Read your post above mine. How is that adding to the discussion? You have done it continually in this thread and it's incredibly tiresome.
ALL issues relating to the bond issue and club finances
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Read your post above mine. How is that adding to the discussion? You have done it continually in this thread and it's incredibly tiresome.
He's doing exactly the same as fergie does when he stretches the truth in his pre match pressers. Literally speaking the piks aren't the responsibility of united. That of course doesn't tell the whole story. He's saying what he thinks is best to protect the business as fergus does with the team.
Put me on ignore then. That's what it's there for. Or stop whining.
Well if the PIK debt was United's legal responsibility then the Glazers could conceivably charge the club interest on their 20%, but it's not, so they can't; therein lies the difference. They can only pay the PIK notes off with their own dividend entitlements, which they'd be entitled to regardless of the existence of the PIK's. It would probably be fair to say that the £70m restricted payment would not leave the club if it were not for the PIK's though, so the effect of the PIK's on the club is likely not going to be zero.
I think the crunch for them will be more on the football side of things. How do they replace SAF and some key players and maintain success in a far more competitive league? Not making the Champions League will have a far more damaging effect on the finances of the club than a few thousand boycotters.
Agreed, but we also have the UEFA FFP rules coming into play in 2013 which in theory should lower transfer fees and player wages across the board as well as fecking City and Chelsea over with their sugar-daddy culture; it's not all doom and gloom.
It will be interesting to see how enforceable the FFP rules are. I'd expect clubs to challenge it as a restraint of trade.
It may also act as a catalyst for the oft mooted formation of a European Superleague with independently negotiated TV rights etc.
It may also act as a catalyst for the oft mooted formation of a European Superleague with independently negotiated TV rights etc.
Sweet jesus you are thick Crerand. I mean really thick. Its painful.
I love it when people have nothing to add but childish insults, says it all about the person and their arguement
How long does the £70M restriction last anyway? It was originally specified as a year's ban. Presumably the bar lifts before the bond runs to term?
I'd agree with that. Whisper it quietly on here though.
United's fans will pay for the Glazers PIKs. Simples.
It's all to do with the mechanics of high-interest financing, datura.
Consider the spread sheet below:
Simplified to £200m total PIK debt beginning, a one-off payment of £95m year one and then £30m every year following from dividends.
Scenario A
This shows how the PIK's might have been paid off had the full 100% of the debt still been held by third parties. It takes until the year 2020 before the debt is eradicated.
Scenario B
This shows how the PIK's might be paid off if the Glazers write-off their 20%. It only takes until 2015 to eradicate the debt.
Scenarios C and D
These show the above scenarios but with the expected drop in interest rate back down to 14.5%. As you can see the dates are 2018 and (nearly)2014 to eradicate the debt.
So you see that by just holding 20% of the PIK's it's possible for the Glazers to wipe out the debt 50% faster, in this case that means a whole 4/5 years earlier than previously expected and forecast by anders.
The club is a whole lot more secure than anyone ever knew, and has been since early 2008.
Are you still on about this with these dumb charts! What about scenario F?
(where the glazers buy up all of the PIK's and then let them keep piling up?)
That's the ideal situation for us I would say, but I seriously doubt they have the personal finances to do that... otherwise they would have done it. Unfortunately the PIKs will have to be paid off from the monies the club passes up to RFJV.
Now you're getting somewhere-
You were totally surprised when the glazers bought up 20% of the PIK's-
stand by to be surprised again in the future- unpleasantly!
That is the long and short of it
What surprise are you expecting?
Coalition crisis leading to an election won by the new left-wing leader of the Labour party Ed Miliband who nationalises all football clubs without compensation and hands them over to the people.
Yep, that would be a surprise. Wouldn't describe it as 'unpleasant' though.
Damn it! How do you keep coming up with these bulletproof arguments?! "Total fantasy-" why didn't i think of that?!
And yet here we have anders...
And then GCHQ...
Perhaps the two most renouned financiers on the caf to tell you that it'sa not total fantasy, that it was in fact you who were the fantasist.
But nevermind, eh?
So renowned that they of course predicted the 20% purchase.
Well this thread has moved on a fair bit since I last saw it!
Some good analysis there Cider - there has obviously been a lot of confusion about what exactly this recent news means, but your conclusions are dead right.
As you say, the debt position of the Group has been better than most analysts have projected as the Glazers pulled off a shrewd move back in 2008. In addition, this year's bond issue made the debt position even more secure - the reality is that the Glazers are in a strong position with no need or desire to sell.
Before you do anymore thinking 9000000- do us all a favor and read a little before you spout off- you have absolutely no idea what you are talking about.
Is this crusoe guy for real?
I do believe he is.
A few posters seem to be asking, "What if the Glazers do not write off their portion of the PIK notes?"
Well, if we take GCHQ's assumption that the notes would have to be paid off evenly, that is, any payment towards them would have to be spread across all the notes regardless of the identity of the holder, then you'll find that the net effect would be exactly the same as if the Glazers did write off their portion of the PIK's.
