Scum confirm plans for £500m bond issue

[Jürgen4PM]

Man Utd confirm plans for £500m bond issue
By Roger Blitz and Anousha Sakoui

Published: January 11 2010 12:22 | Last updated: January 11 2010 12:22

Manchester United on Monday confirmed plans for a bond issue to refinance the football club’s debts, saying it was looking to raise £500m from a senior secured notes offering.

It also revealed it was entering into a new revolving credit facility to allow it to borrow an additional £75m, to be used for working capital and, probably, to help the club to continue buying players.

EDITOR’S CHOICE
Europe braced for boom in junk bonds - Jan-10Lombard: Fair value in football - Jan-05Man Utd eyes bond issue to refinance its debts - Jan-03Top-tier football’s bubble shows signs of bursting - Jan-01Man City owner in £305m debt-for-equity swap - Jan-06The English Premier League champions, owned by US sports franchise owner Malcolm Glazer and his family, said in a brief statement the notes would be due in 2017, and would be issued by MU Finance.

A call option will allow the borrower to buy it back in three years. The senior secured high-yield bonds are not rated, and the proceeds will refinance the club’s senior debt and second-lien loans.

The issue is being underwritten by JP Morgan, Bank of America Merrill Lynch, Deutsche Bank, Goldman Sachs and Royal Bank of Scotland. KKR, the US-based private equity fund, is one of the managers of the deal.

Roadshows have begun in Asia, before moving to Europe and the US. The bond, which will be denominated in dollars as well as sterling, is expected to price at the end of next week.

People with knowledge of the deal said the bond would mean Manchester United was not under the same covenant restrictions as the loans, and would also be able to use up to 50 per cent of its cashflow to pay a dividend to the Glazer family, enabling them to repay a punitive payment-in-kind (Pik) loan, which carries interest of 14.25 per cent.

Manchester United’s secured bank debts total £510m, while the Pik loans – which fall on the Glazers – stand at £202m.

The bond could price with a yield of around 8.5 per cent, one of the people said.

The bond is understood to be secured on most of the club’s assets, including its Old Trafford stadium as well as the Manchester United name, a person with knowledge of the deal said. The club’s Carrington training ground is not part of the security.

The club also issued the yearly accounts for Red Football, the immediate holding company, showing the impact of the £81m sale of Cristiano Ronaldo to Real Madrid last summer.

The sale created a near-quadruple rise in player transfer profit and turned Red Football’s pre-tax loss of £21.4m in 2008 into a pre-tax profit of £48.2m.

Turnover grew from £256.2m to £278.5m, with matchday, media and commercial revenues all increasing. Operating profit before depreciation and amortisation of intangible fixed assets rose from £80.4m to £91.3m.

Red Football reduced the size of its secured bank loan from £518.7m to £509.5m, and net interest payments from £45.5m to £41.9m.

The Glazer family bought Manchester United in a £790m leveraged buy-out in 2005, and last refinanced its debts in July 2006.

 

[Rouge Penguin]

Without the sale of the Waiter, they would have made another loss last year.

They dont have another one to sell, so lets hope they keep losing money.

 

[Jürgen4PM]

Is this type of scheme something that we could consider doing?

 

[rubans]

[quote author=Rouge Penguin link=topic=38384.msg1031326#msg1031326 date=1263213734]
Without the sale of the Waiter, they would have made another loss last year.

They dont have another one to sell, so lets hope they keep losing money.
[/quote]
Pot calling the kettle black, we are in no position to laugh at them. We are in just as bad position, apart from the fact we still have out biggest saleable asset with us. But for how long if a big enough bid catches our glorius leaders eyes?

 

[manwithnoname]

[quote author=Rouge Penguin link=topic=38384.msg1031326#msg1031326 date=1263213734]
Without the sale of the Waiter, they would have made another loss last year.

