with certain covenants contained in the PIK loan agreement. These include:
• restrictions on the incurrence of debt;
• restrictions on dividends and restricted payments;
• restrictions on disposals;
• restrictions on acquisitions;
• restrictions on transactions with affiliates;
• restrictions on granting security; and
• restrictions on sale of share capital.
(pg 21 in the prospectus)
So Red Football JV Ltd is the Glazer vehicle that sits atop the ownership structure. The idea of the deal is that the proceeds from the bond are loaned to Red Football JV, who then make a capital contribution to the actual football bit.
So the proceeds of the bond do flow through to the club, but what about the £146.6m of cash sitting on the balance sheet before the deal? Well with the Senior debt gone, the Glazers are free to raid the club's piggy bank (flush with all that Ronaldo cash) to pay down their horrid PIK notes. Which is exactly what they are going to do, to the tune of £70m (see the note below; top of page 30 in the prospectus):
£ millions Actual As adjusted
Cash and liquid resources(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146.6 116.6
Borrowings:
Senior credit facilities(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 507.0 —
Alderley Facility(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.7 7.7
MUTV loan stock(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.0 5.0
Notes offered hereby(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 500.0
Total borrowings(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 519.7 512.7
Capital employed(7)(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 447.8 847.8
Total capitalisation(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 967.5 1,360.5
So that'll leave about £46m of cash on the balance sheet. Not much of an arsenal to deploy in the transfer market when you take into account working capital needs. So they're looking to set up a £75m revolving credit facility for the football club - effectively borrowing at the club level to pay back the holdco's PIKs. But of course the holdco is not a guarantor of these notes - risk free for the Glazers.
On a consolidated basis, this makes little difference of course - so long as the credit line remains undrawn, it all nets out. But the more I look at the numbers, the more they look horribly, horribly wrong. page 13 of the prospectus
Pro Forma Financial Information and Ratios Data
At 30 September
(£ millions) 2009
Pro forma cash and liquid assets(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116.6
Pro forma gross indebtedness(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 512.7
Pro forma net indebtedness(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 396.1
Pro forma adjusted net indebtedness(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 466.1
Twelve months ended 30 September (£ millions) 2009
Pro forma interest expense(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46.3
Ratio of adjusted EBITDA to pro forma interest expense . . . . . . . . . . . . . . . . . . . . . . . 2.2 to 1
Ratio of pro forma adjusted net indebtedness to Adjusted EBITDA . . . . . . . . . . . . . . . . 4.6 to 1
(1) Pro forma cash and liquid assets represents total cash at bank and in hand of £146.6 million as at 30 September 2009,
adjusted to give effect to this offering of Notes and the application of proceeds as described in ‘‘Use of Proceeds’’.
Of our pro forma cash and liquid resources of £116.6 million as at 30 September 2009, we may, without restriction, make a
distribution or loan of up to £70.0 million to our immediate parent company, Red Football Joint Venture Limited, that may, in
turn, use the proceeds of that loan for general corporate purposes, including repaying existing indebtedness. See ‘‘Description
of the Notes—Certain Covenants—Restricted Payments’’.
(2) Pro forma gross indebtedness of £512.7 million represents total debt of £519.7 million as at 30 September 2009, adjusted
for the Notes offered hereby of £500.0 million and the repayment of our existing senior credit facilities of £507.0 million.
Pro forma gross indebtedness excludes any liabilities relating to our interest rate hedging agreements to hedge the interest
costs on our existing senior credit facilities, which we will crystallise as at the closing date of the offering of Notes. The
mark-to-market value of these hedging arrangements as at 6 January 2010 was a liability of approximately £35 million and we
expect that we will make aggregate payments to such counterparties to reduce the liability by approximately £8 million.
Pro forma gross indebtedness assumes that the £75 million new revolving line of credit is undrawn.
(3) Pro forma net indebtedness is pro forma gross indebtedness minus pro forma cash and liquid assets.
