ALL issues relating to the bond issue and club finances
- Thread starter sammsky1
- Start date
- Status
Not really. I'm saying the accounts say "The Payment in Kind loan is secured against the shares of Red Football Limited." and that the PIK started off at £138m and will end up at £580m.
As we don't know what covenants exist - other than the "pay them back by 2017", we don't know if there was any potential "event of default" when they were £138m. I doubt there was.
I think it's far more likely than the only way the security could be enforced (shares seized by the PIK holders) is on failure to repay at which point they'll be £580m (or a change of control event).....
We all have a collective responsibility to decide what something should be. Who else would decide if not yourself, myself, and everyone else who has a stake involved?
I don't deny that supporters have played a major role in the position that the game finds itself in, but that doesn't mean that we also have to accept each new development, or that we can't change our mind at any point. There's nothing inconsistent about believing that leveraged buyouts are a step too far, for example, and working to have them outlawed, or believing that it's perfectly acceptable to charge for tickets, but that every club should be at least partly fan owned, so that supporters have a genuine say in the emphasis and direction of each club. Either/or situations have a habit of eventually persuading everybody that they're not exactly reasonable or conducive to human choice.
I do deny that we were ever given a fair choice about much that has happened. Supporter psychology hasn't really changed in the last twenty years, which is why more supporters than ever are having to take out loans to afford their season tickets according to research, despite the fact that many of them have reservations about what is happening and where their money is going. That is indicative of people who still think about football in the same way as they ever have done — a mindset that is cultivated and encouraged by the very people who are looking to profit from it — despite the fact that the emphasis of the game has in some respects changed forever. Whether we believe that to be fair or not is ultimately a personal choice.
If every supporter was happy to choose clubs, year on year, depending on which one offered them the best experience and entertainment, for example, I wouldn't have a problem with that. That's not a monopoly, and it would force the clubs in to genuine competition for consumers. As it is, I don't really have that choice, except in the most trivial sense that it's possible, if highly unlikely. But, of course, the clubs wouldn't want that precisely because it would force them to compete for consumers and likely drive down costs.
And that's the fundamental difference between football supporters and the very same people who consume other products. The choice that they have is in some respects illusory, because the evidence suggests that they aren't consuming football in the same way that are consuming almost any other product. And that leads to the question: why are we selling it as though it is consumed just like any other product, then? And the answer to that appears to be, because we can.
Back to supply and demand then, Joga?
The fact is, though i cannot choose which team to support, i do have a choice whether or not to buy a Season Ticket; i can just go to a few matches each season instead, which is what i choose to do now. Likewise i have a choice whether or not to subscribe to Sky Sports; i could go down the pub for games or stream them from home; we do have choices. Where you see lack of choice and therefore exploitation and immorality, i see loads of choice catering for all budgets - i'm skint as shit but i never miss a game. If i were desperate for an ST i could give up smoking or something, i could make that choice, i could stop going the pub and paying £3 a pint; but i choose, quite consciously, to spend my money on things other than Season Tickets; i do have the choice, i'm not being exploited.
The fact is, though i cannot choose which team to support, i do have a choice whether or not to buy a Season Ticket; i can just go to a few matches each season instead, which is what i choose to do now. Likewise i have a choice whether or not to subscribe to Sky Sports; i could go down the pub for games or stream them from home; we do have choices. Where you see lack of choice and therefore exploitation and immorality, i see loads of choice catering for all budgets - i'm skint as shit but i never miss a game. If i were desperate for an ST i could give up smoking or something, i could make that choice, i could stop going the pub and paying £3 a pint; but i choose, quite consciously, to spend my money on things other than Season Tickets; i do have the choice, i'm not being exploited.
It's impossible to have a conversation with Joga, he demands that you prove every statement you make, it's just impossible.
That's easily proven false, but your incessant complaining about the perfectly reasonable request that factual statements should be supported by evidence, and that replies to my posts should at least include some form of argument, is rather strange.
If you don't see the value in either of those things, that's fine, but it appears that you only complain whenever you can't support something that you have said. That's not fine.