They dont have another one to sell, so lets hope they keep losing money.
[/quote]

they could sell Rooney for £60m and have no decent strikers at all.

 

[Rouge Penguin]

[quote author=Brendan link=topic=38384.msg1031349#msg1031349 date=1263214641]
[quote author=Rouge Penguin link=topic=38384.msg1031326#msg1031326 date=1263213734]
Without the sale of the Waiter, they would have made another loss last year.

They dont have another one to sell, so lets hope they keep losing money.
[/quote]

they could sell Rooney for £60m and have no decent strikers at all.
[/quote]

that made me a little bit floppy.

 

[Y1]

[quote author=Rouge Penguin link=topic=38384.msg1031351#msg1031351 date=1263214774]
[quote author=Brendan link=topic=38384.msg1031349#msg1031349 date=1263214641]
[quote author=Rouge Penguin link=topic=38384.msg1031326#msg1031326 date=1263213734]
Without the sale of the Waiter, they would have made another loss last year.

They dont have another one to sell, so lets hope they keep losing money.
[/quote]

they could sell Rooney for £60m and have no decent strikers at all.
[/quote]

that made me a little bit floppy.
[/quote]

and barbetov for 10m?

 

[Halmeister]

There's just been some fella on SSN news saying about how it's inevitable that they're going to go backwards. I didn't really catch it, though, so I will have missed a few things.

As has been pointed out in this thread, though, we're in no position to laugh.

 

[SaintGeorge67]

They could sell rooney to city. Once a blue always a blue.

 

[Wizardry]

[quote author=Rafa4PM link=topic=38384.msg1031331#msg1031331 date=1263213895]
Is this type of scheme something that we could consider doing?
[/quote]


Yep - I described exactly this facility in the thread about our "Yank owners screwing us again" - a title which, not surprisingly, was based entirely on fictitios journalism. As I said in the post, however, this kind of facility is less common in non- public companies as the potential returns if converted to shares is not immediately obvious.


I still think the best approach is what we're told the owners are currently doing; looking to sell a 25% share in the club would create the kind of funding we require, opens up a new market (if done correctly) and increases the pressure to perform on each director. I can't believe that a worldwide roadshow as Purslow is supposedly carrying out won't uncover several interested parties in this economic climate.

 

[Rosco]

[quote author=rubans link=topic=38384.msg1031332#msg1031332 date=1263213905]
[quote author=Rouge Penguin link=topic=38384.msg1031326#msg1031326 date=1263213734]
Without the sale of the Waiter, they would have made another loss last year.

They dont have another one to sell, so lets hope they keep losing money.
[/quote]
Pot calling the kettle black, we are in no position to laugh at them. We are in just as bad position, apart from the fact we still have out biggest saleable asset with us. But for how long if a big enough bid catches our glorius leaders eyes?
[/quote]

Not really. We're in a similar position but the difference is they've only paid back interest on the loans, they haven't paid a penny of the capital back.

And they owe more than three times we do.

 

[Oncy]

Have they essentially agreed in principle to borrow £500 million pound to pay off a percentage of their £750 million pound debt?

Thats the big business equivalent of you paying off your Visa with your Egg card.

 

[drizzt]

[quote author=Rosco link=topic=38384.msg1031622#msg1031622 date=1263250046]
[quote author=rubans link=topic=38384.msg1031332#msg1031332 date=1263213905]
[quote author=Rouge Penguin link=topic=38384.msg1031326#msg1031326 date=1263213734]
Without the sale of the Waiter, they would have made another loss last year.

They dont have another one to sell, so lets hope they keep losing money.
[/quote]
Pot calling the kettle black, we are in no position to laugh at them. We are in just as bad position, apart from the fact we still have out biggest saleable asset with us. But for how long if a big enough bid catches our glorius leaders eyes?
[/quote]

Not really. We're in a similar position but the difference is they've only paid back interest on the loans, they haven't paid a penny of the capital back.