(4) Pro forma adjusted net indebtedness represents pro forma net indebtedness excluding £70.0 million of cash that we may,
without restriction, distribute or loan to our immediate parent.
(5) Pro forma interest expense represents interest expense on gross indebtedness for the twelve months ended 30 September
2009 after giving pro forma effect to the offering of Notes, the implementation of the new revolving credit facility, the
repayment of our existing senior credit facility and the crystallisation of the ‘‘other creditor or liability’’ owed to our hedging
counterparties.
Pro forma interest expense was calculated on the basis of certain assumptions as to interest rates. Pro forma interest expense
has been presented for illustrative purposes only and does not purport to represent what our interest expense would have
actually been had the repayment of our existing credit facilities, the issuance of the Notes and the crystallisation of the
hedging liability occurred on the date assumed, nor does it purport to project our interest expense for any future period or
our financial condition at any future date.
A 1⁄4 percent increase in the assumed interest rate on the Notes would increase pro forma interest expense by £1.3 million.
They're claiming that the Net Debt/EBITDA is 4.6x, and interest cover is 2.2x (safe as houses!) So I've made a few adjustments to make it all a bit more realistic:
For the EBITDA numbers they've used the 12 months to 30 Sept 2009 - a period that includes an extra home game - to arrive at £98m. Taking instead the 12 month number to 30 June, adding a bit for inflation, then taking a bit off for the FA Cup knockout (we got to the semis last year), I reckon £89m looks more realistic.
Now they also entered into a pay fixed, receive LIBOR swap with a notional of £450m at 5.08%. They reckon the NPV of this swap is £35m currently, and they hope to pay back £8m. Then they'll put the remainder on the balance sheet as a liability and amortize it out. However this hasn't been included in the above numbers - you either need to add it to the BS or the interest expense. I've added it back into the interest expense, as they'll have to pay it out like interest.
For some reason they've also excluded current liabilities - I've added this back in, less the swap (I'm not sure if this is classified as current or not - happy to be corrected - I'm also not sure about the net non-current assets).
Anyway - I've come up with this:
Adj EBITDA:
Glazer numbers 98
Adjusted numbers 89
FA cup revenue lost, 1 less home game
Interest Expense:
Glazer numbers 46.3
Adjusted numbers 61.9
Add back swap payments
Cash after 70m paid to RFJV Ltd.
Glazer numbers 46.6
Adjusted numbers 46.6
Gross Debt
Glazer numbers 512.7
Adjusted numbers 560.5
Adding current liabilities, less swap
Net Debt
Glazer numbers 466.1
Adjusted numbers 513.9
Potential Net Debt
Glazer numbers 466.1
Adjusted numbers 588.9
adding the 75mm revolver
Interest cover
Glazer numbers 2.2
Adjusted numbers 1.4
Net Debt/EBITDA
Glazer numbers 4.6
Adjusted numbers 5.8
ADJ Net Debt/EBITDA 6.6
Which looks a whole load more scary to me. Investors would want a whole load more than 9% for this bad boy.
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One of the tabloids is claiming that £70million is actually for investment in player personnel, rather than paying off the PIK notes
What evidence is there to conclude that one way or another at this stage?
What evidence is there to conclude that one way or another at this stage?
I would trust a legal document that describes the securities they are offering for participants and buyers more than a tabloid that has no fecken clue what they're talking about.
That is just for show, they are crafty shites
Accepted
But I'm asking if there is anything definitive in the agreement that would indicate what the funds will be used for? The idea that the Glazers will produce some working capital to enable squad strengthening which will lead to better results, better brand awareness etc leading to further growth and financial return to help pay off the debt... sounds credible in theory
The lack of credibility exists when considering, well if that was the case, what pays off the PIK notes in the short term, which are due in August?
