Man U's Debt

[The Birdman]

Just been a piece on Sky about how Utd's combined actual debt and their PI Kind debt will total over 1 BILLION by the time the term ends in 7 years.

Also says that in the last 5 years under the Glazers Man U have spent £150 million so £30 million a season yet fans criticise Rafa for not overtaking them

[javier_monsterano]

Pi kind?

[The Birdman]

Payment In Kind apparently (according to the financial expert on Sky) he was saying that the debt and the PI Kind debt are seperate and Man U aren't paying the PI Kind debt just adding it onto the original debt

[Matt]

Payment in kind? Are these debts sexual?

[Vermilion]

Just been a piece on Sky about how Utd's combined actual debt and their PI Kind debt will total over 1 BILLION by the time the term ends in 7 years.

Also says that in the last 5 years under the Glazers Man U have spent £150 million so £30 million a season yet fans criticise Rafa for not overtaking them

[dom9]

Just been a piece on Sky about how Utd's combined actual debt and their PI Kind debt will total over 1 BILLION by the time the term ends in 7 years.

Also says that in the last 5 years under the Glazers Man U have spent £150 million so £30 million a season yet fans criticise Rafa for not overtaking them

Why 2 threads? Can we merge?

[Tatterdemalion]

Payment in Kind debt, or PIK bonds are bonds where the interest rolls up rather than getting paid every year. It's believed that Man U are charged 14.25% per year for their PIK bonds, and that around £200m is outstanding (they paid off a substantial amount in PIKs a few years ago)..

However, the really nasty thing about PIKs is that they convert to equity in certain conditions, such as non-payment or default etc. I'm not sure what the terms are for Man U's PIK bonds, or how senior the obligation is relative to all the other debt. Usually PIKs are not senior and the other bonds are more senior (they rank higher in the capital structure, so get paid first in the event of a default). Usually senior bonds have a clause attached to them which prevents other debt being paid down before them which I believe is why Man U are having to refinance the whole caboodle rather than just the PIKs (as they are, net, increasing their interest charge).

Man U's PIKs are owned by some US hedge funds.

To put this another way, if United were to fall behind in some of their interest payments (presumably on the senior 'normal' debt) or some other such financial problem, they would find themselves with a US hedge fund owning a large part of them. They'd pretty much get sold to the highest bidder or more likely asset stripped to pay down the debt.

Our owners are bad, but they're not THAT bad...(not yet anyway).

[The Birdman]

Why 2 threads? Can we merge?

Sorry the reason for the 2 threads was this one is about Man U's debt generally and the thread in the Liverpool forum was the debt in relation to ours and Man U's spending over the last 5 years again against ours.....

[red g]

glazier has taken out 10million in the last year to give to family according to a guy on talksport.

basically saying they are crippling the club with debt

[dww]

glazier has taken out 10million in the last year to give to family according to a guy on talksport.

basically saying they are crippling the club with debt

All seems very odd to me:

Glazer family takes £20m in fees and loans from Manchester United

• Six members of family revealed to have borrowed from club
• David Conn: How the Glazers have milked United for millions

* Owen Gibson
* The Guardian, Tuesday 12 January 2010


Avi, Bryan and Joel, three of Malcolm Glazer's five sons – he also has a daughter – in the stands at Old Trafford. Photograph: Mike Egerton/Empics/PA

Manchester United's owners, who loaded the club with more than £700m in borrowings to fund their purchase, have taken £10m out of the club in "management and administration fees" and have personally borrowed a further £10m in the past year, it has emerged.

The club's financial results, released yesterday, revealed that six members of the Glazer family on the Red Football board had borrowed a total of £10m, which does not have to be repaid for five years.

Manchester United also released an offer document yesterday for the £500m bond it says will be used to re-finance the £509m debt secured on the club.

The offer document reveals that on 30 June last year the club entered into a £2.9m-per-year agreement with SLP Partners, a company related to the Glazers. Since 1 July 2006 a further total of £10m has been paid in "management and administration fees".

"During the period from 1 July 2006 to the date of this offering memorandum, management and administration fees of approximately £0.6m, £1.8m, £1.4m, £3.1m and £3.1m were paid to our affiliates," it said.

Under the terms of the bond issue it promises to terminate the agreement with SLP Partners but reserves the right to pay up to £6m per year to "one or more entities related to our ultimate shareholders for administration and management services".