And they owe more than three times we do.
[/quote]

Don't forget they have close to 175m in PIK loans, where not even the interest is paid. It's rolled straight back into the principal and compounds, @ 14.25%. OUCH!

 

[rubans]

[quote author=Rosco link=topic=38384.msg1031622#msg1031622 date=1263250046]
[quote author=rubans link=topic=38384.msg1031332#msg1031332 date=1263213905]
[quote author=Rouge Penguin link=topic=38384.msg1031326#msg1031326 date=1263213734]
Without the sale of the Waiter, they would have made another loss last year.

They dont have another one to sell, so lets hope they keep losing money.
[/quote]
Pot calling the kettle black, we are in no position to laugh at them. We are in just as bad position, apart from the fact we still have out biggest saleable asset with us. But for how long if a big enough bid catches our glorius leaders eyes?
[/quote]

Not really. We're in a similar position but the difference is they've only paid back interest on the loans, they haven't paid a penny of the capital back.

And they owe more than three times we do.
[/quote]
Really?, so are they merely paying interest on the loan then?
They more owe three times but they maybe three times the business and have more assets such as an 88,000 stadium. What will happen to our debt if we ever do get our promised stadium?

 

[The Slugmonster]

[quote author=Y1 link=topic=38384.msg1031360#msg1031360 date=1263215878]
[quote author=Rouge Penguin link=topic=38384.msg1031351#msg1031351 date=1263214774]
[quote author=Brendan link=topic=38384.msg1031349#msg1031349 date=1263214641]
[quote author=Rouge Penguin link=topic=38384.msg1031326#msg1031326 date=1263213734]
Without the sale of the Waiter, they would have made another loss last year.

They dont have another one to sell, so lets hope they keep losing money.
[/quote]

they could sell Rooney for £60m and have no decent strikers at all.
[/quote]

that made me a little bit floppy.
[/quote]

and barbetov for 10m?
[/quote]

Theres surely some dopes out there that would pay 20-30 million for that lazy bulgarian twat!! Looks towards eastlands!! Or Arry would probably take him back for the sake of just doing some business in the transfer window!!

 

[rubans]

[quote author=Wizardry link=topic=38384.msg1031618#msg1031618 date=1263249572]
[quote author=Rafa4PM link=topic=38384.msg1031331#msg1031331 date=1263213895]
Is this type of scheme something that we could consider doing?
[/quote]


Yep - I described exactly this facility in the thread about our "Yank owners screwing us again" - a title which, not surprisingly, was based entirely on fictitios journalism. As I said in the post, however, this kind of facility is less common in non- public companies as the potential returns if converted to shares is not immediately obvious.


I still think the best approach is what we're told the owners are currently doing; looking to sell a 25% share in the club would create the kind of funding we require, opens up a new market (if done correctly) and increases the pressure to perform on each director. I can't believe that a worldwide roadshow as Purslow is supposedly carrying out won't uncover several interested parties in this economic climate.
[/quote]
Not sure if that is right, all they will be doing is trading one form of debt for another. I know thats how some large businesses work but this is very risky since it means if LFC really start to slip down the league then they will be unable to honor the bond guarentee I believe which is even worse. Rather if Americans just don't make things even worse.

 

[Y1]

Many unhappy returns?
In the prospectus for Manchester United’s proposed £500 million bond issue, potential investors are warned of numerous risk factors that could affect their returns. These include:

Sir Alex Ferguson’s retirement “Any successor to our manager may not be as successful as he has been. A downturn in the performance of the first team may adversely affect our ability to attract and retain such coaches and players.â€

Proposed Uefa regulations on debt “There is a risk that, in conjunction with increasing player salaries and transfer fees, the ‘financial fair-play’ initiative could limit our ability to acquire or retain top players and, therefore, materially adversely affect the performance of our first team.â€

