I'm not a financial expert so...how has our debt risen to a billion?
It hasn't, not quite.
Our debt situation looks like this.
1. We have
senior secured notes of $425.0 million outstanding -- which i. They mature on 25 June 2027. They were sold to a bunch of pension funds back in 2015. We pay interest on them, think its 3.79 percent. Is it a disaster if they aren't repaid in 2027? Nope, normally this type of debt is refinanced by issuing new bonds, by making a rights issue or private placement, or some other type of debt.
These bonds have so called "covenants" which basically are "do nots" for Manchester United plc. It could impact for example the clubs spending. The terms are available in full, filed with the SEC, but are also described a little more reader friendly in the AR. I haven't checked them in detail. The most relevant is probably (as described in the AR):
"[The Bonds] contains a financial maintenance covenant requiring us to maintain consolidated profit for the period before depreciation, amortization of, and profit/(loss) on disposal of, intangible assets, exceptional items, net finance costs, and tax (“EBITDA”) of not less than £65 million for each 12 month testing period (with the flexibility to reduce this to £25 million during the period 31 March 2021 to 30 September 2022 inclusive).We are able to claim certain dispensations from complying with the consolidated EBITDA floor including up to twice (in non-consecutive financial years) during the life of the senior secured notes if we fail to qualify for the first round group stages (or its equivalent from time to time) of the Champions League."
2. We have a
secured term loan facility $225.0 million. This is in essence a bank loan. Think the covenants mostly impact how much interest is paid on the loan. The interest is a margin vs LIBOR (LIBOR + 1.25 to 1.75 depending on the financing of the company). Falls due on 6 August 2029.
3. We have a credit line, under which a syndicate lends us 150m £. As of 30 June, 2022 -- 75m of 150m was used.
Comment:
On 30 June, our long term borrowings (1 and 2) was
530,365,000£ (650m USD) and short term borrowings was
105,757,000£.
On 30 September, our long term borrowings (1 and 2) was
577,367,000£ (650m USD) and short term borrowings was
102,892,000£.
So we didn't draw on the credit line to buy Antony and Casemiro.
How does our cashflow look for Q2? Its probably horrible with no game-day revenue. Last year Cash In was like
25m and our cash flow during Q2 (October-December) was minus 10m. But was that including the sacking of Ole (18,715,000)? I think so right. That means that we netted 10m under normal cirumstances. How much of the 25m was game day revenues?
Our cashflow won't be that negative for Q2. Minus 10? We can draw another 50m on the credit line.
Conclusion:
Without outside financing (the Glazers has since taken over the club provided zero pennies in financing), we aren't spending much more than 100-150m in total over the 2023 January transfer window and the 2022 summer transfer window. This is what Murthough also said before. Its not happening.
Caveat: This is not my home field -- perfectly possible I got something wrong.