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Well said Steer!
Regardless of reported debts Man United are still in massively good financial health Assets/Brand/Renues/ etc. as a business.
Obviously the Glazers have got money tied up all over the place but if some was to put Man Utd on the market there would be a rush of buyers even possibly the owners of City who really thought they were buying United in the first place.
Glazer seem to be letting the experts AF get on with their job while they deal with the finance
Judging by the proposal which I have scanned over today it seems that the Glazers are worried people on quite a few fronts, the first being the performance of the team going forward and also SAF's replacement not being as good at winning trophies.I wouldn't touch this bond scheme because like any investment it comes with a risk and I would prefer they sell outright making them a small profit but we would be back to square one without any debt.I don't think there are too many Arabs out there looking to buy United nor any Russians so it looks like we are stuck with them at least for the next few years.
- 1 Reply to DAVID
It is not easy to ascertain the exact details of everything relevant to these discussions as most of the press are ignorant themselves or tend to mix facts with assumptions. My best guess at the truth:
The bond issue is already a success in that the banks fronting it have already committed to making the £500m (?) available at something like 9 – 9.5%. What they in turn will do is offer these to private investors for c.8.5%. If they succeed in placing all of the offer at 8.5% then the annual cost is simply 8.5% x £500m say about £42.5m. In my previous post I used 9% as a single rate applicable to Utd’s bank borrowing when in reality the debts are spread at various costs varying from 5-10%, hence the interest cost for 2009 was c.£42m. So the first thing to notice is that the bond issue will NOT make the interest payments lower. Most experts apparently predict a 9% rate.
The current borrowings are to be repaid in 5 years whereas the new bond issue will not be redeemable till 7 years later. The main purpose here is to fix the interest rate, extend the period of loan and allow for better maneuverability ie give the Glazers more freedom than they currently have. It has been stated that the current bankers have insisted that Utd make at least a £65m profit prior to interest charges - the meaning of this clause is that player investment for example, is not allowed unless that profit figure can be maintained. This again questions the statement that all the Ronaldo money was available to SAF for spending on players. There are various unconfirmed reports that the G’s will be allowed take some money out but this may be fixed by the new arrangement. Of further interest to Utd fans is that the collateral for the issue is to be virtually all that is Utd except for the Carrington training ground which the G’s hope to sell and lease back.
In close to 5 years of top level success for Utd on the field, how have the G’s fared financially? They invested around £270m of their own money & bought Utd for £830m (when market cap. was c.£660m), the initial loans being £560m. During this time they have undoubtedly put some more private money to pay off some bits of PIK loan interest. The debts now total c.£710m. If Utd on the field was now comparable to the squad of 5 years ago (a big IF!) even, finances have worsened by £150m. It doesn’t take much to see a similar amount or more being required to improve the current squad so as to maintain that status. So my estimate is that they are c.£300m down before accounting for a return on the £270m in a much worse financial climate. Admittedly the ground capacity has been increased. For the G’s t sell now they need a billion (£710m + £280m) near enough just to cover costs. The new proud owner will have to invest heavily into improving the squad, again a very hit & miss affair.
FWIW, the stuff about the worry over SAF’s retirement etc is just part of the possible downsides that any prospectus is required by law to point out. The one I would point out, at least to myself, is that the paying fans may just take more than a passing interest in these developments and decide to boycott – as Levy has done. A drastic drop in season tickets money and overall attendances over not just these issues but also on account of the poor fare being offered is one that could bring the whole house of cards down. For Utd winning was never enough, it HAD to be done in style.