Big spending of United’s rivals “In the Premier League, recent investment from wealthy team owners has led to teams with strong financial backing. The increase in competition could result in our first team finishing lower in the Premier League than we have in the past and jeopardising our qualification for or results in the Champions League.â€

Economic climate “Continued weak economic conditions may adversely affect our match-day and media revenues and could eventually affect our commercial and sponsorship revenues, each of which could have a material adverse effect on our business and results of operations.â€

Threat of terrorism “Our club and our players could be potential targets of terrorism when visiting countries which have a history of terrorism and civil unrest. In addition, Old Trafford is an iconic stadium and a potential target for terrorism.â€

http://www.timesonline.co.uk/tol/sport/football/premier_league/manchester_united/article6985569.ece?openComment=true

 

[Squiggles]

Threat of terrorism?

Ha, for fucks sake.

 

[Sunny]

When you think about it though football matches and stadiumswould make ideal terrorist targets.

 

[Oncy]

[quote author=Sunny link=topic=38384.msg1032312#msg1032312 date=1263379554]
When you think about it though football matches and stadiumswould make ideal terrorist targets.
[/quote]*flips phone open in pocket and dials 999*

 

[Sunny]

Hahaha. Well they would. Thousands of people in and around the game, little security surrounding stadiums.

 

[manwithnoname]

One of the main aims of terrorism is to provoke outrage, dismay and revulsion across the world.

Blowing up Old Trafford would hardly achieve that.

Not blowing it up serves their cause better

 

[Squiggles]

Easy to do, though. All you need is a lighted match and to be within breath of Ferguson.

 

[Fallon]

[quote author=Brendan link=topic=38384.msg1032534#msg1032534 date=1263392425]
One of the main aims of terrorism is to provoke outrage, dismay and revulsion across the world.

[/quote]

I thought loss of life on a mass scale usually results in that when as a result of terrorism?

Personally I think the most appealing target right now is the big brother house, last or series or not.

 

[HC]

Nah, you'd hit a train station or airport.

 

[SaintGeorge67]

I'm more impressed that andy can flip open his phone whilst its in his pocket. A timesaving method surely.

 

[the count]

'I hope we don't go the way of Portsmouth . . . '
Once a great football club, Manchester United is becoming just another business, writes Dion Fanning


Sunday January 17 2010

'My accountant says I did this at a very bad time. My stocks are down

I'm cash poor or something. I got no cash flow or I'm not liquid, something's not flowing.

They got a language all their own, those guys.'

Isaac Davis, Manhattan

Football's comfortable old maxim that no man is bigger than a club has never been strictly accurate. A club will not be great unless it finds a man who believes he is as big as it and can look it in the eye.

The great football clubs were built by men who saw themselves as indivisible from the monoliths they created brick by brick. They believed their values were the club's values, their instincts would have to be the club's sensibility and their judgements would be the only way the club was measured.

Busby, Shankly and Revie had no choice but to view themselves as the clubs they built; anything else would have been confusing and a waste of time. They had no option but to trust their instincts. No manager has any option but to trust his instincts even if it might get him fired. Not trusting them will get him fired even quicker.

If these men were not bigger than the club, it was hard to tell the difference. But football clubs like to believe they will endure so they cling to the line that their fortunes do not depend on one man. Leeds, Liverpool and Manchester United have all survived since the departures of the great men who built them, but in very different ways. Manchester United needed another man to believe he was as big as the club.

Alex Ferguson would be wrong to doubt himself now. By force of will, he has built Manchester United. For more than 20 years he has done what was best for Manchester United by doing what he thought was best for Alex Ferguson. He had to be unreasonable, dictatorial, uncompromising and arrogant or he would not have got anything done. There were times, he said, when he would like to have been the nice guy. He dropped Jim Leighton and Leighton's wife gave him the finger, but would the nice guy have slept any better?

For 20 years he has been Manchester United. His thoughts have been their thoughts, his decisions have been their decisions and if the Glazers had their way, it might not change for the next 20 years.

