Post originally from the United Lounge area. Courtesy of Vazza:
10 key questions about Manchester United's debts under the Glazers
Source:www.guardian.co.uk
From previous "rip off" thread, I also posted this:
According to further press releases from Red Football, that allow a little more insight into the accounts, the Glazer family 'borrowed' in excess of £10million from the debt-ridden company!
Lurking in the full, heart-sinking detail of the Glazer family's proposal to borrow £500m, a partial replacement for the £700m debts their takeover has loaded on to Manchester United, is a page documenting the millions United have paid out to the family members themselves. None of the Glazers appear to have taken a salary out of the club since that May 2005 takeover, which United fans bitterly opposed and which has since cost the club more than £325m in interest.
In those three and half years, ticket prices have almost doubled at Old Trafford, where previously they were restrained to cater for the regulars at the Lou Macari Fish Bar, as well as the prawn sandwich consumers.
The MU Finance plc prospectus, launched in the City yesterday, sets out the fortune the Glazer family have reaped from the club they borrowed £540m to buy. From 1 July 2006, in five separate payments, a round total of £10m was paid in "management and administration fees" to companies affiliated to the Glazers. Under the new bond issue, the family is entitled to be paid up to £6m by United in management and administration fees.
On 30 June last year, United entered into a consultancy agreement with SLP Partners, "a company related to certain of our ultimate shareholders", to pay up to £2.9m. On top of that, on 19 December 2008, each of Malcolm Glazer's five sons and one daughter, all of whom are directors of Red Football Limited, each personally borrowed about £1.66m from the club, a total of £10m.
Added together, the management fees, consultancy agreement maximum and the £10m the six family members actually borrowed from United make a total of £22.9m paid to the family and their affiliated companies in three and a half years.
No explanation was offered yesterday for these fees, or for why the Glazer family felt the need to borrow £10m from Manchester United. The Glazer family's official spokesman, who is responsible for discussing United's financial affairs, declined to comment.
Duncan Drasdo, chairman of the Manchester United Supporters Trust, was more forthright. "Now we know that as well as their takeover imposing a huge debt on the club, and the massive interest payments United have to service each year out of the club's ticket and other income, the Glazer family have paid themselves many millions of pounds personally," he said. "The tide is turning at Old Trafford as fans see how much the takeover has cost, the increased ticket prices and the failure to invest in the team despite £81m received from selling Cristiano Ronaldo. We do not want the Glazers to refinance the massive debts they have brought to the club — we want them to go."
The accounts released yesterday were for just one company, Red Football Limited, in the thicket the Glazers have built around the Old Trafford crock of gold. The figures showed the net interest for the year to 30 June 2009, on the £514.5m debts loaded on to that company, was £42m. That, then, soaked up more than half the galactic fee Real Madrid are scheduled to pay for Ronaldo. Another United company records the £175m also owed to hedge funds, at 14.25% interest — a charge in 2008-09 of £25m.
Sir Alex Ferguson said last week that the Ronaldo money is available to him, and he had "absolutely no issue at all with the club's finances". Yet the £81m took United from a thumping, multimillion-pound loss it would have recorded, into the £26m profit being highlighted to the City yesterday.
It is, quite simply, impossible to sustain the argument, to intelligent supporters stumping up their hard-earned cash for tickets at ever-increasing prices, that the £700m borrowings the Glazers have imposed, and £67m of interest payable last year, is having no impact.
City sources were saying yesterday that United's sheer size, income and dedicated following makes the bond issue an attractive enough offer – despite the "high degree of risk", including a possible fall in success, decline in crowds and uncertainty over who will replace Ferguson.
The fees to be earned by the bankers and professionals who have made this all possible is £15m. By the end of it, the Glazer family may be able to replace £500m they have borrowed with a different £500m borrowed on slightly less terror-inducing terms. But Manchester United, formerly the proud, rich, football behemoth of the Premier League, will still be laden with the extraordinary debts of a takeover which nobody wanted, except for seven members of a family in Florida, and their very well-paid advisers.
