Manchester United's first bond issue, launched barely a fortnight ago, is in danger of falling flat after analysts confirmed it has become one of the market’s worst performers this year.
Last week, the club confirmed it had raised the £500 million investment they sought to get the club’s spiralling debts under control. However, the price of United’s £250 million sterling denominated bonds has tumbled to just 93 per cent of their original face value, while the value of the $425 million of dollar-denominated bonds has fallen to 94.5 per cent of their face value. More than 50 low-risk investors, primarily insurers and pension-fund providers, stumped up the cash at a fixed annual interest rate of 9 per cent. However, if an investor had bought a £100,000 bond, he would have made a loss of £5,000.
Some analysts are claiming the bonds have been priced too highly, although the club have declined to comment.
“In a benign credit market, Manchester United is one of the worst performing bonds since the beginning of 2009,†Suki Mann, a credit strategist in London at Societe Generale, told the Financial Times.
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ANALYSIS: how profits will be spent
The club could issue more debt by increasing the size of the bond, but are reportedly not keen to return to the market at the moment.
United had initially raised the funds after club officials embarked on a week-long series of “road shows†across three continents, sporting a “warts-and-all†322-page prospectus in a desperate bid to woo investors. According to the latest accounts for the year ended June 2009, United owed £509 million to international banks.
The money raised through bonds will be used to pay back that debt, secured against the club. But while the annual interest bill will remain largely unaffected, United, crucially, will be freed of the strict financial conditions imposed by lenders that would have made life extremely difficult for the Barclays Premier League champions if they were less successful on the pitch.
United will face an annual interest bill of £45 million on the bonds, similar to the £41.2 million paid in the last financial year, but unlike the debt at present secured against the club, the bonds do not mature until 2017.
Supporters’ groups who have campaigned for the removal of the Glazers are appalled at the amount of borrowing.
Last week, the club confirmed it had raised the £500 million investment they sought to get the club’s spiralling debts under control. However, the price of United’s £250 million sterling denominated bonds has tumbled to just 93 per cent of their original face value, while the value of the $425 million of dollar-denominated bonds has fallen to 94.5 per cent of their face value. More than 50 low-risk investors, primarily insurers and pension-fund providers, stumped up the cash at a fixed annual interest rate of 9 per cent. However, if an investor had bought a £100,000 bond, he would have made a loss of £5,000.
Some analysts are claiming the bonds have been priced too highly, although the club have declined to comment.
“In a benign credit market, Manchester United is one of the worst performing bonds since the beginning of 2009,†Suki Mann, a credit strategist in London at Societe Generale, told the Financial Times.
Related Links
Glazers buy time as bond issue raises £500m
Premier League transfer window ins and outs
Second Ferdinand appeal risks Wembley place
Multimedia
ANALYSIS: how profits will be spent
The club could issue more debt by increasing the size of the bond, but are reportedly not keen to return to the market at the moment.
United had initially raised the funds after club officials embarked on a week-long series of “road shows†across three continents, sporting a “warts-and-all†322-page prospectus in a desperate bid to woo investors. According to the latest accounts for the year ended June 2009, United owed £509 million to international banks.
The money raised through bonds will be used to pay back that debt, secured against the club. But while the annual interest bill will remain largely unaffected, United, crucially, will be freed of the strict financial conditions imposed by lenders that would have made life extremely difficult for the Barclays Premier League champions if they were less successful on the pitch.
United will face an annual interest bill of £45 million on the bonds, similar to the £41.2 million paid in the last financial year, but unlike the debt at present secured against the club, the bonds do not mature until 2017.
Supporters’ groups who have campaigned for the removal of the Glazers are appalled at the amount of borrowing.