That's not bad. I could pick at all four premises, but then you'd only complain that I have the completely unrealistic expectation that you could support some of them, so I'll instead say that I completely agree (I'm lying).
Ahh, hand-waving then?
It's impossible to have a conversation with Joga, he demands that you prove every statement you make, it's just impossible.
Try this for logic though Joga...
- Football is an industry just like any other
I'll have to stop you there. Football isn't an industry like any other.
Economically it operates differently. First, clubs only make money if their competitors achieve (relative) success. Second, clubs have an exclusive and emotional hold over their customers. Have you ever heard of anyone getting their ashes scattered in Tescos?
Legally it operates differently. Specificity of sport is recognised in the Treaty of Lisbon. It gets legal breaks (in terms of freedom of movement and competition law) that other industries don't get.
Oh, i see what you've done there, Ralphie, you've forgotton to read the rest of my post
Here, i can help you with that...
- Football is an industry just like any other
- I know this because all industries have aspects individual only to themselves: in this regard they're similar
- Football is an industry with aspects individual only to itself
- Therefore football is an industry just like any other
You see, Ralphie, it's the differences between industries that defines them as seperate industries; each have their own little nuances; they all have this in common.
There you go, all better now.
I doubt it will be the 31 August.
The Q1, Q2 and Q3 reports have to be issued 60 days after each quarter end, but Red Football have 120 days to publish the annual figures after the 30 June year end.
If they choose to use all 120 days (they don't have to obviously) it'll be 28th October.
Sorry but I don't really subscribe to all this talk of "collectives". The "collective consciousness" and all that bollocks. A collective is comprised of individuals and each individual chooses according to his/her own values. Your values are clearly different to mine so you make your choice and I'll make mine.
You can change your mind but reversing something as big as football has become with all its vested interests won't be easy. Swimming against the tide never is.
Wow. What a completely random example! What made you come up with that one?
That's going to be tricky. You are effectively trying to restrict fair and free trade between willing participants.
Hmmm... the option for fans to own a part of Manchester United was there for the best part of 15 years and at the start of that period, it wouldn't have taken an enormous amount of money to secure a significant holding but the fans declined to take up the option. To me, this suggests that your idea doesn't have much in the way of legs.
Personally, I am not a fan of fan-based ownerships. I would much prefer a small group at the helm making the decisions with the best interests of the club at heart.
As far as I can see with a fan-based ownership model, you'd have to have some kind of election to nominate a "spokesperson" which instantly creates a division of opinion and 51% can leave the other 49% pissed off that they didn't get their way or you can mush the views together and come out with a compromise which tends to be a bit of both sides and satisfies neither (I'm not a big fan of democracy, either).
What, exactly would change under a fan based ownership model? What is this "genuine say in the emphasis and direction of each club" that you speak of? It sounds like wooly rhetoric with little substance to me.
What direction do you think Manchester United should be taking? What should be our "emphasis"?
Yes, this is all about the laws of supply and demand.
I was speaking to someone and asked him what would be a better way of determining ticket prices and his answer was... use the Disposable Income figures of the local area as provided by the Office for National Statistics.
So... that would seem to mean that we have to take the LOWEST figure (in order to ensure that nobody is excluded) and take it from there.
What disposable income figures don't tell you is how much of that disposable income they would be prepared to spend on a season ticket and I suspect that if some people were asked, they would say, "Nothing".
So, we have to give tickets away for free! But let's keep it real and say something affordable like £100 a season. That shouldn't price anyone out.
Will people be excluded under such an arrangement? Yes, of course they would. Once the 55,000 (or however many STs are available) have gone, everyone else is excluded and those with tickets have them for life and those without will just have to wait their turn on the 100,000 waiting list.
No doubt a few enterprising souls will discover a way to make themselves a few quid by engaging in a bit of "supply and demand" themselves.
Subjecting ticket prices to the laws of supply and demand might not be perfect but I still believe that it is the best and fairest way although some form of discount scheme to reward loyalty could be implemented.
I saw you making a similar point on another thread where you were trying to say that "soon only the super rich will be able to afford tickets". I think this is a bollocks argument to be honest.