I'm not a financial whizz so apologies if I've made any basic mistakes there. I'm just a fecking football supporter, I shouldn't have to be bothered about this kind of thing
speaking as someone who has remained quiet on the subject, I had been secretly hoping that it would all work for the better. The information on this site from the likes of ralphie, yourself, theimperialinn et al was/is convincing and seemed to be strongly backed in terms of passion, knowledge and finiancial information however not being a biz wiz and not understanding everything truely there was still this sense of a storm on the horizon
I'd like to think its not denial/ignorance but merely wanting the best for the club, however anyone who denies these facts truely has their head in the sand. Its sad for someone like myself who follows the club from canada, I can't imagine(truely, no one can unless they experienced it first hand) how the lads who have put their blood,sweat and tears into united for all these years.
It doesnt look great right now and really looks like we are dependant upon success on the pitch, even after one of the most successful runs in club history.
In some respects, given you're following from abroad, the Glazer takeover doesn't affect you as badly, and thus you wouldn't expect that you'd be as concerned as say a supporter who's being stung by the current price of a match ticket
But it's not all like that. As a match goer, whatever happens (barring the ultimate disaster which I feel would never be allowed to happen), there will be a club here for me to support, and I will support, whatever level the club drops too. You on the other hand are reliant on us being one of the top Premiership teams, because if not, the satellite companies won't choose our games to air, and you won't be able to watch the side full stop
I always wonder how foreign supporters of sides like QPR and West Brom get by. Even then you might get the odd game, what if you support Bury!!!
Guys
I've not read all this thread, but...
You know the bonds will be issued at a discount, right? Whoever is throwing around 5.25%... That's not the total cost to us. It'll be more than that. 8-9% probably would seem more reasonable.
On the other hand, the Glazer's are not fools. I don't want to seem pro-Glazer here, but restructuring debt does make sense if it means we pack back less.
We and they are linked. Our money is their money, so if we can pay back some of the PIK at 14-15%, whatever it is, that's a good thing.
I'm sorry that we're in this indebted position, but given that we are we need to make the best of it.
I've not read all this thread, but...
You know the bonds will be issued at a discount, right? Whoever is throwing around 5.25%... That's not the total cost to us. It'll be more than that. 8-9% probably would seem more reasonable.
On the other hand, the Glazer's are not fools. I don't want to seem pro-Glazer here, but restructuring debt does make sense if it means we pack back less.
We and they are linked. Our money is their money, so if we can pay back some of the PIK at 14-15%, whatever it is, that's a good thing.
I'm sorry that we're in this indebted position, but given that we are we need to make the best of it.
Manchester United stake all on £500m bond issue
The Glazers have decided that a bond is the best way to secure their much-maligned regime at Old Trafford.
From The Times
January 12, 2010
Oliver Kay, Football Correspondent
Manchester United stake all on £500m bond issue | Manchester United - Times Online
This week their globe-trotting policy is being taken to a new extreme in the form of a series of “road shows” across three continents, after the Glazer family settled on a £500 million bond issue to safeguard their much-criticised ownership of the club.
Yesterday a United delegation held road shows in Hong Kong and Singapore in an attempt to woo various financial institutions and attract the investment that would reduce the burden of the club’s overall debts, last recorded at £699 million.
Today and tomorrow they return to Europe and David Gill, the chief executive, will host sales pitches in London, Paris, Frankfurt and Zurich. From there they will fly to the United States, where the Glazers, on home soil, will extol the benefits of investing in the world’s most profitable but debt-ridden football club.
If it sounds frantic, or indeed desperate, it is certainly an approach that throws up as many questions as answers. United announced a record turnover yesterday of £278.5 million and pre-tax profits of £48.2 million for the financial year ending June 30, 2009.
But it took the £80 million sale of Cristiano Ronaldo to Real Madrid to convert a loss into a gain and, with an unpredictable financial climate ahead, the Glazers have decided that a bond — whereby the debts are secured against money borrowed from investors, who would in turn expect a considerable return on their investment when it matures in 2017 — is the best way to secure their much-maligned regime at Old Trafford.
