United confirm plan to raise £500m through bonds
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Manchester United confirmed on Monday they will look to raise £500 million through bonds to restructure their debts.
The Premier League champions have been struggling under interest payments due on the debts which the Glazers ran up when borrowing in order to purchase the club. In the year up to June 30, 2009, they had to pay out £41.9 million in interest payments.
Although the club did record a pre-tax profit of £48.2 million, that figure includes the £80 million raised from the sale of Cristiano Ronaldo to Real Madrid. Without the sale of Ronaldo, the Red Devils would have been reporting a loss of £31.8 million. Turnover was up in the financial year, from £80.4 million in 2008 to £91.3 million.
The bond will be used to repay the "senior secured notes". It was thought that the Glazers would be looking to finance the £175 million worth of payment-in-kind notes that are currently attracting 14.25% interest. However, this is considered personal debt and will not be refinanced through bonds.
"Manchester United today announced that it will be seeking to raise approximately £500 million aggregate principal amount from an offering of senior secured notes due 2017,'' said a United statement. "The notes, whose proceeds will be used to refinance existing debt secured against the club, will be issued by MU Finance plc.''
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Manchester United will be seeking to raise approximately £500 million aggregate principal amount from an offering of senior secured notes due 2017.
The notes, whose proceeds will be used to refinance existing debt secured against the Club, will be issued by MU Finance plc.
None of the notes or the guarantees to be issued in the offering have been or will be registered under the U.S. Securities Act of 1933 and may not be offered or sold in the United States absent registration or an applicable exemption from such registration requirements.
This announcement does not constitute an offer to sell or a solicitation to buy in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction and is not intended to provide the basis for any credit or other evaluation of any securities or offering referred to herein. -
United confirm plan to raise £500m through bonds
Manchester United confirmed on Monday they will look to raise £500 million through bonds to restructure their debts.
The Premier League champions have been struggling under interest payments due on the debts which the Glazers ran up when borrowing in order to purchase the club. In the year up to June 30, 2009, they had to pay out £41.9 million in interest payments.
Although the club did record a pre-tax profit of £48.2 million, that figure includes the £80 million raised from the sale of Cristiano Ronaldo to Real Madrid. Without the sale of Ronaldo, the Red Devils would have been reporting a loss of £31.8 million. Turnover was up in the financial year, from £80.4 million in 2008 to £91.3 million.
The bond will be used to repay the "senior secured notes". It was thought that the Glazers would be looking to finance the £175 million worth of payment-in-kind notes that are currently attracting 14.25% interest. However, this is considered personal debt and will not be refinanced through bonds.
"Manchester United today announced that it will be seeking to raise approximately £500 million aggregate principal amount from an offering of senior secured notes due 2017,'' said a United statement. "The notes, whose proceeds will be used to refinance existing debt secured against the club, will be issued by MU Finance plc.''
But the Glazers will not be selling the club and intend to use the money saved from restructuring the debt to ensure significant money is available to Sir Alex Ferguson to spend in the transfer market.
ESPN Soccernet has been assured that the bond is not a prelude to a sale or in any way a manouvre to attract a buyer. The bond should attract institutions and City investors which will enable the club to repay at a stable and affordable rate of interest.
However, ESPNsoccernet has been informed by City experts, that this is by no means an attempt to find a new owner, or to sell the club, that is definitely not on the agenda.
Despite the world being in recession, Manchester United are the most profitable club in the world at a time when clubs like Manchester City and Chelsea are recording massive losses. But fans remain concerned about the bottom line without the Ronaldo cash.
The Glazers message is clear - none of the clubs figures, nor their desire to reshape their loans of £509 million impacts on manager Sir Alex Fergusons ability to reinvest in the transfer market So far Sir Alex has stated it is because he cannot find the players of the right quality and price, rather than it being a question of not having the money.
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seriously.. all these clubs should just employ mi as their CFO.. knn... i sure clean house till the make money.... really dunno what the fuck their accountant is doing...
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Manchester United (and the Glazers) have an exit option should their fortunes turn - Relist in London to become a PLC again
Glazer could easily sell off half his stake and issue new shares to institutional and retail shareholders through an IPO to repay the bulk of the debt. This will leave Glazer with a large share of the debt-free pie while not even contributing a cent. This is akin to borrowing 500 mil to buy a 700 mil company and then relisting it on a stock exchange while raising 300 mil to repay majority of the debt and selling another 50% of your stake in order to pay down your own personal debts. In the end, you have barely used a single cent but you are now in control of a large public company. Very risky but very lucrative if done correctly.
The bond issue is merely Stage 1 of the endgame.
1) Borrow 500 mil to buy Manchester United and taking it private.
2) Use United operating income to pay off the interest
3) Refinance United's debt into a single package - a senior note
4) Use United operating income to pay off the interest
5) Launch a United IPO on the Stock Exchange - a) Sale of new shares to pay off the debt principal and b) sale of 50% of Glazer's stake to pay up his debts and realizing some profit.
6) Glazer will remain one of the largest shareholder (after the dilution) of virtually debt-free United
7) New manager will have funds to buy new players - guaranteeing trophies
8) Share price rise - Glazer happy, shareholders happy, fans happy -
I personally think this bond issue is a genius plan... I never thought a football club could actually sell bonds. But I guess if you are big enough, maybe it can be achieved. Not sure if anyone have ever done it before but I belief others will copy in future if it works out...
I mean, the situation is such that they have to come up with new ways to reduced the growing interest so this might actually be a good plan. 7 yrs maturity and interest at fix 9%... will be more stable and affordable rate of interest than the current one where they have to depend on bank loans and changing interest rates from 9% to 14.25%...
I think the Glazers are actually very smart with the way they are handling the whole thing step by step... Let's face it, the Glazers are not in to earn big money at this moment, they have not even mentioned or try to sell any part of it since purchasing the club unlike Pool's George Gillett who scout the world for a buyer hoping to make a quick profit...
They look like they have ideas to settle the debts situation year by year... But in 10 yrs time or maybe 8, if everything turns out well... or just per normal... They could end up owning a debt free club that could worth almost twice their $1 billion now.
And it all started from the $200 over million investment...
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Personally I have never supported the Glazer purchase of united, as they have indebted the club with so much of money, when they spent 200m of their own money and borrow some 500m from banks and mutual funds. the interest repayment alone every year is 40m-50m (pls correct me if the figure is wrong), which will cut and reduce the profitability of the club and turn it into an operating loss. is this sustainable? I dun think so, that explains why the club need to raise funds via issuance of debt. the interest repayment is 9-10% per annum, and the repayment will start in 5-10 years time.
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If we are realistic, before the Glazers bought them, they were a PLC and the club was also in a mess. The shareholders were not serious football fans either. They only used it to deal with Sir Alex on their horse racing dispute and caused a lot of trouble.
Being a PLC helped them a lot in the earlier years when they manage to generate more income while the other clubs weren't doing so. But as the years went on, things changed.
Being a PLC has its bad points too... There were a few things they couldn't do or must do... which put them in a disadvantage position.
And its not as though being a PLC they could use all the profits they made to buy players... They still need to pay their shareholders. Whatever profits they made, they still have to pay huge dividend... Its like no difference from servicing their interest I guess in a way. Only big difference is they are not in debts on the accounts books... But still must pay someone right...
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how I wish Bill Gates/Buffet or even some Saudi/Brunei Kings have a rush of blood and buy MU...