It suggests that there is this vast army of super-rich Manchester United supporters waiting in the wings to buy tickets but the only reason they don't buy them now is because they're too cheap and they'll only start buying when they're £10k a season or something.
What we are seeing at the moment is supply and demand reaching its optimum level (hence the freezes). There are no "super rich supporters" out there who don't already have a ticket. Where we are is where we are naturally, fairly and without coercion.
Bingo
I wouldn't disagree with anything that Anders has said on this.
It would be nice to see the PIK T&C but it seems like, short of breaking into the Pall Mall office (which Anders has probably considered) we're destined to not know all the facts.
We'll hear about the PIK carve out (on the grapevine) if and when it happens though won't we?
They just need to wait until after May 2011 and then I'm happy either way.
Why May 2011 ?
You're absolutely right that there is a choice about whether to buy a season ticket, although I don't accept that the choice is as simple and straight-forward as it is with most of the things that we buy. In fact, I'm fairly certain that it isn't, because there is a whole body of psychological research that specifically details the rather unique psychology of football supporters.
The question that I've found difficult to have answered is whether the fact that we have little preference in the "normal" market and that we readily change supplier depending on things like price, service, and the quality of the product, is an important component of our beliefs about, and the efficient workings of, free markets? In other words, would everything else still be exactly the same if it was impossible to provide the kind of competition that we find in most of the rest of the market? I'm not convinced, and I'd go as far as to say that competition of the kind that we find with most products is an absolutely essential component of our understanding about how free markets should operate.
I've never denied that there isn't some choice in football, because there clearly is. But it would be misleading to claim that the choice that we do have is analogous to that in other areas of the market, because it isn't. Choice doesn't just refer to an ability to decide yes or no, it also means that there should be products of differing prices from different companies, all competing against each other. Yes, there is a range of ticket prices, but the fact that they're all offered by the same company who literally has a monopoly on that particular product means that it actually has nothing to do with competition. And before you state the obvious and suggest that these things aren't even possible within football, allow me to retort: well, what makes you believe that we should be applying all of the same rules and practices to it, then?
I also have few choices if I want to watch four of the five TV rights packages. To be fair, that particular problem has been partly circumnavigated by forcing Sky to allow other set-top box providers to host certain Sky Sports channels. Of course, Sky responded to that by increasing the price of those channels to make it even more difficult for those companies to host the channels at a fair price, and then removed Sky Sports News from FreeView, altogether.
Perhaps I should't care about any of this. After all, I have every Sky channel in three different rooms in the house. But I also recognize that I'm fortunate enough to be able to afford to do that (because of my life circumstances, not because of something that I have intentionally done that others somehow don't deserve) and that I'm contributing to those high prices simply by paying for it. But according to some people, if I made the conscious decision to stop paying for it, I would be purposely harming the club, Sky, well, someone at least. So, I really can't win.
The original PIKS converted into 33% of equity if not redeemed, I don't know what happened when they were restructured. It's another of these pointless projection exercises in any case since the PIKS will get paid before term.
Joga_Bonito: I really am lost as to what point exactly you are trying to make?
I have tried to engage with you before but it didnt really seem to lead anywhere.
As I explained to you the other day, you only have to look at our ticket prices over recent years to see that free market principles really do function perfectly well in football.
I have tried to engage with you before but it didnt really seem to lead anywhere.
As I explained to you the other day, you only have to look at our ticket prices over recent years to see that free market principles really do function perfectly well in football.
So Anders has to buy us all a pint.
Ah ok - I am with you now!
Personally I think it will either happen right now or not at all.
Of course they might be forced to wait due to certain redemption windows and we don't know when they might be.
Oh and mine's a strongbow
@Joga
If i want to watch United i can take any of the following options:
The club's owners are not doing anything immoral with their ticket pricing policy because i am entirely free to choose as to whether or not their prices offer me good value. I am not a prisoner of or a slave to the club; any choice i make in how i watch United i make freely and i take my custom as a fan wherever and in whichever manner i see that best fits my circumstances.