In explanation of this, look above at the 'Scenario B' spreadsheet. This shows how soon the PIK's could possibly be eradicated if the Glazers wrote off their portion. Look at the 'Total PIK' level for year 2011; after the £95m payment is made and the interest added for 2010, the total of outstanding PIK debt in 2011 is £91m.
Now, consider what would happen in the same situation but instead with the Glazers' portion of the PIK notes still in place.
The Total PIK debt year 2010 would be £200m, and once interest is added at 16.5% this would increase to £233m, divided 20% - £46.6, and 80% - £186.4 between the Glazers and third party holders.
The £95m payment would then similarly have to be divided, 20% - £19m, and 80% - £76m, which would reduce the total debt to a split of 20% - £27.6m, and 80% - £110.4m between the Glazers and third parties.
Now, the Glazers have just paid themselves £19m for their 20% holding of the PIK notes, so this extra cash can be paid back in.
Split it 20% - £3.8m, and 80% - £15.2m and the new PIK totals are; 20% - £23.8m, and 80% - £95.2m.
Again, the Glazers just paid themselves £3.8m, which can again be paid back on the PIK's. You get the gist;
Split 20% - £0.8m, and 80% - £3m the new totals would be 20% - £23m, and 80% - £92.2m.
This process can continue indefinitely until you're calculating just pence, but if you stop there for the sake of sanity, look at the total PIK debt for the remainig 80%; £92.2m; remarkably close to Scenario B's £91m in the same year; i can assure you that the £1.2m difference comes only from rounding the figures up or down through various stages of each calculation; the net effect to the PIK's would be exactly the same regardless of whether or not the Glazers write off their portion.
So by buying the 20% in 2008 the Glazers have effectively already written off that portion of the debt, because an IOU to oneself is absolutely worthless; either way, whether they write off the PIK's now or continue to hold them for tax purposes or whatever, the net effect to the remaining 80% is equal.
Edit.
This is purely just a mathematical concept, perhaps anders, GCHQ or someone else could comment and expand upon its practical application?
Well, if we take GCHQ's assumption that the notes would have to be paid off evenly, that is, any payment towards them would have to be spread across all the notes regardless of the identity of the holder, then you'll find that the net effect would be exactly the same as if the Glazers did write off their portion of the PIK's.
In explanation of this, look above at the 'Scenario B' spreadsheet. This shows how soon the PIK's could possibly be eradicated if the Glazers wrote off their portion. Look at the 'Total PIK' level for year 2011; after the £95m payment is made and the interest added for 2010, the total of outstanding PIK debt in 2011 is £91m.
Now, consider what would happen in the same situation but instead with the Glazers' portion of the PIK notes still in place.
The Total PIK debt year 2010 would be £200m, and once interest is added at 16.5% this would increase to £233m, divided 20% - £46.6, and 80% - £186.4 between the Glazers and third party holders.
The £95m payment would then similarly have to be divided, 20% - £19m, and 80% - £76m, which would reduce the total debt to a split of 20% - £27.6m, and 80% - £110.4m between the Glazers and third parties.
Now, the Glazers have just paid themselves £19m for their 20% holding of the PIK notes, so this extra cash can be paid back in.
Split it 20% - £3.8m, and 80% - £15.2m and the new PIK totals are; 20% - £23.8m, and 80% - £95.2m.
Again, the Glazers just paid themselves £3.8m, which can again be paid back on the PIK's. You get the gist;
Split 20% - £0.8m, and 80% - £3m the new totals would be 20% - £23m, and 80% - £92.2m.
This process can continue indefinitely until you're calculating just pence, but if you stop there for the sake of sanity, look at the total PIK debt for the remainig 80%; £92.2m; remarkably close to Scenario B's £91m in the same year; i can assure you that the £1.2m difference comes only from rounding the figures up or down through various stages of each calculation; the net effect to the PIK's would be exactly the same regardless of whether or not the Glazers write off their portion.
So by buying the 20% in 2008 the Glazers have effectively already written off that portion of the debt, because an IOU to oneself is absolutely worthless; either way, whether they write off the PIK's now or continue to hold them for tax purposes or whatever, the net effect to the remaining 80% is equal.
Edit.
This is purely just a mathematical concept, perhaps anders, GCHQ or someone else could comment and expand upon its practical application?
Yes, it is an iterative process that (as described above) asymptotically tends to the cancellation scenario outlined in your spreadsheet.
I think Andersred has already commented on the iterative process.
There is a pretty simple solution which, from a practicable point of view, kills the pointlessly recursive process of using ever diminishing pik returns to reduce the total outstanding pik balance still further.
The Glazers simply need to inject cash (x*dividend) into RFJV immediately prior to the pik redemption dates such that their share of the total amount redeemed ((1+x)*dividend) is equal to the amount they injected.
Solution: x =25%. (from x*dividend=.2*(1+x)*dividend)
So, for an annual dividend of, say, 30m, the glazers add 7.5m, the total pik remeption becomes 37.5m, and a week later auld Malc receives 7.5m in the post that matches the amount stolen from his piggy-bank a week earlier.