Source: guardian.co.uk
10 key questions about Manchester United's debts under the Glazers
[How big is Manchester United's debt?
Manchester United's holding company carries £509.5m in debt secured on the club and its assets. A further loan, secured on the Glazers' shareholding in the club, is believed to be worth £200m.
What is the current interest rate?
The interest rate on the £509.5m secured on the club ranged between 2.15% and 5% above the rate at which banks lend to one another and was spread between four loans due to be repaid between 2013 and 2016. The offer document reveals that, fearing uncertainty over interest rates, last year it swapped those rates for a fixed rate of just over 5%. That hedging position had lost the club around £35m by 6 January this year. The interest rate on the so-called Payment in Kind loans taken out by the Glazers from US hedge funds is 14.25%. It "rolls up" annually, meaning that a debt of £138m has already ballooned to £200m.
Why launch the £500m bond issue now?
Partly because confidence has returned to the bond markets. The Glazers hoped to refinance in 2008 when the markets turned against them. The MU Finance plc offering is just one of a glut of issues coming in the early part of this year. But there are other reasons to move quickly, in the hope of capitalising on results boosted by a transfer profit of £80.7m and a run of recent on-pitch success that has realised bumper sponsorship and TV revenues. If the Glazers' own finances are beginning to be squeezed, it would also increase their appetite for refinancing the debt secured on the club.
Why structure it this way?
Under the terms of its four bank loans, the Glazers were unable to use the club's revenues to repay their own high interest PIK loans. A note in the document makes provision for up to £70m to return to the Glazers' ultimate parent company for "general corporate purposes, including repaying existing indebtedness". For the first time they appear to have a mechanism to funnel some of the club's revenues to the parent company to repay the PIK loans.
What if they default on the PIK loans?
The hedge funds would not gain any say over the operational side of the business, but they could prevent it incurring fresh debt or paying out dividends, as well as gaining the power to block any potential sale.
On what terms will the bond be offered?
The price will not be set until a roadshow has gauged interest. Experts say the offer documents assume an annual yield (interest) of around 9.25%, or £45m a year. The bond's term will be for seven years, with a buy-back option after three.
Isn't that more interest than the club is currently paying?
Yes. But – as well as giving them a mechanism to divert £70m to the parent company – the Glazers will claim it offers greater certainty in managing United's cashflow and debt repayment and consolidates various loans with different end dates into a single sum.
Do the Glazers have a plan?
The prospectus trumpets their success in increasing ticket prices, achieving 8.5% compound growth between 2006-07 and 2008-09 and a further 2.5% increase this season. However, it warns corporate hospitality sales will remain "challenging" then, confusingly, suggests they will be a key engine of growth. Aside from an £80m shirt sponsorship deal with Aon, £35.9m of which has been banked up front, and its ongoing £303m Nike deal, they say they will be able to greatly increase the £19.5m brought in from other global sponsors.Beyond that, and the possibility of a game-changing development such as a European league, it admits that much is dependent on the team's continued success on the pitch. In the meantime, they insist they can continue to service the debts and finance a successful team from existing cashflow.
What is their exit strategy?
If they can successfully refinance and start to reduce the amount they owe through the onerous PIK loans, they will still hope to at some point sell the club - still saddled with debt - on at a large profit. But the pool of potential buyers appears to be contracting all the time, and the possibility of having to deal with a tumultuous post-Alex Ferguson era is an ever-present fear.
Does Ferguson have money to spend?
Yes, money could be found to fund player transfers. But to say all of the £80m-plus raised has been made available is disingenuous, because under the new terms of the bond issue up to £70m of the club's free cashflow of £116m could be diverted to the parent company to help repay the PIK. The club also plans to use a new £75m credit facility provided by a syndicate of banks led by JP Morgan to help fund player transfers, according to the offer document. But that facility, which replaces an existing undrawn £50m overdraft, will add to the overall £700m debt pile.