If i want to go to Old Trafford and watch games live then i'm going to expect to pay for that, because there are hundreds of thousands of other fans who would also like to go to Old Trafford and watch games live and there are only a limited number of seats; a perfect example of supply and demand dictating cost.
I can't afford it at the moment (though, frankly, if i still lived in Manchester and didn't have to travel fifty miles to every game i probabaly could quite easily; seats in the East and West stands are very good value) Nevermind, eh? I am free to choose not to buy a season ticket and pick whichever other option from the above then takes my fancy, which is exactly what i do.
No exploitation. No immorality. No rip-offs. No lack of free choice. No psychological trauma. No problem.
If i want to watch United i can take any of the following options:
- I can buy a season ticket at a range of different prices
- I can then opt in or out of the Carling Cup ACS
- I can buy tickets on a individulal match basis
- I can subscribe to Sky Sports
- I can stream matches online
- I can go down the pub
- I can go to a mate's house where the match might be on
The club's owners are not doing anything immoral with their ticket pricing policy because i am entirely free to choose as to whether or not their prices offer me good value. I am not a prisoner of or a slave to the club; any choice i make in how i watch United i make freely and i take my custom as a fan wherever and in whichever manner i see that best fits my circumstances.
If i want to go to Old Trafford and watch games live then i'm going to expect to pay for that, because there are hundreds of thousands of other fans who would also like to go to Old Trafford and watch games live and there are only a limited number of seats; a perfect example of supply and demand dictating cost.
I can't afford it at the moment (though, frankly, if i still lived in Manchester and didn't have to travel fifty miles to every game i probabaly could quite easily; seats in the East and West stands are very good value) Nevermind, eh? I am free to choose not to buy a season ticket and pick whichever other option from the above then takes my fancy, which is exactly what i do.
No exploitation. No immorality. No rip-offs. No lack of free choice. No psychological trauma. No problem.
You're the only person who's taken me up on that.
Why do you think they haven't taken the £95m yet?
Found other cash? Fear of upsetting the fans? Don't care about the extra PIK cost incurred since February? Someting else?
It's about as pointless as most of the discussion on here, I think.
I dunno... it just got me thinking... what if "the shares" doesn't mean ALL the shares? What if it means just 25% of the shares or something?
What if a % of them are paid off before term? Would that make it less of a % of the shares?
What if they defaulted on a portion of it? Would they lose (say) 10% of the club?
The thing is, I, like most others have always worked on the basis that if they don't pay off the PIKs then they would lose the club.
What if they would only lose a % of the club but not enough for them to lose overall control (i.e. more than 50% of the club)?
It's all speculation and mad projection, as you say, but it's food for thought, I think.
However, I agree that it looks likely that they will pay them off before term but we know about these Glazers and their defaulting ways...
If the original converted to 33% you would guess that the percentage is less than 20% which of course invites the question: is paying off the PIKS better than letting them convert? It stands at £240M to say 20% of £1.2Bn right now (conveniently a draw).
It's about as pointless as most of the discussion on here, I think.
I dunno... it just got me thinking... what if "the shares" doesn't mean ALL the shares? What if it means just 25% of the shares or something?
What if a % of them are paid off before term? Would that make it less of a % of the shares?
What if they defaulted on a portion of it? Would they lose (say) 10% of the club?
The thing is, I, like most others have always worked on the basis that if they don't pay off the PIKs then they would lose the club.
What if they would only lose a % of the club but not enough for them to lose overall control (i.e. more than 50% of the club)?
It's all speculation and mad projection, as you say, but it's food for thought, I think.
However, I agree that it looks likely that they will pay them off before term but we know about these Glazers and their defaulting ways...
Using approximations, the PIK debt is around £220 m - £240m at an interest rate, as far as I know, of approx 16.25% (was 14.50%). £70m of the cash in the bank is earmarked to pay down part of the debt. Assuming that is done this debt reduces to around £150m (or £170m) which is being rolled up at say £25m a year. I am sure the Glazers want to pay this all off and not have it converted into equity. Furthermore why would the creditors (hedge funds) want equity in Red Football JV anyway ? Assuming they want to pay this off over the next five years they'll need to find approx £45m a year together with the bond interest of approximately £49m a year. That gives a total of £94m a year to service the debt and repay part of the outstanding capital. They still have to liquidate the bond of £520m or refinance it in 2017. So to say "they'll pay it off" maybe a little too glib by way of a proper answer.