Now, if you allow for this in your spreadsheet, it will not exactly mirror the cancellation scenario but pik elimination occurs at the same time, the amount paid by the club in dividends will also match up. The total interest bill will be a bit higher though.
There are other solutions; the Glazers could use their pik proceeds as a balancing fund to adjust the amount they want to take in dividends- it is, afterall, discretionary subject to a maximum of .5*CNI.
As for the rest of your post; there are other scenarios. In fact, a whole multitude of them.
The Glazers might simply pocket the redemption proceeds thus rendering reduntant our ruminations on the vexations of recursive algorithms.
Why?
For one thing, though the club is an asset appreciator, it hasn't been a good provider of the other component of equity return- cash income in the form of personal dividends- and this is mainly down to the various covenants.
Holding the piks entitles them to a discrete dividend stream of 20% (reportedly) of an annual dividend amount that they can control (subject to a limit). With a dividend of 95m (the carveouts a.k.a. the 'Ronaldo money' plus a bit) the Glazers can reduce their pik indebtedness by 95m and collect 19m at the same time. They can no doubt find use for this money elsewhere and probably can offset the amount against losses elsewhere. They might even use the 19m to pay back the 10m loan from the club. Who knows? THe point, of course, is that the 20% of the pik proceeds is theirs to spend without restriction unlike the annual dividends and carveouts.
For another, the actual cost to them of not using their pik redemption proceeds to further unwind the pik is not as big as you might expect.
In your cancellation scenario, the Glazers cancel their share of the pik, bringing the outstanding balance down from 200m to 160m. The club saves about 110m in pik payments. However, the Glazers, in cancellation, miss out in 60+m of uunrestricted pik dividends. There is also a cost (with cancellation) in terms of missed interest expense relief of about 20m or so.
So the difference (for them at least) isn't too big over the entire period that the pik remains on the book. You might also want to factor in the Glazer's need for cash in arriving at the likeliest scenario.
Another option is for the Glazers to cancel their share of the piks after the carveout of, say, 95m is taken. The 19m (16m of the 'Ronaldo money') windfall will come in handy I'm sure.
Cheers, Jazz.
What is CNI? I was under the impression that their dividend entitlement was simply ((EBITDA-SeniorDebtInterest)/2); are there further restrictions as to how much they can take depending on what they intend to use the cash for?
Excuse the lack of financial prowess on my part, as you can tell i'm a layman.
Edit.
I've just realised; is .5*CNI just the proper way of describing the formula i've written above?
What is CNI? I was under the impression that their dividend entitlement was simply ((EBITDA-SeniorDebtInterest)/2); are there further restrictions as to how much they can take depending on what they intend to use the cash for?
Excuse the lack of financial prowess on my part, as you can tell i'm a layman.
Edit.
I've just realised; is .5*CNI just the proper way of describing the formula i've written above?
Ciders,
CNI is Consolidated Net Income and is equivalent to EBITDA-SeniorDebtInterest- the former according to wikipedia and the latter according to an accountancy sort who posts on here.
I am only aware of the more obvious restrictions; the Bond prospectus probably contains other more obscure restrictions that might\might not be material in a given circumstance. I once took a gander at the section relating to covenants and restricted payments and amidst the almost indecipherable knot of whereofs, might nots and mays I had a moment of stunning existential clarity: I realised I had a life to live and it involved me being somewhere\anywhere else pretty sharpish.
You will find the bond prospectus (and other club-related, financial publications) filed under 'Resources' in the AndersRed Blog. I trust he'll forgive the reference.
I think the vast majority of posters on the financial threads are truly laymen (and I include myself in this category) but if you added that percentage to the percentage proclaiming 'expertise', you will find that answer greatly exceeds 100%.
Someone has been watching 24 ....
Seems the United fans are still not happy with the Glazers. However I'm going to need to get my eyes and my ears checked, as I'm sure GCHQ/Cider were saying the protests are over and why would they lie? 
Seems the United fans are still not happy with the Glazers. However I'm going to need to get my eyes and my ears checked, as I'm sure GCHQ/Cider were saying the protests are over and why would they lie?
They were loud and clear tonight Ralphie
Brilliant atmosphere start to finish. Superb from United fans.
Some of you will never be happy no matter what; i guess moaning and moaning and moaning and moaning somehow helps you to come to terms with that. Nevermind, eh?
It's called supporting the club, ciderman. I'm sad I missed it tonight, it sounded immense.
It did sound immense, it's just a shame that you're first reaction to hearing a good atmosphere is to start thinking about the Glazers and how much you hate them.
You couldn't hear the fans without hearing the anti-Glazer or see the United end in the second half without seeing the big G&G banner.
So yes I admit, I did think of how annoyed the pro-Glazerites on here would be and have a little chuckle to myself.
Tbf, the vast majority of the chants were about current and ex-players, not Glazer.
As has been the case for the last 6 months.
That's what i thought to be honest, i just presumed i'd missed the bit Ralphie was on about.
Yep, the anti-Glazer chants usually start when we are comfortably ahead or at the end of the game, ie never to the detriment of supporting the team which some people would try and have you believe..
It was a good atmosphere. Did i hear a Berbatov song? How did that go?
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