Is correct. Give ciderman a biscuit and urr the dunces hat.
ALL issues relating to the bond issue and club finances
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Is correct. Give ciderman a biscuit and urr the dunces hat.
Corrected for you.
No ciderman should be in the corner with the pointy hat. Did you miss all the discussion about how much money could be channelled up to RFJV to pay down the PIKS? (Probably already done by the way).
What would happen if they owned 100% of piks and the interest was £32m but the max dividend was only £26m?
This apparent mathematical impossibility would cause the world to collapse on itself perhaps.
This apparent mathematical impossibility would cause the world to collapse on itself perhaps.
Perhaps you could summarise then how they can take more than the dividends allowed under the bond issue to pay themselves interest on their share of the pik debt?
And no I didn't miss that discussion, so perhaps you could clarify.
They pay down their £36M share of the PIKS using the £70M channelled up from Man Utd plc to RFJV. Pretty simple eh? The dirty divi doesn't even come into it.
I would suggest the maximum dividends allowed under the bond scheme is the maximum DIVIDENDS allowed under the bond scheme.
If it says maximum amount of money in any guise in any scenario you might be correct but I have not seen that anywhere in the prospectus, although it could be there.
If the glazers find a way to make money reproduce during electronic transfer I hope to feckery they tell the rest of us how to do it.
Leaving themselves no way of dealing with the rest, which will roll up and feck them over.
Moving the goalposts?
It appears you are now saying it is possible, just unlikely because it would be a mistake or leave them vulnerable?
What other guises are you suggesting and how would their ability to remove money that way be changed by their acquisition of the piks?
The sensible thing to do is attack the rest and keep the potential tax hedge. The point is, of course, that they can take the money any time they choose. Take a pointy hat and join ciderman.
Well they could do that but it would be far more financially sensible to use the £70m to pay off some of the other piks and write off their own portion, allowing them to shit on the remaining piks with their dividend and have some left over for whores and coke or whatever.
Well no, because how does buying their own stake from the £70m allow them to bank 16.5% interest on an ongoing basis. You can't collect interest on something you don't own.
They could just pay down their interest on an ongoing half-year basis couldn't they?
If they held 100% of the PIK notes then they wouldn't be charging themselves interest; they wont be charging themselves any interest whatsoever on any percentage of the PIK notes because the concept is stupid, they just can't profit by paying themselves money that they already have.
That's money that they're already entitled to take anyway, regardless of their 20% stake in the PIK notes. We're discussing whether or not they can extract additional reserves from the club on top of what they're already entitled to; the answer is no, they can't.
Beat me to it. Put simply the pik purchase does not mean they can take a single penny more than they are already entitled to from the club. In the corner the lot of you.
No, peter, we are discussing whether or not the Glazers can take additional funds from United with them holding 20% of the PIK notes in comparison to a scenario in which they didn't hold the PIK notes; the answer is no, they can't; that £70m plus any dividend entitlement was available to them regardless of whether they hold the 20% or not; holding the 20% increases the amount they can extract from United by exactly £0.
From money they are already entitled to! The pik purchase changes absolutely nothing. They can't take 16.5% extra, which is what we have been arguing about.
Correct. If they paid themselves any interest on their 20% or even paid themselves the full £40m note then they'd have only given themselves money that was already theirs; they'd be taking tenners out of the right pocket and putting them in the left, at no further expense to the the club whatsoever.
The profit was made when they bought the 20% at a cut-down price, that was the masterstroke; there is no more profit to be made on the 20% now that they only owe it to themselves, and owning the 20% does not effect in any way their entitlement, be it the £70m one-off payment or annual dividends, from the club. They cannot extract any more cash from the club than they were previously entitled to.
Into the dunce corner everyone, please
feck me, what a discussion.
On the source of the cash, the date of the personal loans (19 December 2008) struck me as nicely coincidental when thinking about the PIK purchase.
If Bloomberg are correct and it was a post Lehman distressed hedge fund seller, then the end Q4 2008 redemption date would have been the most likely pressure point on the fund. It would also have been virtually impossible to borrow the money from anywhere else around that time (that's not a point about the Glazers by the way, GE were worried about short-term commercial paper issuance at various points in Q4 2008).