The announcement prompted an angry response from the Manchester United Supporters Trust, which has been resolute in its anti-Glazer stance since the family bought the club in 2005.
“Now is the time for the Glazers to go,” Duncan Drasdo, the chief executive, said. “This bond issue is just rearranging the deckchairs and still leaves the club with huge debts, which they expect supporters to continue to fund. The day the Glazers put the club up for sale you can expect celebration on the streets of Manchester. Most supporters have had enough.
“Under their ownership the club has become liable for more than £260 million in interest payments alone and the latest trading statement would have shown a substantial loss were it not for the sale of Ronaldo.”
In the business plan that accompanied the Glazers’ refinancing of the club’s debts in 2006, it was spelt out that a net sum of £25 million would be available each year for Sir Alex Ferguson to strengthen his squad and that if “there is a need to acquire a ‘superstar’, there is an incremental £25 million capital spend bucket available to the club”.
However, having sold Ronaldo last June and lost Carlos Tévez to Manchester City, United responded by signing Antonio Valencia from Wigan Athletic for £17 million and making a series of bargain-basement signings — Gabriel Obertan, Mame Biram Diouf and Michael Owen — to augment their attack.
Ferguson insists that it his decision to avoid further spending, saying that there was “no value” to be found in the transfer market last summer or during this month’s transfer window.
He has cited on several occasions that United made a club-record bid in excess of £30 million to sign Karim Benzema from Lyons, but the France forward joined Real for £35 million, with his wage demands and other associated costs proving beyond the “value” set by the manager.
United’s financial performance continues to exceed the Glazers’ expectations, but the cost of running the club is more than they accounted for. Their projected sums in 2006 accounted for a turnover of £234.2 million for the past financial year (actual figure £278.5 million), but they severely underestimated the running costs at £141.3 million. United’s wage bill alone for the past financial year is understood to be £122 million.
Even in a year when they have sold Ronaldo without replacing him, the Glazers have found themselves feeling the pinch.
The Glazers have decided that a bond is the best way to secure their much-maligned regime at Old Trafford.
From The Times
January 12, 2010
Oliver Kay, Football Correspondent
Manchester United stake all on £500m bond issue | Manchester United - Times Online
This week their globe-trotting policy is being taken to a new extreme in the form of a series of “road shows” across three continents, after the Glazer family settled on a £500 million bond issue to safeguard their much-criticised ownership of the club.
Yesterday a United delegation held road shows in Hong Kong and Singapore in an attempt to woo various financial institutions and attract the investment that would reduce the burden of the club’s overall debts, last recorded at £699 million.
Today and tomorrow they return to Europe and David Gill, the chief executive, will host sales pitches in London, Paris, Frankfurt and Zurich. From there they will fly to the United States, where the Glazers, on home soil, will extol the benefits of investing in the world’s most profitable but debt-ridden football club.
If it sounds frantic, or indeed desperate, it is certainly an approach that throws up as many questions as answers. United announced a record turnover yesterday of £278.5 million and pre-tax profits of £48.2 million for the financial year ending June 30, 2009.
But it took the £80 million sale of Cristiano Ronaldo to Real Madrid to convert a loss into a gain and, with an unpredictable financial climate ahead, the Glazers have decided that a bond — whereby the debts are secured against money borrowed from investors, who would in turn expect a considerable return on their investment when it matures in 2017 — is the best way to secure their much-maligned regime at Old Trafford.
The announcement prompted an angry response from the Manchester United Supporters Trust, which has been resolute in its anti-Glazer stance since the family bought the club in 2005.
“Now is the time for the Glazers to go,” Duncan Drasdo, the chief executive, said. “This bond issue is just rearranging the deckchairs and still leaves the club with huge debts, which they expect supporters to continue to fund. The day the Glazers put the club up for sale you can expect celebration on the streets of Manchester. Most supporters have had enough.