Privately, Alex Ferguson had expressed some doubts about Malcolm Glazer before they took over Manchester United. David Gill, his chief executive, had even more. Those on the outside were most vocal. "He is going to be much keener to boost profits, particularly as he's going to have to borrow so much to buy the club. I can only see that it's the fans who are going to lose out here in a big way," Michael Crick, Ferguson's biographer and a United fan, said at the time.

For the Glazer years, the fans have had one thing to sustain them, one man has allowed them to overlook the way the club has been run and to believe they weren't losing out: Alex Ferguson.

In the year after Malcolm Glazer and his family took over, it was hard to see Ferguson remaining in the job, not because the Glazers wanted him out, but because the supporters did. The Glazers allowed Ferguson to stay and to rebuild. Since they arrived there have been three league titles and a European Cup. The players purchased before they arrived have been the glittering stars but they allowed the squad to be reshaped as well. They also relied on Alex Ferguson's genius.

* * * * *

The world understands the language of the business world more than it did before. It has had no choice. Last week, Manchester United, the most famous club in the world, began to absorb what had happened to it when it was bought by men in the leverage business, the business that brought the world to its knees.

The Glazers' takeover of Manchester United was done in accordance with the principles of the time. United had no debt when it was a plc. The Glazers would change that. This is what they do.

Firstly, prices went up and they continue to go up. United were the only Premier League club to raise ticket prices this season. Sales of their corporate boxes are down about 16 per cent. It is no longer difficult to get a ticket for any Manchester United match. The waiting list for season tickets is shrinking.

The Glazers didn't cause the recession that has led to a drop in demand, although a million men like them did. United had been pared down before the world collapsed and they have had to keep doing so. All around the world, companies like United that had massive debts were stripping back. "The only way you can make it work is to leverage the shit out of the balance sheet," said one stockbroker.

Alex Ferguson was hailed for signing Michael Owen last summer when it seemed like a strange way to reinvest £80m from Ronaldo. There was no problem, he insisted. There was no value in the market. Unlike Rafael Benitez, who has always let it be known how little money he has been given, Ferguson wasn't going to rock the boat.

Football is a world in which the truth is neither appreciated nor acknowledged. When Partizan Belgrade suggested last year that the reason Manchester United would not be signing their teenager Adem Ljajic was because of a "financial crisis" at Old Trafford, the comments were laughed out of town. Ljajic was not signed because he wasn't good enough, sources at Old Trafford said and there may have been some truth in that. But the greater truth was that he was no longer worth the gamble. It was another revealing insight into the pinch at United.

There is nothing unusual in that during a recession, except United's insistence that it is business as normal. Those on the inside say it has been anything but normal.

Last year, the Manchester Evening News revealed that the former players who work in the corporate hospitality suites were no longer allowed watch matches in the stand at Old Trafford. United said that it was a safety issue as the former players had been blocking the gangways, but for those on the inside it was just added to the catalogue of austerity that has become normal since the Glazers arrived.

Players have been let go, teams have been disbanded and the sense that United exists to achieve glory has been replaced by a need to exist to service the debt. This is what happens when football thinks it's a business. This is what happens when football turns into bad business.

The most favourable figures suggest a net spend on transfers of £6m a year since the Glazers arrived, a level of expenditure which would only have been possible thanks to the spendthrift days of the plc when United signed Rio Ferdinand, Wayne Rooney and Cristiano Ronaldo. One of those assets has already been sold, another is not worth selling so it is Rooney who is United's most important player but, perhaps, the only asset that can ensure the club continues in profit. Ferguson says it is "utter rubbish" to suggest that Rooney would be sold to service the debt. He is not the man to ask.

Last week, United began to promote their bond issue and were obliged to outline scenarios that could affect their profits in the future. This led to a week of bad headlines and doomsday scenarios. There was also a need to face up to reality. The performances on the field have forced people to do that, to understand that there is a link between the boardroom and the pitch, that football's line that off-the-field matters don't affect the team don't make sense any more. Not when every player is an asset to be stripped.

