Well, you've made 90% of that up, but nevermind eh?
ALL issues relating to the bond issue and club finances
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Well, you've made 90% of that up, but nevermind eh?
I'd say 99%.
Sorry Rood, could you clear one thing up for me please? How much do we owe in PIK loans right now and how much of that did the Glazers buy? I.e. what do we actually have to pay back in terms of the PIK loans?
Many thanks.
While it is certainly true that Ronaldo wanted to leave, and that his decision had nothing to do with the owners, it is also true that the club would not have had the same ability to deal with (some of) the PIK's if Ronaldo had not been sold (if that is what they intend to do with that money, which appears at least likely).
We will probably never know if the sale of such an asset was even thought about as a potential strategy to deal with the PIK's, so it's pointless to even speculate about it, but what is not pointless is asking where the money for the PIK's would have come from without that windfall (and how they originally planned to deal with them).
It is also reasonable to think that far more of that money would have been reinvested back in to the club if it wasn't saddled with such a debt, and that is where the real criticism should be aimed, because it is the tangible difference between the player being sold by a club with the debt burden that we currently have, and one without that kind of burden.
Even those who are ambivalent towards the current owners don't argue that the debt burden is good for the club. And that's important, because they're left arguing that it isn't excessively detrimental, which is a very different thing, altogether.
We will probably never know if the sale of such an asset was even thought about as a potential strategy to deal with the PIK's, so it's pointless to even speculate about it, but what is not pointless is asking where the money for the PIK's would have come from without that windfall (and how they originally planned to deal with them).
It is also reasonable to think that far more of that money would have been reinvested back in to the club if it wasn't saddled with such a debt, and that is where the real criticism should be aimed, because it is the tangible difference between the player being sold by a club with the debt burden that we currently have, and one without that kind of burden.
Even those who are ambivalent towards the current owners don't argue that the debt burden is good for the club. And that's important, because they're left arguing that it isn't excessively detrimental, which is a very different thing, altogether.
Unfortunately I cant clear it up because we still dont know the detail for sure.
The stories that are coming out estimate that 20% of the PIK was bought back but for all we know it could be even higher. Before this story we had been working from the assumption that the PIK has reached a level of around £200m to £220m.
The doomsday merchants hardly help themselves by just making shit up though do they.
80% of around 200 mill is still a very large amount of money.
Who has bought this pik debt?
If its the club then obviously the burden is reduced but if its the Glazers or a separate vehicle they own then how is the burden reduced exactly?
If its the club then obviously the burden is reduced but if its the Glazers or a separate vehicle they own then how is the burden reduced exactly?
Well they could have written that portion of the PIKS off or are using the interest towards paying down the remaining burden. We obviously dont know.
I don't think they can be using the interest to pay down the remaining PIK notes, Rich. Could be wrong, but:
If for argument's sake the total PIK debt is £200m, and the Glazer family hold 20% or £40m of that; the first annual interest at 16.5% would be £33m, only 20% or £6.6m of which would be owed to the Glazers. The thing is though, as far as we're aware the Glazers have no obligation to pay the interest on an annual basis, instead it just rolls up increasing the total debt amount, meaning that year two will see a PIK debt of £233m if nothing is paid off by then; £186.4m likely owed to entities other than the Glazers. The point is, the interest doesn't get paid, and even if it did, the Glazers obviously wouldn't receive anywhere near like enough from their chunk of the PIK debt to cover the interest payable to the other 80%; without another source of cash the PIK's can not be stabilised in this manner.
Purely from a mathematical point of view i can't see why they wouldn't just write off the £40m, leaving a remaining PIK debt of £160m; they could then pay down the £95m from our bank account leaving only a debt of £65m; the first annual interest bill then would be only approx. £11m, which would easily be payable by future dividends; the PIK's could be cleared completely in three years time and the club and the Glazer family would become infinitely more secure as a result.
Anders says that the 20% revelation was a good move by the owners, but not a game-changer. I'd suggest perhaps though that the move changes the picture considerably; not only could it have moved their business plans forward by up to five years, meaning that the club can be wholly financially secure well before the re-financing of senior debt in 2017, but it too has lessened the chances of any third party forcing the Glazers into a sale from 'quite slim' to 'approaching zero'.
They can let their bit of the PIK roll up using it to offset tax and write it off at the end (or is that where avoidance becomes evasion?).
Yeah. Having given it some more thought they'd be bonkers not to do that. All of their problems would be/have been solved all at once.
And yet our owners certainly do seem to be quite adept at doing the outright bonkers at times and making it work. At this point you can probably guarantee that anything predicted by anders will be miles off the mark; the Glazers have a knack of doing the unexpected and causing those less inventive who doubt our owners' financial prowess to end up looking a little silly.
Don't you get it? We still owe it all- just because they bought some of the PIK's it doesn't mean that the clubs debt went down- in fact it went up!
