13-01-2010, 07:38 AM
I was reading a little bit more about the bonds issue. The expected return on investment for someone looking to get on board with the Glazers would be around 9.5%. I'm not sure if that would be per annum, but the group turnover is diminishing over each financial year, meaning that, unless they have some magic wand or great scheme to make more money, then investors are going to be hard pressed to find a reason to invest.
Manchester United Plc may struggle to sell 500 million pounds ($806 million) of junk bonds because it isn’t rated and investors have other options, said Jonathan Moore, high-yield analyst at Evolution Securities Ltd.
The 18-time English soccer champions plan to issue seven-year bonds in pounds and dollars. Management is meeting potential investors in Asia and Europe this week, and in the U.S. next, in an effort to interest the widest possible circle of buyers, said Tatjana Greil Castro, who manages about $1 billion of high yield debt at Muzinich & Co. Ltd. in London.
“Most traditional high-yield investors won’t touch this,” said London-based Moore. “It’s unrated, so some investors can’t take it, and there’s a very busy new-issue calendar so there are plenty of alternatives. Most people just won’t focus on something with far too much leverage, limited free cash flow and lumpy earnings.”
A spokesman for the U.S.-based Glazer family, which owns the club, declined to comment.
Manchester United is seeking to woo investors as high- yield borrowers attempt to raise as much as 45 billion euros in Europe this year, according to Barclays Capital. Fresenius Medical Care AG & Co. KgaA is seeking to sell 250 million euros of junk bonds and Virgin Media Inc. is offering 500 million pounds of notes denominated in pounds, euros and dollars.
‘Skeptical’
Red Football Ltd., the Glazer’s holding company, still has debt of about 608 million pounds stemming from the family’s 2005 buyout of the club, and interest payments have caused losses.
“This will be a difficult sale,” said Greil Castro. “My first reaction is that I’m skeptical. It’s a sector thing, all based on how well they’re doing on the pitch and other things they can’t fully control.”
Red Football had net income of 25.6 million pounds for the year ending June 30, 2009, after the club sold star player Cristiano Ronaldo to Real Madrid for 80 million pounds, according to the offer document. The club also got an advance payment from Aon Corp., the insurer that puts its name on players’ shirts, of 35.9 million pounds.
The club “seems to assume” it will pay about 9.25 percent interest on its new bonds, based on so-called pro forma figures in the offer document that outline what its finances would look like if it currently had the bonds, said Moore. These show pro forma gross indebtedness of 512 million pounds and an interest bill of 46.3 million pounds a year, or 9.04 percent.
European borrowers with comparable debt profiles are in the B category, according to Moore. Investors currently demand yields of more than 9.5 percent to buy their debt, Merrill Lynch’s Euro High Yield, B Rated Index shows.
Manchester United Finance, the company selling the bonds, hired Bank of America-Merrill Lynch, Deutsche Bank AG, Goldman Sachs Group Inc., JPMorgan Chase & Co., KKR & Co. and Royal Bank of Scotland Group Plc for the deal.
Source: John Glover - Bloomberg
Manchester United Plc may struggle to sell 500 million pounds ($806 million) of junk bonds because it isn’t rated and investors have other options, said Jonathan Moore, high-yield analyst at Evolution Securities Ltd.
The 18-time English soccer champions plan to issue seven-year bonds in pounds and dollars. Management is meeting potential investors in Asia and Europe this week, and in the U.S. next, in an effort to interest the widest possible circle of buyers, said Tatjana Greil Castro, who manages about $1 billion of high yield debt at Muzinich & Co. Ltd. in London.
“Most traditional high-yield investors won’t touch this,” said London-based Moore. “It’s unrated, so some investors can’t take it, and there’s a very busy new-issue calendar so there are plenty of alternatives. Most people just won’t focus on something with far too much leverage, limited free cash flow and lumpy earnings.”
A spokesman for the U.S.-based Glazer family, which owns the club, declined to comment.
Manchester United is seeking to woo investors as high- yield borrowers attempt to raise as much as 45 billion euros in Europe this year, according to Barclays Capital. Fresenius Medical Care AG & Co. KgaA is seeking to sell 250 million euros of junk bonds and Virgin Media Inc. is offering 500 million pounds of notes denominated in pounds, euros and dollars.
‘Skeptical’
Red Football Ltd., the Glazer’s holding company, still has debt of about 608 million pounds stemming from the family’s 2005 buyout of the club, and interest payments have caused losses.
“This will be a difficult sale,” said Greil Castro. “My first reaction is that I’m skeptical. It’s a sector thing, all based on how well they’re doing on the pitch and other things they can’t fully control.”
Red Football had net income of 25.6 million pounds for the year ending June 30, 2009, after the club sold star player Cristiano Ronaldo to Real Madrid for 80 million pounds, according to the offer document. The club also got an advance payment from Aon Corp., the insurer that puts its name on players’ shirts, of 35.9 million pounds.
The club “seems to assume” it will pay about 9.25 percent interest on its new bonds, based on so-called pro forma figures in the offer document that outline what its finances would look like if it currently had the bonds, said Moore. These show pro forma gross indebtedness of 512 million pounds and an interest bill of 46.3 million pounds a year, or 9.04 percent.
European borrowers with comparable debt profiles are in the B category, according to Moore. Investors currently demand yields of more than 9.5 percent to buy their debt, Merrill Lynch’s Euro High Yield, B Rated Index shows.
Manchester United Finance, the company selling the bonds, hired Bank of America-Merrill Lynch, Deutsche Bank AG, Goldman Sachs Group Inc., JPMorgan Chase & Co., KKR & Co. and Royal Bank of Scotland Group Plc for the deal.
Source: John Glover - Bloomberg