Other points:
1) We know that they hadn't written off their 20% holding in PIKs at 30 June 2009 as they were still in the RFJV accounts at that date. It'll be interesting to see the next RFJV accounts in Jan 2011.
2) It isn't a related party transaction under FRS8 as RFJV was not a party to the purchase.
On the tax avoidance/tax evasion question, they took advantage of the loophole provided by Section 361(2) of the Corporation Tax Act 2009. The aim of clause 361 is to charge the "gain" on a "connected party" buying debt at a discount. The loophole (described here) allowed newly created SPVs to acquire debt at discounts tax free. RFJV showed no taxable gain in their 2009 accounts.
The S361(2) loophole was subsequently closed in the Finance Act 2010 as part of the government's anti-avoidance measures.
So now their avoidance would (if repeated) be evasion. Untangle that moral maze!
Edit: Cider is of course correct, the dividend entitlement is capped irrespective of its destination.
On the source of the cash, the date of the personal loans (19 December 2008) struck me as nicely coincidental when thinking about the PIK purchase.
If Bloomberg are correct and it was a post Lehman distressed hedge fund seller, then the end Q4 2008 redemption date would have been the most likely pressure point on the fund. It would also have been virtually impossible to borrow the money from anywhere else around that time (that's not a point about the Glazers by the way, GE were worried about short-term commercial paper issuance at various points in Q4 2008).
Other points:
1) We know that they hadn't written off their 20% holding in PIKs at 30 June 2009 as they were still in the RFJV accounts at that date. It'll be interesting to see the next RFJV accounts in Jan 2011.
2) It isn't a related party transaction under FRS8 as RFJV was not a party to the purchase.
On the tax avoidance/tax evasion question, they took advantage of the loophole provided by Section 361(2) of the Corporation Tax Act 2009. The aim of clause 361 is to charge the "gain" on a "connected party" buying debt at a discount. The loophole (described here) allowed newly created SPVs to acquire debt at discounts tax free. RFJV showed no taxable gain in their 2009 accounts.
The S361(2) loophole was subsequently closed in the Finance Act 2010 as part of the government's anti-avoidance measures.
So now their avoidance would (if repeated) be evasion. Untangle that moral maze!
Edit: Cider is of course correct, the dividend entitlement is capped irrespective of its destination.
And even if they choose to pay down their own interest first they're putting it in a pocket with a hole in it as it'll cost them more down the line in interest on the 80%, so they can't even benefit in real terms anyway.
Thanks for clarifying Andy. Sounds like they've got at least one clever fecker working for them. How much do you reckon they saved on tax by getting in before the new regs?
They can't fully redeem their 20% share with the £70m dividend from Red Football Limited. The entire PIK debt would have to be redeemed in equal amounts. So you're looking at 30% of the entire PIK debt (and 30% of their share) being redeemed if the £70m dividend is taken out.
Word, bro, word.
Not much actually. 28% of the discount perhaps.
I think at school we used to say "sussed".
Glad to see you keeping the dunces in check, Cider. The usual suspects are somehow trying to argue that the latest news about the Glazers PIK purchase is a bad thing for the club. It's nothing of the sort of course and it's terrific news for the Glazers themselves which leaves the Red Knights up shit's creek without a paddle.
Anders, perhaps you should alter your position on boycotts in light of the latest news? We discussed your PIK projection charts before and both agreed that boycotts would do little but 'put pressure' on the Glazers to sell; now that such pressure would be practically non-existant, will you retract your recommendation of boycotts? Glazers holding 20% of the PIK notes makes them practically untouchable; would it not be best for the club then if we just continued to grant our full support and watch as our finances become increasingly healthier and healthier over the next seven years? You never projected for this, and it certainly shows the club to be at least doubly as financially secure as in even your previous best projection; will you alter your stance accordingly?
What do you think they'll do with their 20% Cider?
I've no idea, mate, but i'm convinced that their holding it makes the club far more secure than you had ever previously predicted. It's always been about options, hasn't it? The more options available the safer we are. This gives the Glazers many options.
Of course they would.
In that 100% PIK ownership scenario:
They own company A, which has a certain revenue.
They own PIKs held against company A's parent company.