I'd like to point out that the management fees were £10m and taken AFTER the time they repurchased the PIK - but dont let those little details get in the way of your tin foil hat theories
It seems to me almost obvious that the Glazers will prioritise the 80% debt owed, clearly because they won't want the retarded interest rates to roll up on said debt.
I do however think that whilst this debt is being paid off, they will have been allowing their £40m share of the PIK's to "roll up" at the current rate of 16.25%. This is all speculation of course but if they intended to do Utd a favour and write it off (which would be amazingly out of character), they would be the first people to come out and say the PIK debt is 20% less than reported (or Gill would have said the figure quoted was inaccurate). I also suspect the accounts would show this reduction.
If this thesis is correct then there is no difference between the Glazers owning 20% of the PIKs vs anyone else owning it. In fact it could actually be worse because the Glazers have a clear conflict of interest with paying their share of the PIKs off. Do they pay the interest off early and personally receive less money or let it roll up for years under the facade of a debt and receive a much higher payment in the long run?
I do however think that whilst this debt is being paid off, they will have been allowing their £40m share of the PIK's to "roll up" at the current rate of 16.25%. This is all speculation of course but if they intended to do Utd a favour and write it off (which would be amazingly out of character), they would be the first people to come out and say the PIK debt is 20% less than reported (or Gill would have said the figure quoted was inaccurate). I also suspect the accounts would show this reduction.
If this thesis is correct then there is no difference between the Glazers owning 20% of the PIKs vs anyone else owning it. In fact it could actually be worse because the Glazers have a clear conflict of interest with paying their share of the PIKs off. Do they pay the interest off early and personally receive less money or let it roll up for years under the facade of a debt and receive a much higher payment in the long run?
You are grasping at straws mate.
Why would we want to keep a player who is so inent on leaving. He was after his 'dream', not money. Same with Fabregas. Once Barca makes a proper offer, Arsene will definitely sell Fab.
Dont agree with you there at all finneh but at least there is some logic there rather than the uninformed bollocks put forward by loons like crusoe.
As peterstorey mentioned above, for tax reasons it will always make sense to leave the PIK in place rather than cancel it immediately.
Unless they are forced to, the Glazers dont announce anything so Im not sure why you would expect them to make any kind of announcement on this?
Plus Gill has always maintained that the PIK is nothing to do with the club (perhaps those comments were made in the knowledge that they were already being dealt with?) so quite obviously he isnt going to bother commenting on it either.
Finally the PIKs will have a set timeframe so it is not correct to suggest that they can just allow it to keep rolling up indefinitely - so even if part of what you say is true (and I dont think any of it is), the worst case scenario would be that there is actually no material difference to the club at all.
I'd like to point out that the management fees were £10m and taken AFTER the time they repurchased the PIK - but dont let those little details get in the way of your tin foil hat theories
What you can't use one debt to pay off another debt? ....
I'd like to point out that the management fees were £10m and taken AFTER the time they repurchased the PIK - but dont let those little details get in the way of your tin foil hat theories
Fungibility covers that- look it up!
At last!
Total fantasy..... United will always owe the glazers money- they are set to pull it out as interest payments forever.
Put a sock in it, Crusoe, you're making Crerand look clever in comparison.
How do you suppose, crusoe, that the Glazers can expect to profit from United through interest on their 20% of the PIK notes?
The 20% is essentially just money they owe to themselves, not money owed to them by United; the Glazers can only each year take upto their annual dividend entitlement of:
(EBITDA-SeniorDebtInterest)/2 if EBITDA>=SeniorDebtInterest*2
:from the club; that is the extent of their entitlement as owners; whether from that they then choose to pay themselves whatever interest their £40m PIK holding has incurred in proportion to the other 80% of the debt, or they use it for other means as they have previously written off their 20% stake, would be entirely irrelevant in terms of cash-outflow to either the Glazers or Manchester United.
In short, the Glazers cannot profit from interest incurred on their portion of the PIK debt.
If putting this concept into analogy would help you understand then consider this:
Imagine you had a job which paid £300 a week. £300 is your weekly wage for services to your employers, you cannot make over £300 in any one week; consider this the Glazers annual dividend entitlement from United. Now, imagine you wrote yourself an IOU for £400 and stipulated that it would incur interest at a rate of 16.5% every week until paid off; of course, this represents the Glazers' 20% stake of the PIK debt. Now, whether you decided to tear up that IOU, to pay it off in full over a few weeks, to pay yourself only the interest each week leaving the bulk of the IOU intact, or to ignore it and let the interest just roll-up, the net effect to you would be exactly the same in every case; any money transfered due to the IOU would only ever be from yourself to yourself, and each week you'd receive no more or less than £300 from your employer, entirely regardless of the IOU's existence or how you decided to handle it; you'd not profit from writing yourself an IOU, and nor would your employer ever have to pay out any more than the £300 each week that you were already entitled to anyway.
If you can understand the above then you will clearly see that your conspiracy theory is mathematically illogical and impossible; anyone who can understand the above will see that, and if you still do not understand and continue believing in your theory then you will just end up looking even more of an idiot than you do already i'm afraid.