The fact that the Glazers have taken £10m in "management and administration fees" since July 2006 doesn't help either. In December 2008, Malcolm Glazer's children each borrowed £1.66m from the club which came to another £10m.

These sums have provoked outrage but they are not United's problem now, making the money to meet their interest payments is the trouble. The sale of players -- and Rooney is the only player who would come close to the Ronaldo sale which allowed United to make a profit last year -- seems to be the simplest way.

Otherwise they may have to consider the sale of Old Trafford or, more likely, Carrington. For investors considering the merits of the bond prospectus United are presenting, that is one of the problems. "With other companies doing something similar, you would have a clearer idea of the assets they propose to sell to ensure profits, but you don't have that with United, probably for obvious reasons," said one stockbroker.

Investors may like to hear all ideas on how the club can maximise profits but the supporters of United cannot be told there is a plan to sell Rooney, Carrington or perhaps Old Trafford. United have already received almost half of their new sponsorship deal even though it doesn't begin until next season. Rooney may not be sold but Nemanja Vidic and a few others almost certainly will. The Glazers will have to find a balance too. More than anything, they need the team to be successful.

For that reason, Ferguson cannot leave. United cannot afford more uncertainty in an unsure world and a doubtful market. There are many professional investors who believe United's bond issue will succeed but there is also some scepticism. "I would like the yield to be higher for the type of company it is," a stockbroker said last week.

United, with an unclear idea of where they will make the next big profit and uncertainty over where the club will go, are not as good a prospect as a normal business. Some suspect that if the bond is to be taken up, the yield will have to be higher than its current return of just under nine per cent.

Others are more optimistic, suggesting United could easily get to the half a billion they are looking for. Those who know the club and know football are more dismissive. Fred Done is usually paying out on Manchester United winning the league right about now. He is one of the richest men in north-west England and head of Betfred, the bookmakers.

On Friday, he gave his verdict on the bond issue. "I wouldn't touch it with a barge pole. I would like to know how much equity the Glazers have put into the club. I do not think it's very much. I am seeing empty corporate boxes, I am seeing empty seats and there are tickets on open sale which you did not see a year ago. I am seeing cracks in the team. It is just debt-ridden and as a supporter, it saddens me. I hope we do not go the way of Portsmouth."

He is not the only man thinking drastically. Yesterday Manchester United fans met to consider their response. For the Manchester United Supporters' Trust, this has been their most hectic time since the Glazers arrived. Some now want radical action, a refusal to purchase season-tickets that would force the club into administration and allow the supporters to buy it.

Across England, fan ownership is the radical solution -- being suggested at Newcastle, Liverpool and Manchester United -- to the feeling that the game and their clubs have been stolen. Fan ownership is not seen as viable by professional investors who feel that fans may be enthusiastic but they are reluctant ultimately to contribute financially above paying for season tickets. A share in the club which promises nothing more but the security of the club may only appeal to a few.

But the few are growing and the dismissive talk will not bother those who point to the judgement of the same people as they allowed debt to smother the world in recent times. "It's nothing short of sacrilege for the Glazers to consider selling Carrington but particularly Old Trafford," said Sean Bones of the Supporters' Trust. "It's up to Manchester United fans to defend any attempt to break up the club like this."

One man remains the glue. Alex Ferguson has spent most of this season insisting that he could blow the Ronaldo money in a moment if he wanted to. The truth came out last week. On Friday at his press conference, Ferguson refused to talk about the finances, the most pressing issue at the club. The militant shop steward is now a company man. But he is bigger than the company Manchester United have become.

Sunday Independent

http://www.independent.ie/sport/soccer/premier-league/i-hope-we-dont-go-the-way-of-portsmouth-2017528.html