“Under their ownership the club has become liable for more than £260 million in interest payments alone and the latest trading statement would have shown a substantial loss were it not for the sale of Ronaldo.”
In the business plan that accompanied the Glazers’ refinancing of the club’s debts in 2006, it was spelt out that a net sum of £25 million would be available each year for Sir Alex Ferguson to strengthen his squad and that if “there is a need to acquire a ‘superstar’, there is an incremental £25 million capital spend bucket available to the club”.
However, having sold Ronaldo last June and lost Carlos Tévez to Manchester City, United responded by signing Antonio Valencia from Wigan Athletic for £17 million and making a series of bargain-basement signings — Gabriel Obertan, Mame Biram Diouf and Michael Owen — to augment their attack.
Ferguson insists that it his decision to avoid further spending, saying that there was “no value” to be found in the transfer market last summer or during this month’s transfer window.
He has cited on several occasions that United made a club-record bid in excess of £30 million to sign Karim Benzema from Lyons, but the France forward joined Real for £35 million, with his wage demands and other associated costs proving beyond the “value” set by the manager.
United’s financial performance continues to exceed the Glazers’ expectations, but the cost of running the club is more than they accounted for. Their projected sums in 2006 accounted for a turnover of £234.2 million for the past financial year (actual figure £278.5 million), but they severely underestimated the running costs at £141.3 million. United’s wage bill alone for the past financial year is understood to be £122 million.
Even in a year when they have sold Ronaldo without replacing him, the Glazers have found themselves feeling the pinch.
Someone pointed this out in the noobs and this is the most worrying aspect about this proposal. They can use 70 million of club's liquid assets to pay of the loans of the parent company. Basically sucking the club dry of its liquid capital.
I think if United ever had a Leeds like disaster, we would be able to watch them online. Probably every game. Who knows, the fight to regain United's place in the world might be very popular viewing.
The only way out of this seems to be for the Glazers to sell.
They clearly did not take into account that the glory financial days would end and now have a serious problem on their hands.
Manchester United are courting investors with a bond issue but their problem remains the same: the club have too much debt
From The Times
January 12, 2010
Analysis: Helen Power; Business Correspondent
Old Traffords 'fundamental problem yet to be tackled | Manchester United - Times Online
On paper, Manchester United’s bond issue looks like good news for the club and their supporters. However, United owe more than £500 million to international banks and those lenders have imposed a number of conditions that would make life difficult for the club if things get worse on the pitch.
The Glazers are notoriously secretive about the club’s finances, but The Times understands that United’s existing lenders have tied the club to a number of strict financial targets they must meet or face the banks taking over.
These include a provision that the club must make a profit of £65 million a year before interest payments. In 2009 they managed a profit of a little more than £90 million, but this was earned in a year when United made it to the final of the Champions League. A failure to qualify for Europe would knock tens of millions off profits.
But if the bond issue goes ahead, the club will not face financial tests unless they need to borrow more money or want to make big changes, such as developing the stadium. A bond issue will remove the risk of not meeting their targets and give them more choice about how they spend their profits.
Lots of other big companies — even the University of Cambridge — have switched from bank loans to bonds this year for this very reason.
The bond issue is almost certain to succeed. United’s advisers, JPMorgan and Deutsche Bank, started to market it in Hong Kong yesterday. Insiders said almost all the banks and financial institutions offered the bond have taken it up.
The club’s advisers are still negotiating over what rate of interest United will pay, but the final rate is likely to be about 9 per cent, slightly less than they are paying their banks at the moment. But the problem with the bond is that it does not address United’s fundamental problem: that the club have far too much debt.
The club borrowed £130 million from hedge funds using PIK notes in 2006. But because the PIKs attract a massive 14.5 per cent interest rate, the club owe £200 million on that loan today. And, by 2017, United will owe a whopping £588 million.
The club also said in their prospectus for bond investors that they will borrow a further £75 million from banks for “working capital” to provide a kitty for Sir Alex Ferguson to buy new players. Which sounds like good news for fans. But if that money is used, United’s debt will soar to a whopping £787 million, storing up more trouble for the future.