Unless fungibility means inventing a time machine to use money you just borrowed to pay for something you bought months ago then I doubt it (just in case anyone was wondering, it doesnt !).
Also I notice that you ignored the fact that your numbers are completely incorrect - keep trying though.
Unless fungibility means inventing a time machine to use money you just borrowed to pay for something you bought months ago then I doubt it (just in case anyone was wondering, it doesnt !).
Also I notice that you ignored the fact that your numbers are completely incorrect - keep trying though.
Hmmm
The Glazers could have taken a short term loan to buy some of the PIK debt and then used their loans from United to pay off this loan - what's so hard?
I didn't mean they would leave it in place indefinitely, I just believe they will wait till the final deadline before paying their share off. I do however think that Gill would have said "we have nothing to do with the PIKs, not to mention that they are significantly less than reported".
This is of course completely true, but paying the PIK's under the facade of the parent company debt looks better from the outside. The Glazers aren't going to always take their maximum dividend every year, but with the PIKs in place they at least appear to have a clear reason to take a higher than "normal" dividend.
As has been said before, we could pay the 80% off within 5~ year period, after which everyone would expect the Glazers to take a much lower dividend. However with their share of the PIK in place they can let the 20% accrue for 7? years before attempting to pay it off, taking a higher than normal dividend for a much longer period with the only beneficiaries of this being themselves.
The question you need to ask yourself is: do you think the Glazers would (present and future) have take the exact same dividend with the PIKs in place vs no PIKs.
I've just lent myself £100. I've proper tricked myself though, because i'm never going to pay it back, i'm just going to pay myself the interest and i'll live off that. Oh bollocks i've tricked me! Damn-it, i think i've figured out that i've tricked myself! Grrr, i'm such a cnut! Haha, i'm such a cnut!
finneh said:
But they're entitled to the dividends anyway, they don't need an excuse if they want to take them in full; and, if they did want an excuse, saying that they need the money to pay themselves back the money that they owe themselves is no excuse whatsoever, so what would be the point? It's just ridiculous.
It may be more tax efficient to not write-off the PIK they hold.
That was my first thought but I reckon the revenue would get a bit pissed off if you tried to offset interest on a loan that was actual being notionally paid to yourself.
Yes, we only won the league with him there though.
Not really. Speculation cannot be proved and it's not a completely unreasonable assertion.
Been at the glue again? Usually have you down as the sanest of the Glazer defenders but that's as reasonable as Ronaldo staying. They won't write it off when it's another vehicle to take money out of United. They may pay the rest off or even buy some of it themselves but there's no way they'll give up the opportunity of taking more money out of the club without impunity
You're missing one key point. The Glazers didn't put any of their own money into the purchase so don't consider the debt as theirs. The debt is the club's, to be paid for by the sponsors, fans and media.
QFT.
One of the worst analogies you've ever let depart the space between your ears and trickle down your arms to the keyboard.
The Glazers own 20% of the PIKs. They are secured against a club that they happen to own via loans rather than there own cash. They see it as a cash cow that, with the bond issue, has stipulations over the amount of money that they can take out. This allows them to take out so much more, even with the rest of the PIK debt. They'll simply refinance in 2017 having taken extra millions out.
Tell us how they can take more out then, URR. Don't just say they can, describe the process, show us how.
Tip.
They can't.
Tip.
They can't.
It depends on what kind of entity their PIK is housed in I guess. There is no issue with accruing interest on an intercompany loan in my experience as the receiving company will be taxed on the income.
Who in their right mind would sell a 14%-16% accruing coupon at below face value? (seems to be the assumption)
Secured against one of the biggest sports brands in the world with a huge amount of equity so very low risk while being high return.
I find it very hard to believe on its own merit let alone with some of the added drivel mixed in with it.
Secured against one of the biggest sports brands in the world with a huge amount of equity so very low risk while being high return.
I find it very hard to believe on its own merit let alone with some of the added drivel mixed in with it.
They can take the interest from the PIKs.
That's more than they're entitled to take out already.
This should help:
Business Math for Dummies: Amazon.co.uk: Mary Jane Sterling: Books.
Tip. You're not funny and you're wrong again.
They can't just take the interest on the PIK's from United though, that's the point.
The PIK's can only be paid by the Glazers' personal wealth or from their dividend entitlement. Their dividend entitlement is limited as i described above, and they'd be entitled to exactly the same amount regardless of whether or not they'd have ever bought 20% of the PIK notes. If they decide to pay themselves the 16.5% interest on the £40m PIK holding then they'd only be giving themselves cash that they were fully entitled to anyway; they can't take the interest from the club on top of their dividends.
If this year's dividend entitlement is, for example, £26m, then they can take up to that amount; owning 20% of the PIK notes has no effect whatsoever on how much they can take from the club; £26m would be the maximum they can have. If they then decided that out of that £26m they were going to pay themselves the £6.6m owed to them in interest then:
26 - 6.6 + 6.6 = 26
...guess what? They've still only got £26m!
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