Manchester United to Pay Off $353 Million of Soccer Team's Corporate Debt
By Tariq Panja - Nov 15, 2010 8:58 PM GMT
Manchester United’s owners agreed to pay off a payment-in-kind loan worth about 220 million pounds ($353 million), according to a corporate filing by the English soccer club.
Red Football Joint Venture Ltd. will “prepay 100 percent from the outstanding loan on Nov. 22,” the team’s parent company said. The document, called a voluntary free-payment notice, was signed Joel Glazer, co-chairman of Red Football, and was sent to the holders of the loan. Philip Townsend, a spokesman for Manchester United, declined to comment.
The Glazer family, which also runs the National Football League’s Tampa Bay Buccaneers, bought the 18-time English soccer champion in 2005. United supporters have protested against owners because of the debt they’ve added to the team. The Glazers were shouldering 16.25 percent annual interest charges on the PIK debt because of concern they’d face fans’ anger if they used the soccer club’s cash to pay off the loans.
The Glazers aren’t going to take any money out of the club to pay down the debt. With PIK loans, interest rolls up annually and increases the amount owed.
The Glazers bought the 18-time English champion for 790 million pounds. In January, they converted a bank loan secured against the team into a 526 million-pound bond. Under the bond’s terms, the Glazers could make a one-time withdrawal of 70 million pounds from the club to pay down the PIK loan.
Anti-Glazer protests increased after details of how the owners were financing the once debt-free club were revealed in the bond prospectus. Thousands of supporters took to wearing the green and gold colors of the team’s original incarnation, and a group led by Jim O’Neill, chairman of Goldman Sachs Asset Management, emerged as a potential buyer.
16.25 Percent Interest
The PIK loan issued in August 2006 to Red Football Joint Venture is held by fewer than 10 investors, mainly hedge funds. The facility started out as a 138 million-pound loan, accruing annual interest of 14.25 percent. That rose to 16.25 percent after the club breached a debt-to-earnings ratio agreement. The Glazers bought back between 15 and 20 percent of the loan in 2008.
The PIK loan to United was due to mature in 2017. If the Glazers had held the debt until then, they would have owed almost 600 million pounds at the current interest rate, according to Bloomberg calculations.
On Oct. 8, the team announced a record loss of 83.6 million pounds for the year ending June 30. Much of that was attributable to interest payments and costs related to replacing long-term bank debt with the bond. Sales reached a record 286 million pounds.
Since the Glazers’ purchase, United has won three domestic league titles and took the Champions League in 2008.
The club has increased revenue from various sources since the takeover, notably in commercial operations. A London-based sales team has negotiated sponsorship and partnership deals in industry sectors across the world.
United is currently third in the Premier League, three points behind leader Chelsea and one behind Arsenal.
To contact the reporters on this story: Tariq Panja in London at [email protected].
To contact the editor responsible for this story: Christopher Elser at [email protected].
Glazers to pay off PIK debts on 22/11/2010
- Thread starter DanH84
- Start date
Soldato
That's not the only debt we have.
So you will no longer be in debt
we will still be in debt.
There's 2 types of debt still in existence which were used to fund the takeover.
The parent debt is secured against the club, it's the bond and stands at around £530million. Interest payments on that are around £40mill/annum
The second and nastier type of debt is these Payment In Kind Notes. They are not secured against the club (directly on the Glazers) however the assumption has always been that United's funds will be used to pay them down.
The interest on these is a huge 16.25% currently but one area in which they differ from a traditional loan is that rather than paying the interest it simply rolls up in to the capital. If these had been left untouched (never really going to have happened) they would have been worth near 600mill on maturity (2017).
Essentially the Glazers never plan on having United debt free, they won't pay down the parent debt they'll simply seek to refinance on more favourable terms when the bond matures. They never need to have United debt free to be honest. They simply want the debt payments to become insignificant in comparison to our revenue.
Caporegime
This sounds like the ideal job, what's the going rate for a spokesman who declines to speak?
Who knows. They can't remove that amount from the clubs accounts though. The maximum they could possibly take is £95million they aren't entitled to any more from the clubs funds.
*They could secure a loan as finance at a lower rate though,
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That would be the only saving grace for Utd fans wanting to get shot of the Glazers any time soon.
The last thing Utd fans would want is the Glazer's to no longer be responsible for any of the debt.
A slightly narrow view but impossible to say more until more details are out. It would appear to be good news though. Even if refinanced it would appear that the future interest commitments of the club will be reduced.