From The Times
January 12, 2010
Analysis: Helen Power; Business Correspondent
Old Traffords 'fundamental problem yet to be tackled | Manchester United - Times Online
On paper, Manchester United’s bond issue looks like good news for the club and their supporters. However, United owe more than £500 million to international banks and those lenders have imposed a number of conditions that would make life difficult for the club if things get worse on the pitch.
The Glazers are notoriously secretive about the club’s finances, but The Times understands that United’s existing lenders have tied the club to a number of strict financial targets they must meet or face the banks taking over.
These include a provision that the club must make a profit of £65 million a year before interest payments. In 2009 they managed a profit of a little more than £90 million, but this was earned in a year when United made it to the final of the Champions League. A failure to qualify for Europe would knock tens of millions off profits.
But if the bond issue goes ahead, the club will not face financial tests unless they need to borrow more money or want to make big changes, such as developing the stadium. A bond issue will remove the risk of not meeting their targets and give them more choice about how they spend their profits.
Lots of other big companies — even the University of Cambridge — have switched from bank loans to bonds this year for this very reason.
The bond issue is almost certain to succeed. United’s advisers, JPMorgan and Deutsche Bank, started to market it in Hong Kong yesterday. Insiders said almost all the banks and financial institutions offered the bond have taken it up.
The club’s advisers are still negotiating over what rate of interest United will pay, but the final rate is likely to be about 9 per cent, slightly less than they are paying their banks at the moment. But the problem with the bond is that it does not address United’s fundamental problem: that the club have far too much debt.
The club borrowed £130 million from hedge funds using PIK notes in 2006. But because the PIKs attract a massive 14.5 per cent interest rate, the club owe £200 million on that loan today. And, by 2017, United will owe a whopping £588 million.
The club also said in their prospectus for bond investors that they will borrow a further £75 million from banks for “working capital” to provide a kitty for Sir Alex Ferguson to buy new players. Which sounds like good news for fans. But if that money is used, United’s debt will soar to a whopping £787 million, storing up more trouble for the future.
Aye thats my main point, since you have the blessing to go to games, be totally immersed in the club this situation will hit you deep, deeper than someone like myself. Don't get me wrong, as a supporter this infuriates me but it cant compare to someone from manchester.
Luckily due to the "global village" media has made society, with sites that stream feeds, sites like espn that does a gamecast update, internet that prodcasts over the radio or sites like redcafe were lads post updates of the game I'll never go lacking from United. Since 03 its been a part of my life and i've loved every second of it and wont let it go regardless of premierleague status or divison -5.
ha interesting point about bury, though if you are a supporter, you follow them thick and thin, low coverage or not. as mentioned above, luckily there are websites dedicaded to follow them.
Oh, and I definitely expect Vidic to be sold in the summer.
Bonds are a way for companies to sidestep the banks
From The Times
January 5, 2010
Carl Mortished, World Business Editor
Their word is their bond but whose credit do you trust? A famous football club, an 800-year old university or the Treasury? All would like to borrow your money or tap your pension fund.
The University of Cambridge wants £400 million to finance property development, Manchester United wants twice as much to cut its debt and the Government is hoping to raise more than £200 billion to pay for everything from nurses’ salaries to new helicopters for the Army. At the same time, the corporate sector is throwing bonds about like confetti. Non-financial companies issued more than $1 trillion in bonds last year as businesses rushed to take advantage of cheaper money and easier terms in the global capital markets.
Instead of borrowing from banks, companies are going direct to the prime source of cash — the pension funds of ordinary savers. They are offering bonds, which are promises to pay a sum at a fixed interest rate and instruments that can be bought and sold like an equity share.
The reason for the surge in bond finance is that the crippled banks have been shut out of the lending market. Required to boost their reserves after suffering stupendous losses, the banks want to lend at high rates of interest and charge big fees to arrange loans. Businesses find better terms in the capital markets, where bond investors are hankering for income at a time when bank deposits yield almost nothing.