Remember the £1.2bn is enterprise value so equity value would be c. £700m.
The assumption is that they will take their £25m dividend plus the £70m carve out this year and so pay off £95m which reduces it to perhaps £130m. As far as I am aware, they need to pay them off by 2017 which obviously gives them seven years.
I would have thought that if they can continue to take £25m/year dividends then that is £150 over the following six years which won't quite be enough due to the interest that is added but it shouldn't be too far away and I still believe that they have other sources of income/equity which could be added to this.
And this is what I am wondering in a way... what if they fall short? Does that outstanding debt get converted into an equivalent amount of equity?
The intention is undoubtedly to refinance the Bond in 2017.
I think it does get converted into equity. Anyhow, if they do reduce it by
£95m now that brings it down to say £145m (adding interest for 2010). That means over 7 years they need £36m a year to pay it off. Add the bond interest of £49m say and you get repayments of £85m a year. Assuming EBITDA of £100m going forward that's still a tight squeeze. 85% of net profit going to service debt and they still have £520m outstanding at the end of it. Clearly £100m a year will have to escalate and that depends on so many factors. They are relying on considerable revenue growth over this period.
I might be being a bit of a donut here but even if that were the case then we are still talking profits here aren't we?
I mean, even taking those figures, it still leaves £15m for player transfers which means another £10m has to be found in order to fulfil their "promise" of the £25m/year net spend?
And they have more or less covered this with the £75m RCF?
I agree, it is a tight squeeze and they will be hoping for some growth in revenues but I don't think that is entirely unrealistic over a period of seven years even if increases are merely inflationary (which is clearly not how they see it).
I am also of the opinion that one of the biggest expenses faced by football clubs (player wages) have hit their ceiling and will start to come down or remain fairly static over the coming years which is an area of saving that will impact positvely on profits.
I have never thought that was the case - I have always assumed that if they default on the PIK then the debt converts to equity for the hedge funds who gave the original loan. I had thought around 30% but definitely a minority stake in any case. Of course, it is just my estimate as we don't know for sure.
And if people think that the Glazers are cnuts, then you better pray that these hedge funds don't get involved!
I think it's 100% of the equity. Look at JPM's capital structure table from the 2006 IM:
This isn't independent research like the 2010 note, this is JPM acting as RF's bankers. They value the equity at £433.5m, so £131m of PIKs which could rise to over £500m if not repaid in 2017 should on those numbers be secured on 100%.
I'd add that I've never been disabused of the idea it's 100% by anyone I know inside the club or who work or worked for the club's adivsers....
This is what I remember reading at the time (or something very like it): 'But there is one clause which has so far attracted little attention, Clause 7A in Appendix 4: if the PIKS remain outstanding after 63 months from 12 May 2005, Glazer will be forced to transfer 30 per cent of his stake in Red Joint Venture to the hedge funds'.
We have known all along this is the case..
But hey, who cares about a minor detail like that.. Thats just paper talk, the small print so as to speak..
We won the carling cup FFS.. Who gives a shit that the loan sharks get to take on one third of our club..
Thats unimportant..
That's the old prefs . Redeemed in 2006.
It's you and the other boycotters going out of your way to try and ensure that that happens, fred, don't forget that.
I know but it is very unlikely that the new ones for a lesser amount would convert into a higher percentage of equity.
I could try explaining it to you, but that would go right over your head.
Something like the campaign to remove the Glazers would be way way out of your league. I would suggest you stick to the Baldrick level of advanced mathematics..
I've heard you explanations before, mate. They're shit.
Hope you enjoy watching the Newcastle match on a crappy stream on Monday btw.
Hope you enjoy watching the Newcastle match on a crappy stream on Monday btw.
As it happens I am at work monday night, so unfortunately wont be watching the game at all.
You can tell me all about it when you get back from Old Trafford.
That's shit. Why can't you take the night off?
- Status