Highly suspicious imo as to where the £220m has come from ;
1) Last year it was widely reported the Glazer's Malls were heavily in debt - I seem to recall from too rapid growth several years ago but I could be wrong)
2) The TB Buccaneers are doing ok this season but havent done much since they won the Super Bowl 8 seasons ago. According to Forbes the team as a whole is worth $963m , but the Glazers recently asked the Florida tax payers for $12m for a new facility (so this isnt where the money is coming from)
It will be very interesting to find out where this enormous amount has come from - but Im dubious that none of it has come from Utd's coffers , even if the statements state this currently....
1) Last year it was widely reported the Glazer's Malls were heavily in debt - I seem to recall from too rapid growth several years ago but I could be wrong)
2) The TB Buccaneers are doing ok this season but havent done much since they won the Super Bowl 8 seasons ago. According to Forbes the team as a whole is worth $963m , but the Glazers recently asked the Florida tax payers for $12m for a new facility (so this isnt where the money is coming from)
It will be very interesting to find out where this enormous amount has come from - but Im dubious that none of it has come from Utd's coffers , even if the statements state this currently....
Dont forget though, the Buccs have one of the youngest sides which in turn have one of the smallest wage scales, they are reportedly $40m under the wage cap so thats pure profit right there. The NFL side is making them money no doubt about it, unlike sport in this country, the NFL is a buisness that makes money not squanders it (as it should be)
!!!
MUST isnt my information source - not sure why you thought it was!!
Given the state of the team currently - £95m would be a huge loss from the cash reserves theoretically still in the bank (even the figures announced today are roughly 2 months old)
Admittedly I hadnt thought that it would have to be announced immediately (to the bond holders) - surely only announced before the next set of figures after today?
No that isnt pure profit at all - just because the team can spend X millions on wages, doesnt mean it actually has that money to spend in the first place!!
I havent looked into the accounts of the TBB's for a long time, but from the financial reports its strange that its hardly ever mentioned as a source of revenue for the Glazers if the team is producing so much income for the family
It isnt uncommon at all - but it seems strange to me that if the team is so successful you ask your fans (and other locals) for money you never need to pay off.....seems to me like they are more likely to alienate fans rather than bring them in
I love Utd and I would happily buy shares if they were available , even if I didnt even have 0.0001% I would still legally own a fraction of Utd - if Utd asked me to build them a training ground for free to replace Carrington its a completely different kettle of fish even if the £ value is the same as the shares mentioned above (I would probably say **** ***)
MUST isnt my information source - not sure why you thought it was!!
Given the state of the team currently - £95m would be a huge loss from the cash reserves theoretically still in the bank (even the figures announced today are roughly 2 months old)
Admittedly I hadnt thought that it would have to be announced immediately (to the bond holders) - surely only announced before the next set of figures after today?
No that isnt pure profit at all - just because the team can spend X millions on wages, doesnt mean it actually has that money to spend in the first place!!
I havent looked into the accounts of the TBB's for a long time, but from the financial reports its strange that its hardly ever mentioned as a source of revenue for the Glazers if the team is producing so much income for the family
It isnt uncommon at all - but it seems strange to me that if the team is so successful you ask your fans (and other locals) for money you never need to pay off.....seems to me like they are more likely to alienate fans rather than bring them in
I love Utd and I would happily buy shares if they were available , even if I didnt even have 0.0001% I would still legally own a fraction of Utd - if Utd asked me to build them a training ground for free to replace Carrington its a completely different kettle of fish even if the £ value is the same as the shares mentioned above (I would probably say **** ***)
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They aren't nice, they're just businessmen for all the ethical questions getting 12mill for nothing is good business. Real Madrid have been getting similar at tax payers expense for decades. Indications are that there is no carve out although this isn't definite. If they had to source an alternative means of finance and wished to leverage this against the club they would have to forewarn the bond holders.
I think you missed the point - the tax payers they want to get the money off are the very fans that come to their stadium. So the fans paying the taxbill are less likely to spend in the stands/merchandising etc etc (and with human nature being like it it, its quite possible they would spend less also even allowing for the tax)
So to my mind in requesting tax payers foot the bill they are likely to loose revenue in the long run rather than gain it
Just an opinion mind you
I do imagine they would take things like that into account. I can't imagine that a few pence on my tax bill would cause me to not buy merchandise if I wanted it.
Anyway it's kind o beside the point. Conference call to take place soon - will be interesting!
Anyway it's kind o beside the point. Conference call to take place soon - will be interesting!
Money made from official merchandise in the NFL is spread evenly among all 32 teams.
the revenue from a team football shirt x team sells in its own stadium is shared with all the other teams?
Never realised that - how very strange