The 322-page offer document for those bonds, circulated in the City yesterday, also makes provision for £70m to be redistributed to the ultimate parent company for "general corporate purposes, including repaying existing indebtedness". This is thought to refer to the high-interest hedge fund loans secured against the Glazers' own shareholding in Manchester United. Those Payment In Kind loans, which accrue interest at a rate of 14.25% a year and "roll up" on an annual basis, are now believed to be worth almost £200m, as compared with £175m the previous year.

The document also reveals that the club has received a large slice, £35.9m, of its new £80m sponsorship deal with AON. It also reveals plans for a new £75m "revolving credit line".

City insiders expect the refinancing, put on hold when the markets collapsed in 2008, to succeed. The bond's yield, which could be around 9%, will be set only after an international roadshow. The offer document also reveals that Red Football recently lost £35m when attempting to hedge against a rise in interest rates last year.

In its financial results the club revealed that it was only the £80m sale of Ronaldo and other transfer dealings that lifted Manchester United out of the red last season. Results for the Red Football Ltd subsidiary revealed a pre-tax profit of £48.2m but also indicated the overall amount owed by the club and its owners broke the £700m barrier for the first time since Malcolm Glazer acquired the club in 2005.

Despite increased revenues, interest payments and write downs meant that, without the £80.7m realised in transfer profits in the year to June 2009, the club would have made a loss of £32.5m.

According to yesterday's results, bank loans secured on the club now stand at £509.5m, compared with £518.7m the previous year. Interest payments on that debt totalled £41.9m.

Representatives of the Glazers have repeatedly pointed to the cash flow generated by the club, once the interest on the loans had been serviced and before write-offs, as proof that money is available to Sir Alex Ferguson for team strengthening purposes.

The Glazers have been keen to emphasise that the PIK loans, advanced by hedge funds at a high rate of interest when the family last restructured the debt in 2006, are not secured on the club but on their shareholding in it. If they were to default, the hedge funds would not have any say over the operational side of the business.

The £500m bond issue, if fully subscribed, is unlikely to reduce the club's interest burden in the short term. It will be used to repay four secured loans, with interest rates of between 2.125% and 5% above the Libor rate at which banks lend to one another. Those rates were swapped for a fixed rate of 5.08% last year.According to the offer document, those hedging arrangements had cost Red *Football around £35m to 6 January this year. It has promised to use some of the proceeds of the bond issue to reduce the liability by £8m. City sources said that the seven-year bond would give the Glazers greater certainty and no longer leave them at the mercy of the market. The release of yesterday's figures will have partly been designed to prove to potential investors the health of Manchester United's cashflow position despite its heavy debt burden.

The club's results showed an increase in turnover for the year to June 2009 to £278.6m from £256.2m as matchday revenues, media income and commercial revenues all continued to rise.

Matchday revenue increased from £101.5m to £108.8m, largely thanks to increased season-ticket prices, while media revenues rose from £90.7m to £99.7m and commercial income rose from £64m to £70m. The club will also point to a wages to turnover ratio of 44%, which compares favourably with most other Premier League clubs.

[red g]

there would be financial meltdown if they hadnt sold ronaldo.......

who knows we may not have to sell torres aand they have to sell there 1 only other asset Rooney.....or maybe vidic is worth a few quid to.

We may not be what we were but i predict an almost liverpool fall from from grace for scum over the next 10 years

[Vermilion]

Knowing their luck, some Chinese Zillionaire will come along and snap them up, doubling their fan base and income in one foul....really foul...no horrendously foul swoop.

edit. Nah just kidding, it'll never happen ?

foul instead of fell obviously.

[-V-]

Crash and burn please.

I do find it odd that they have allowed their debt situation to worsen. Surely they could not have planned for things to go like this when they took over.

[red g]

Crash and burn please.

I do find it odd that they have allowed their debt situation to worsen. Surely they could not have planned for things to go like this when they took over.

not so sure, they have taken a lot of money out which in effect they didnt have to start with!!!

i am sure they are very pleased

lets face it, someone will step in and buy the club when they are about to be ruined!!

[-V-]

Thats the thing though, Im pretty sure they have increased commercial revenue year-on-year since they took over. So if they have gotten into a worse state financially then how did it happen? Malcolm Glazer probably has the most experienced money men around to manage his businesses so did the purposely allow the interest on the debt to get out of hand?