Manchester United's holding company carries £509.5m in debt secured on the club and its assets. A further loan, secured on the Glazers' shareholding in the club, is believed to be worth £200m.
What is the current interest rate?
The interest rate on the £509.5m secured on the club ranged between 2.15% and 5% above the rate at which banks lend to one another and was spread between four loans due to be repaid between 2013 and 2016. The offer document reveals that, fearing uncertainty over interest rates, last year it swapped those rates for a fixed rate of just over 5%. That hedging position had lost the club around £35m by 6 January this year. The interest rate on the so-called Payment in Kind loans taken out by the Glazers from US hedge funds is 14.25%. It "rolls up" annually, meaning that a debt of £138m has already ballooned to £200m.
Why launch the £500m bond issue now?
Partly because confidence has returned to the bond markets. The Glazers hoped to refinance in 2008 when the markets turned against them. The MU Finance plc offering is just one of a glut of issues coming in the early part of this year. But there are other reasons to move quickly, in the hope of capitalising on results boosted by a transfer profit of £80.7m and a run of recent on-pitch success that has realised bumper sponsorship and TV revenues. If the Glazers' own finances are beginning to be squeezed, it would also increase their appetite for refinancing the debt secured on the club.
Why structure it this way?
Under the terms of its four bank loans, the Glazers were unable to use the club's revenues to repay their own high interest PIK loans. A note in the document makes provision for up to £70m to return to the Glazers' ultimate parent company for "general corporate purposes, including repaying existing indebtedness". For the first time they appear to have a mechanism to funnel some of the club's revenues to the parent company to repay the PIK loans.
What if they default on the PIK loans?
The hedge funds would not gain any say over the operational side of the business, but they could prevent it incurring fresh debt or paying out dividends, as well as gaining the power to block any potential sale.
On what terms will the bond be offered?
The price will not be set until a roadshow has gauged interest. Experts say the offer documents assume an annual yield (interest) of around 9.25%, or £45m a year. The bond's term will be for seven years, with a buy-back option after three.
Isn't that more interest than the club is currently paying?
Yes. But – as well as giving them a mechanism to divert £70m to the parent company – the Glazers will claim it offers greater certainty in managing United's cashflow and debt repayment and consolidates various loans with different end dates into a single sum.
Do the Glazers have a plan?
The prospectus trumpets their success in increasing ticket prices, achieving 8.5% compound growth between 2006-07 and 2008-09 and a further 2.5% increase this season. However, it warns corporate hospitality sales will remain "challenging" then, confusingly, suggests they will be a key engine of growth. Aside from an £80m shirt sponsorship deal with Aon, £35.9m of which has been banked up front, and its ongoing £303m Nike deal, they say they will be able to greatly increase the £19.5m brought in from other global sponsors.Beyond that, and the possibility of a game-changing development such as a European league, it admits that much is dependent on the team's continued success on the pitch. In the meantime, they insist they can continue to service the debts and finance a successful team from existing cashflow.
What is their exit strategy?
If they can successfully refinance and start to reduce the amount they owe through the onerous PIK loans, they will still hope to at some point sell the club - still saddled with debt - on at a large profit. But the pool of potential buyers appears to be contracting all the time, and the possibility of having to deal with a tumultuous post-Alex Ferguson era is an ever-present fear.
Does Ferguson have money to spend?
Yes, money could be found to fund player transfers. But to say all of the £80m-plus raised has been made available is disingenuous, because under the new terms of the bond issue up to £70m of the club's free cashflow of £116m could be diverted to the parent company to help repay the PIK. The club also plans to use a new £75m credit facility provided by a syndicate of banks led by JP Morgan to help fund player transfers, according to the offer document. But that facility, which replaces an existing undrawn £50m overdraft, will add to the overall £700m debt pile.