If they take money out of company A to pay the PIKs, then the money going into paying the PIKs is all theirs. They don't have to maintain the PIKs, keep them competitive(!), pay them wages, etc. It's pure profit.
Bottom line is that they'd be daft not to let the PIKs spiral in that scenario because ultimately they can continue taking money out of company A including extra dividends (as advised in the bond prospectus).
These extra dividends, which can only be used for paying down RUJV's debt (i.e. the PIKs), can be paid over the course of the next 7 years. If they let the PIKs spiral and refinance the bonds at, say £1bn to cover the cost of the bond payback plus the PIK, they give the bond holders half and take the other half straight over to Glazer central to clear the PIKs. The next cycle of refinancing japery then starts again.
We've done that bit, URR.
You were wrong, your examples are nonsense, so kindly put a sock in it, will ya?
Even if the Glazers held 100% of the PIK's then they still could not take any more than their annual dividend entitlement out of the club; the entitlement is capped and is calculated entirely irrespective of all PIK debt no matter who holds it; any payment the Glazers wished to make to themselves for the PIK notes could only ever come from either their personal wealth or the dividends which they would be wholly entitled to regardless of whether they held 100% or 0% of the PIK notes, and what's more, any payment made to themselves would be entirely negated by the fact that the whole concept is fecking nonsense! They could hold 100% of the PIK's and let the interest roll up until they total £100trillion, it would not make the slightest bit of difference to either United or the Glazers. So put a fecking sock in it!
You were wrong, your examples are nonsense, so kindly put a sock in it, will ya?
Even if the Glazers held 100% of the PIK's then they still could not take any more than their annual dividend entitlement out of the club; the entitlement is capped and is calculated entirely irrespective of all PIK debt no matter who holds it; any payment the Glazers wished to make to themselves for the PIK notes could only ever come from either their personal wealth or the dividends which they would be wholly entitled to regardless of whether they held 100% or 0% of the PIK notes, and what's more, any payment made to themselves would be entirely negated by the fact that the whole concept is fecking nonsense! They could hold 100% of the PIK's and let the interest roll up until they total £100trillion, it would not make the slightest bit of difference to either United or the Glazers. So put a fecking sock in it!
How does the Glazer's owning 20% or the PIKs make the club 'doubly more secure'?
Why can't they just pay down their 20%?
No one said they could take more dividends. I made that point clear in reply to Richio on the previous page.
It was whether they could take more money, which of course they can if they have different income stream from the club I.E Interest on PIKS.
It was whether they could take more money, which of course they can if they have different income stream from the club I.E Interest on PIKS.
No PIK agreement would allow preferential treatment of some holders over others.
They could waive their rights.
Or they could "recycle" their repayment proceeds (say the share of the £70m) into RFJV and use it to repay more (an interative process).
Simply because if they choose to write off their portion of the PIK debt then the remainder of the debt can be cleared by 2013. Without that 20% held by the Glazers you're looking at at least 2017 best-case-scenario before the PIK's could possibly be cleared. Once the PIK's are cleared the club is pretty much home and dry as far as any real risk to our finances is concerned; the news that the Glazers control 20% of that debt is a massive boost to anyone worried about the club's future; it's the nature of high-interest finance; 20% might not sound like a huge amount, but do the sums and you'll see that it really puts us in a position one whole order of magnitude better off than we would be without it.
Also I do not think this 20% ownership of the Piks is bad thing at all if true.
It reduces the risky debt secured against the share holdings and shows commitment to the club through extra investment.
Risk has always been my biggest objection to the ownership and capital structure model, reducing that makes me happy.
The other issue about taking money out though I still don't get why they are limited to only a dividend when they have shown with loans, management fee's etc.. that they can clearly extract other monies.
The interest on the PIKs I would expect them to take otherwise why invest in them? why not just pay them off?
It reduces the risky debt secured against the share holdings and shows commitment to the club through extra investment.
Risk has always been my biggest objection to the ownership and capital structure model, reducing that makes me happy.
The other issue about taking money out though I still don't get why they are limited to only a dividend when they have shown with loans, management fee's etc.. that they can clearly extract other monies.
The interest on the PIKs I would expect them to take otherwise why invest in them? why not just pay them off?
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