Glazer family loans saddle Manchester United with debt of £716m - 7M sport

Glazer family loans saddle Manchester United with debt of £716m



Posted Thursday, January 21, 2010 by theguardian.com

Glazer family loans saddle Manchester United with debt of £716m
Manchester United owners Bryan Glazer, left, Avi Glazer, centre, and Joel Glazer have overseen club debt of £716m.

Interest charges on loans taken out by the Glazer family and secured on their shareholding in Manchester United were this summer set to jump to an incredible rate of 16.25%, as the total debt now carried by the club stands at £716.6m.

The accounts, which provide a more complete picture than the figures released last week, show that, even allowing for a profit of £80.7m on player transfers, the parent company made a profit of £6.4m due to the need to service that debt.

The imminent hike in interest rates from 14.25%, due to take effect in August this year, would have further accelerated the rate at which the hedge fund debt – which has already swollen from £138m to £202.1m – "rolled up".

Under the terms of a £500m bond scheme, the Glazers have made provisions to channel up to £127m back into the parent company in the first year alone to start paying down that debt. The Red Football Joint Venture figures, filed at Companies House, are likely to be seized on by critics of the Glazer regime as evidence of United's reduced spending power.

Although turnover rose from £256m to £278m, only a fraction of that £22m increase was spent on players wages, which rose by just £1.8m.

The club has trumpeted its low wages to turnover ratio of 44% as a signal of its robust financial health but fans may see it as further evidence of the Glazers regime failing to invest in the team, while paying off interest on the borrowings their take­over imposed on the club .

United's financial situation was laid bare last week when the football club subsidiary published its accounts and launched a detailed prospectus for the bond issue.

In the first year the Glazers can potentially take £127m in cash out of Manchester United, including a £70m one-off transfer from the club's reserves that would have been impossible under its existing agreements with lenders but is provided for under the terms of the bond. The amount owed to US hedge funds has been accumulating at 14.25% a year since August 2006 and according to the accounts, the £138m originally borrowed had already increased by £66.6m to £202.1m by June 2009.

Added to £509.5m in bank loans secured against the club and £5m in other borrowings, the total debt carried by the club – including the loans taken out by the Glazers and secured against their shareholding – stood at £716.6m by June 2009.

The accounts do show that the Glazers have delivered on their strategy of increasing turnover, through increased ticket prices and a more aggressive commercial strategy.

Club owned media rights showed growth of 37% and sponsorship income went up 48% on the previous year, not including a new £80m shirt deal with Aon.

City sources yesterday predicted that the bond offer, secured on the stadium and other assets, was likely to be fully subscribed at an estimated yield of between 8.75% and 9%. It is likely to be clear by the end of the week whether the scheme has succeeded. The publication of the bond document has sparked a fresh wave of anti-Glazer sentiment among supporters. The Manchester United Supporters Trust, long-standing critics of the Glazer takeover, said yesterday that it had recruited thousands of new members since the bond prospectus was circulated to prospective investors last week.

Tag:


Attention: Third parties may advertise their products and/or services on our website.7M does not warrant the accuracy, adequacy or completeness of their contents.
Your dealings with such third parties are solely between you and such third parties and we shall not be liable in any way for any loss or damage of any sort incurred by you.