Bond markets are less developed in Britain than in the United States, where every municipality issues bonds to fund infrastructure. Some institutions, such as the Crown Estate, are prohibited by law from borrowing. Britain’s public sector bond market was virtually shut down by Margaret Thatcher when she sought to get a grip on spendthrift local authorities. Since then, the Treasury calls the tune but there is a growing clamour for more fund-raising by local government. Transport for London has issued bonds and many local authorities would like to raise funds for housing or transport with bonds backed by rents or bus fares.
From The Times
January 5, 2010
Carl Mortished, World Business Editor
Their word is their bond but whose credit do you trust? A famous football club, an 800-year old university or the Treasury? All would like to borrow your money or tap your pension fund.
The University of Cambridge wants £400 million to finance property development, Manchester United wants twice as much to cut its debt and the Government is hoping to raise more than £200 billion to pay for everything from nurses’ salaries to new helicopters for the Army. At the same time, the corporate sector is throwing bonds about like confetti. Non-financial companies issued more than $1 trillion in bonds last year as businesses rushed to take advantage of cheaper money and easier terms in the global capital markets.
Instead of borrowing from banks, companies are going direct to the prime source of cash — the pension funds of ordinary savers. They are offering bonds, which are promises to pay a sum at a fixed interest rate and instruments that can be bought and sold like an equity share.
The reason for the surge in bond finance is that the crippled banks have been shut out of the lending market. Required to boost their reserves after suffering stupendous losses, the banks want to lend at high rates of interest and charge big fees to arrange loans. Businesses find better terms in the capital markets, where bond investors are hankering for income at a time when bank deposits yield almost nothing.
Bond markets are less developed in Britain than in the United States, where every municipality issues bonds to fund infrastructure. Some institutions, such as the Crown Estate, are prohibited by law from borrowing. Britain’s public sector bond market was virtually shut down by Margaret Thatcher when she sought to get a grip on spendthrift local authorities. Since then, the Treasury calls the tune but there is a growing clamour for more fund-raising by local government. Transport for London has issued bonds and many local authorities would like to raise funds for housing or transport with bonds backed by rents or bus fares.
Wow. That is just incredible.
. Even if the team is successful on the pitch, I just hope this issue isn't ignored the way it has been for the last 3 seasons.What cnuts.
I think the fans are getting a taste of how America operates financially. There is zero long term thinking from CEO's anymore. They only care about operating in the now, creating favorable results, so they can make their dough and get out. There is no long term thinking anymore, because they are not rewarded for long term profits. I'm surprised they didn't sell the club after selling Ronaldo.
The Glazers are going to try to sell the club while it teeters on the brink and attempt to make a profit. Hope it works.
I think the fans are getting a taste of how America operates financially. There is zero long term thinking from CEO's anymore. They only care about operating in the now, creating favorable results, so they can make their dough and get out. There is no long term thinking anymore, because they are not rewarded for long term profits. I'm surprised they didn't sell the club after selling Ronaldo.
The Glazers are going to try to sell the club while it teeters on the brink and attempt to make a profit. Hope it works.
Appalling
We cure the debts with another debts, these banks are the banks which caused the world wide financial crises
This is only a tide of shit
This is the NEW ECONOMY, entrepreneurs without money, how to take over and control a corporation without money
This is the base plan:
1. Take over a company with debts and without money
2. Steal all
3. Sell all
4. Escape with helicopters during the night
5. Mission accomplished
We cure the debts with another debts, these banks are the banks which caused the world wide financial crises
This is only a tide of shit
This is the NEW ECONOMY, entrepreneurs without money, how to take over and control a corporation without money
This is the base plan:
1. Take over a company with debts and without money
2. Steal all
3. Sell all
4. Escape with helicopters during the night
5. Mission accomplished
Glazer family takes £20m in fees and loans from Manchester United
Bleeding us dry, the fecking cnuts.