Source:www.guardian.co.uk
From previous "rip off" thread, I also posted this:
According to further press releases from Red Football, that allow a little more insight into the accounts, the Glazer family 'borrowed' in excess of £10million from the debt-ridden company!
Lurking in the full, heart-sinking detail of the Glazer family's proposal to borrow £500m, a partial replacement for the £700m debts their takeover has loaded on to Manchester United, is a page documenting the millions United have paid out to the family members themselves. None of the Glazers appear to have taken a salary out of the club since that May 2005 takeover, which United fans bitterly opposed and which has since cost the club more than £325m in interest.
In those three and half years, ticket prices have almost doubled at Old Trafford, where previously they were restrained to cater for the regulars at the Lou Macari Fish Bar, as well as the prawn sandwich consumers.
The MU Finance plc prospectus, launched in the City yesterday, sets out the fortune the Glazer family have reaped from the club they borrowed £540m to buy. From 1 July 2006, in five separate payments, a round total of £10m was paid in "management and administration fees" to companies affiliated to the Glazers. Under the new bond issue, the family is entitled to be paid up to £6m by United in management and administration fees.
On 30 June last year, United entered into a consultancy agreement with SLP Partners, "a company related to certain of our ultimate shareholders", to pay up to £2.9m. On top of that, on 19 December 2008, each of Malcolm Glazer's five sons and one daughter, all of whom are directors of Red Football Limited, each personally borrowed about £1.66m from the club, a total of £10m.
Added together, the management fees, consultancy agreement maximum and the £10m the six family members actually borrowed from United make a total of £22.9m paid to the family and their affiliated companies in three and a half years.
No explanation was offered yesterday for these fees, or for why the Glazer family felt the need to borrow £10m from Manchester United. The Glazer family's official spokesman, who is responsible for discussing United's financial affairs, declined to comment.
Duncan Drasdo, chairman of the Manchester United Supporters Trust, was more forthright. "Now we know that as well as their takeover imposing a huge debt on the club, and the massive interest payments United have to service each year out of the club's ticket and other income, the Glazer family have paid themselves many millions of pounds personally," he said. "The tide is turning at Old Trafford as fans see how much the takeover has cost, the increased ticket prices and the failure to invest in the team despite £81m received from selling Cristiano Ronaldo. We do not want the Glazers to refinance the massive debts they have brought to the club — we want them to go."
The accounts released yesterday were for just one company, Red Football Limited, in the thicket the Glazers have built around the Old Trafford crock of gold. The figures showed the net interest for the year to 30 June 2009, on the £514.5m debts loaded on to that company, was £42m. That, then, soaked up more than half the galactic fee Real Madrid are scheduled to pay for Ronaldo. Another United company records the £175m also owed to hedge funds, at 14.25% interest — a charge in 2008-09 of £25m.
Sir Alex Ferguson said last week that the Ronaldo money is available to him, and he had "absolutely no issue at all with the club's finances". Yet the £81m took United from a thumping, multimillion-pound loss it would have recorded, into the £26m profit being highlighted to the City yesterday.
It is, quite simply, impossible to sustain the argument, to intelligent supporters stumping up their hard-earned cash for tickets at ever-increasing prices, that the £700m borrowings the Glazers have imposed, and £67m of interest payable last year, is having no impact.
City sources were saying yesterday that United's sheer size, income and dedicated following makes the bond issue an attractive enough offer – despite the "high degree of risk", including a possible fall in success, decline in crowds and uncertainty over who will replace Ferguson.
The fees to be earned by the bankers and professionals who have made this all possible is £15m. By the end of it, the Glazer family may be able to replace £500m they have borrowed with a different £500m borrowed on slightly less terror-inducing terms. But Manchester United, formerly the proud, rich, football behemoth of the Premier League, will still be laden with the extraordinary debts of a takeover which nobody wanted, except for seven members of a family in Florida, and their very well-paid advisers.
Source: guardian.co.uk