How sensible is Manchester United's 500 million bond issue ?

Given the poor state of the UK economy, is it sensible for a big club like Manchester-United to go ahead with the bond issue?

 

1) Not really. When a sport/entertainment-oriented activity such as soccer rises to such a financial "level", it has to mark a long-term peak in it's popularity and success.
2) It's "good" of the organization to attempt to raise the money, as long as it is not at an interest rate that is 2,000 basis points over LIBOR.
3) It's "bad" for investors to even consider buying the bonds, at any interest rate.

 

This is going to be a disaster form Man Utd. As a big fan what has happened here is a travesty. A club that was the worlds biggest and best run club making £35+ million inprofit every year was taken ove rby these p****'s and instantly swallod up in £700 M debts. Not only that they are taking out about £5 Million per annum for them-selves.

In the long run they are never going to offload this debt. So what their plan is I have no idea. football (soccer as you guys call it) is not like any other business. Too much profit is swallowed up in wages and transfers. In fact it's hard to earn a profit. The best teams are now ones owned by the billionaites who treat it as a hobby (i.e expect to lose money.)

The Glaziers need to get out quick and offload to a money laden Arab/Russian with cash to burn because this arrangement is not going to work.

I am trying to organize a mass "non attandence" but as per usual people are so dumb they bleeive every piece pf PR that comes out these lying b****'s mouths! Riddance to them and this once great club. Disaster is near. My only good point is Liverpoo lare in an even worse state then us LOL

 

I think that levels of debt is not easily manageable. What ppl don't understand is that big clubs pay big wages and most of the revenue is eaten up by wages/fees etc.

If Liverpool sell all their players they can wipe 80% of their debt. But if Manchester United sell all their players they can barely reduce their debt by half. That is the key difference now between the two clubs.

I think the boards should have resisted the takeover by the Americans. for over 20 years Liverpool have been owned by businessmen and they have done shit. Manchester United were publicly owned during that period and were the most succcessful club.

 

Manchester United Owners Said to Use Team to Pay Debt (Update1)
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By Tariq Panja and John Glover

Jan. 15 (Bloomberg) -- Manchester United’s owners will use cash from the 18-time English soccer champion to reduce hedge- fund debts that helped pay for their 2005 takeover, said an investor familiar with the matter.

The Glazer family is trying to raise 500 million pounds ($816 million) in a bond issue, and plan to wait before using 70 million pounds to pay their debts to avoid negative publicity, club officials told the investor, who attended a sales presentation and declined to be identified. The option to transfer the cash to the Glazers is outlined in bond documents.

United fans have expressed concern with the club’s finances and its ability to sign new players since the Glazers’ 790 million pound takeover. The Americans want to prevent discontent growing by putting distance between the bond issue and transferring the cash to pay the PIK loans, said the person familiar. The PIKs, which pay 14.25 percent coupon, have risen to 202 million pounds, according to Bloomberg data.

“There’s a lot of pressure on the Glazers to pay down the PIKs,” said Jonathan Moore, a high-yield analyst at Evolution Securities Ltd. in London. “It’s going to happen sooner rather than later, but they’re not hiding their intentions, given the language in the indentures. Bondholders are going into this with their eyes open.”

A spokesman for the Glazer family in London declined to comment on the report. Manchester United spokesman Philip Townsend also declined to comment.

Borrowing

The Glazers’ takeover was funded by senior debt, the hedge- fund debt and equity. While senior debt of about 500 million pounds was leveraged against the club, the family was responsible for repaying the 138-million pound hedge- fund loan. That’s ballooned to a 202-million-pound liability because of a 14.25 percent interest rate, Bloomberg data show.

United borrowed 699 million pounds in August 2006 and says it had 116.6 million pounds cash and deposits on Sept. 30. The club said it was raising the bond to pay off 509.5 million pounds of senior debt secured against the club.

The team’s management, led by chief executive officer David Gill and Chief of Staff Ed Woodward, are holding presentations to drum up interest in the seven-year junk bonds. They’ve pitched in Hong Kong, Paris, Edinburgh and London yesterday.

Interest on PIK loans is paid with more debt securities until maturity, when principal and interest are paid together.

Family Interests

“This whole exercise in terms of the bond issue is not about United’s finances, it’s about the family looking out for its own interests,” said Duncan Drasdo of the Manchester United Supporters Trust, a group that’s campaigned against the Glazers since their buyout. The Financial Times reported the owners expect to keep United until at least 2017.

United expects to pay a coupon of about 8.75 percent on the new borrowings, said the person, citing conversations with people involved in the transaction. The person was speaking on condition of anonymity because the meeting was private.

“That’s way too low,” said Moore. “Really they should be paying 10 or 11 percent.”

The club has said the team would only be responsible for the senior debt taken out against Manchester United and not the PIK debt.

Investors may demand tighter conditions on the bonds, according to Covenant Review, an independent credit research firm. Risks to bondholders’ interests include allowing the Glazers to sell the club’s Old Trafford Stadium.

The owners would also be able to sell assets that are earmarked as collateral for the bonds, then reinvest the proceeds as they see fit, Covenant Review said.

Coach Plans

The sale is being managed by JPMorgan Chase & Co., Goldman Sachs Group Inc., Deutsche Bank AG, Bank of America Merrill Lynch and Royal Bank of Scotland Group Plc.

The talks included discussions about what plans the club has for a successor to 68-year-old manager Alex Ferguson. The Scot has steered the club to the most successful period in its history since he joined United in 1986. He’s collected 11 Premier League titles, two European Cups and claimed other domestic and international successes.