Bleeding us dry, the fecking cnuts.
Could this not be put in the other doom and fecking gloom threads?
I already put it in the main thread.
Well I have spent a few hours reading stories, having a quick look through the prospectus and just generally trying to digest all the info that is currently being released.
After almost 5 years of constant speculation about our financial situation with no real info to back it up either way, there is now a 300 page official document with all sorts of detailed info about our current financial situation plus some background into what has been going on over the past few years.
There is far, far too much info to summarise but a few random comments from what I have seen so far ...
Positives:
- The club currently has around £145m cash in the bank
- The bond issue should lead to a reduced interest bill and secure the mid term future of the club
- Revenues and operating profit are still increasing year on year
- initial reports suggest that the bond issue is likely to be successful and maybe even oversubscribed
Negatives:
- The Glazers want to use upto £70m of club funds to pay off their own debts (the PIKs)
- They lost £35m by trying to hedge against interest rate changes
- It is not guaranteed that the bond offer will be successful
It is late and my head is spinning with all the info so I am happy to be corrected on any of this.
After almost 5 years of constant speculation about our financial situation with no real info to back it up either way, there is now a 300 page official document with all sorts of detailed info about our current financial situation plus some background into what has been going on over the past few years.
There is far, far too much info to summarise but a few random comments from what I have seen so far ...
Positives:
- The club currently has around £145m cash in the bank
- The bond issue should lead to a reduced interest bill and secure the mid term future of the club
- Revenues and operating profit are still increasing year on year
- initial reports suggest that the bond issue is likely to be successful and maybe even oversubscribed
Negatives:
- The Glazers want to use upto £70m of club funds to pay off their own debts (the PIKs)
- They lost £35m by trying to hedge against interest rate changes
- It is not guaranteed that the bond offer will be successful
It is late and my head is spinning with all the info so I am happy to be corrected on any of this.
Well according to Suedesi above the 70m comes from the club's balance sheet so in reality we have 46m in cash, although I'm not sure how he got that figure.
Well £146.6m is what was in the club bank account as of 30 Sep 2009 (suggesting that the Ronaldo cash plus more has indeed been sat unused in the club's coffers).
If the bond offering is successful then:
- the Glazers get permission to use upto £70m to pay off the PIKs
- another £30m cash is lost along the way (inc. £15m fees and expenses for the bond offer)
This leaves the figure of £46m as quoted in Suedesi's post - the Glazers then aim to add a further £75m revolving credit facility (if required) to that which gives a grand total of £121m to be spend on transfers and working capital.
owners of Man Utd take out cash shocker....
United are theirs.
Delete this before Pogue sees it and gouges his eyes out?
And no one mention that Ljajic got kicked to the curb because the Glazer boys desperately needed a new yacht and a Mediterranean villa for Christmas.
And no one mention that Ljajic got kicked to the curb because the Glazer boys desperately needed a new yacht and a Mediterranean villa for Christmas.
Naah. Cant be. He got kicked out to save the blushes of news readers all around the world from pronouncing him name incorrectly.
We had Berbatov threads
We had suicide/doom threads
We had Tevez threads
Now we have money threads
RedCaftrend
We had suicide/doom threads
We had Tevez threads
Now we have money threads
RedCaftrend
I hear there are mushroom farmers asking the admins how we maintain such a rich environment for consistent fungal growth.
The answer, is [echo]patience[/echo]
Does anybody know whether there is a chance that if this bond issue is oversubscribed their might be a chance to wipe out all of the bank debt, in which case only the bond debt will remain?
Well it is the norm in many sports clubs for the owners to financially support the team. Taking cash out is fairly rare, especially when you are saddled with spiraling debts.
according to the press, there is a good possibility that it ll be oversubscribed but i dont know whether the extra funds can be used to wipe out the piks
Nope. The club belongs to the Glazer's creditors.
- Status