To contact the reporters on this story: Tariq Panja in London at tpanja@bloomberg.net; John Glover in London at johnglover@bloomberg.net

http://www.bloomberg.com/apps/news?pid=20601087&sid=ag9j93aPz0Mw&pos=6

 

They reported the profit just before the bond issue so that they will have takers (not like they wouldn't have any )...

 

Jim O'Neill, Goldman Sachs' star economist and a lifelong Manchester United fan, has declared his opposition to the club's recent bond issue – despite the investment bank making millions in fees from the fund raising.

http://www.telegraph.co.uk/finance/...m-ONeill-attacks-Man-United-fund-raising.html

 

How long until Wayne Rooney moves to Barcelona?

 

Sounds like Glazer has more than half his net worth in Man U.

Its a quick and dirty way to get liquid for him.

 

Wayne Rooney not for sale at any price - Man Utd

Rooney's current Old Trafford contract expires in 2012

Striker Wayne Rooney is not for sale at any price, Manchester United chief executive David Gill told BBC Sport.

Rooney is in brilliant form with 21 goals this season which could trigger an offer from Europe, with Barcelona and Real Madrid said to be interested.

But Gill told BBC 5 live Sportsweek: "Unless Alex agreed to it, we would not accept an offer, regardless of the value, for a player we want to keep."

Gill said they had a 35m Euro bid for France striker Karim Benzema refused.

United manager Sir Alex Ferguson had been tracking the talented 22-year-old for months but saw his offer rejected by Lyon, who accepted a 41m Euro bid by Spanish giants Real Madrid in July 2009.

"We didn't get Benzema but we did offer 35m Euros," said Gill.

If I went to (joint board chairman) Joel Glazer and said 'Alex wants a particular player, can we have the money?' The answer would be an unequivocal yes

Man Utd chief executive David Gill

"It was just one phone call to the States saying we would like to make an offer for him 35m Euros and they said 'fine'. We did it, but he went to Real for something like over 40m Euros.

"But Alex has gone on record saying that was too much."

Gill also alleviated fears that United's owners, the Glazer family, would sell Old Trafford or the club's Carrington training ground.

A prospectus Â_circulated to potential investors prior to the club's £504m bond issue last week suggested Carrington could be sold to a holding company controlled by the Glazer family and leased back to the club.

But Gill said: "I am 100% convinced that will never happen under Glazer family ownership. The sale and leaseback opportunity within the bond document is done for financial and tax planning. Manchester United Limited continue to have complete control of Carrington."

The bond issue allowed the club to pay off nearly all their outstanding bank debts of £509m, although the debts of the club's parent firm, Red Football Joint Venture, rose to £716.5m in the year to June 2009.

While the club now faces an annual interest bill of £45m a year, Gill said the club has no financial reasons to sell their prized assets, including Rooney, who is enjoying his best form for United since his £25m move from Everton in 2004.

"Wayne has a contract through until 2012," said Gill. "He has gone on record to say he wants to stay and we want him to stay.

"I'm sure that will be addressed in the close season. We hope that would be the case as we want to put him on a new, long-term contract. He's 24 and got the best years of his life ahead of him.

"Very few players, particularly UK-based players, want to leave Manchester United."

And Gill's pledge to keep hold of Rooney, was backed up by the player himself who spoke of his desire to remain at United.

"This is my club and I'm very happy here," said Rooney.

"My family live 30 minutes away. I'm perfectly happy and there is no reason to play my football anywhere else. Manchester United are the biggest club in the world."

Gill stressed that United's debts of £500m are a "misconception" because the club has about £140m in cash available, over half of which was generated by Cristiano Ronaldo's world record £80m transfer from United to Real Madrid last summer.

And he confirmed manager Sir Alex Ferguson can spend all £80m on new players, should he wish to expand the squad.

"I'm sure if he needed that money, it would be spent," said Gill, who oversaw the arrival of defender Chris Smalling from Fulham for about £7m on Thursday.

"If I went to (joint board chairman) Joel Glazer and said 'Alex wants a particular player, can we have the money?' The answer would be an unequivocal yes. They have demonstrated it (with Benzema).

"From my own personal perspective, we have no doubt that they (the Glazers) would support whatever we require.

"They will only get value back by ensuring the team continues to be successful, continues to attract exciting players and continues to produce results off the pitch.

"The Glazer family bought (American football team) the Tampa Bay Buccaneers in 1995 and 15 years later, they still own that - they are in it for the long-term."

While Gill reiterated the Glazers' commitment to the club, supporters are planning a 10-minute boycott of the Champions League last 16 match against AC Milan on 10 March in an attempt to raise awareness as they bid to force the American family out of Old Trafford.

Concerned by the £716m debt burdened by the Glazers, a number of fans plan to enter the ground 10 minutes after kick-off to expose empty seats at the ground with millions of people watching around the world.



But Gill believes any protest would be counterproductive on a night when United need their supporters most.

"I would appeal to the fans to be sensible and get behind the team," he added.

"We are a very well-run club and, given what's happening at other clubs, people should be proud of what's happening at Manchester United.

"It (the protest) serves no purpose and it won't change a thing. It will a tough game and we can't afford for the fans not to be there. Let's not have ridiculous protests of that nature, in my opinion."

http://news.bbc.co.uk/sport2/hi/football/teams/m/man_utd/8489038.stm