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Man Utd Restructures It's Debts To Save On Annual £50Mn Interest Bill

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'Manchester United cuts debt costsRobin van Persie lifts the Premier League trophy Big name signing Robin van Persie help Manchester United win the Premier League this season

Manchester United has struck a new loan deal to cut the amount of interest it pays on its huge debts.

The Premier League club, which is owned by the Glazer family, has refinanced £178m of outstanding debt, a move that should save it £10m a year.

The Glazers bought Manchester United in 2005, taking out hundreds of millions of pounds' worth of loans to fund the takeover.

That has prompted concerns over the financial stability of the club.

It still has about £307m in debts, but has continued to enjoy on-field success under the Glazers, with five Premier League titles and one Champions League victory.

The club has also spent significant amounts of money on big name signings, including Robin van Persie from Arsenal last year.

Its finances continue to be bolstered by TV revenues. In the 2012-13 season, it is reported to have made more than £60m - more than any other club.

The refinancing deal has been struck with Bank of America and means that interest rates on the loans of between 8.75% and 8.38% will be cut to a variable rate.

Last year, the club paid about £50m in interest alone.

David Bick, chairman of Square1 consulting, told Radio 5 live that the deal meant Manchester United would now be paying off their debts "on more reasonable terms".

He said the club still had "a long way to go" in paying off its debts, but said the Glazers appeared to have made the most of the club's global presence, which has drawn revenue in from places such as East Asia.

"It's a massive global brand, they have extracted commercial income from all corners of the globe," he said.''

doing some basic maths and £50mn interest would mean there's more loans sat somewhere or maybe I'm missing something.didn't the glaziers take over Man U buy using the club as collateral?dread to think of the state of your average clubs balance sheet these days.

That £52m is before they floated on NYSE and also covered part of the bond issuance so we're paying part of that interest to themselves effectively. So the article is wrong, it was closer to £31m and will fall to £21m. A £10m saving. Enough to buy Ronaldo back B)

The new variable rate is LIBOR + 1.5 to 2.75%

They're currently paying only 2.78% thanks to Merv

I started a thread on it here http://www.housepricecrash.co.uk/forum/index.php?showtopic=190629

At one point the total debt of the club and the holding companies was just shy of £800m, and still nobody knows how they refinanced the £250m of PIK notes via the Nevada holding company.

In terms of the club itself though interest payments have fallen from around 80% of EBITDA in 2006 to just 12% after this refinancing.

With the increase in revenues (sponsorship, TV etc) the debt could be repaid quite quickly now if desired.

Excellent analysis of the debt profile since takeover here

http://www.housepricecrash.co.uk/forum/index.php?showtopic=190629

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t

I remember a poster on here saying how he used to see nat lofthouse getting the bus into bolton on a saturday morning before games.

My Dad used to be a great Charlton Athletic supporter in the 1930's when they were a top division team and he told me that the players used to travel back after a game on the same tram as the supporters, footballers were held in high regard, they earned about twice as much as office and factory workers.

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They'll keep loading new debts onto the club if the fans keep paying them down. They can then use that leverage for other stuff.

Wrong.

The Glazers are home and hosed, they have no need. They're considerably richer now than they were before the takeover. It could have gone very, very wrong but they pulled it off. I have to say, very begrudgingly, well done.

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interesting that this 2010 article estimates the net debt at £720mn

It went up to around £780m

If you take a look at the link I provided above it shows you how it's been reduced.

where did those PIKs go?

They were repaid from the Glazers' ultimate holding company in Nevada. Since Nevada trusts are not required to report publicly nobody knows where the money came from. Could be cash, finance or equity on other assets. If you find out let me know.

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We'll see.

They'll do whatever makes most money in the long run.

Given the incredible rise in revenues, within a couple of years they'll be swimming in cash either way, so can increase dividends, buy back the public float, reduce ticket prices, extend the stadium.

It's taken 10 years or so and c£500m cash leaving the club in that time, but as a purely business achievement one has to hand it to them.

How is Peter Kenyon's 'break even in 2010' plan going at Chelsea btw? :D (Oh yeah, Roman had to write off his loans didn't he)

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but there's clearly been a capital injection from outside the business.

It's not quite that simple due to the ownership structure, which has changed since 2005, and the financing structure which has also changed significantly several times, from the initial takeover funding to the issue of the PIK roll-up debt, through the bond issuance, the part float, the part repurchase of some of the bonds and now the upcoming repurchase of the sterling bonds funded by the BoA facility. So when you say a capital injection from outside the business, that's not into MUFC i.e. the club itself, but repaid the remaining PIKs at the holding company level. Unless you're acting for the Glazers its not possible to know what form that took. Even Gill as CEO of MUFC wouldn't necessarily be aware of that.

The PIK notes were rolling up at around 15% p.a. the bond debt 8.75% bi-annual interest payments, the floated equity hasn't paid a dividend and the BoA variable facility is starting at 2.78% so the interest charges in total have been slashed from the post-takeover days in 2005.

As to Ham's point about the Glazers taking money out of the club, I think you'd have to distinguish between payments they've taken (management fees as board members, part sale proceeds from the float etc) and the interest payments/finance charges. Obviously those have largely gone to the hedgies who held the PIKs, the bond holders, and the funding banks.

Unlike Chelsea which is funded as a hobby not a business, MUFC is not only self-funding but increasingly swimming in cash. Of course it would be naive to think that Glazers won't soon be in a position to start taking substantial dividends, but there may be several reasons why they might want to keep some level of debt/leverage at the club level.

Season ticket prices aren't being increased next season so in real terms at least, that's a cut. Probably partly in response to the change in manager I'd have thought.

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Unlike Chelsea which is funded as a hobby not a business, MUFC is not only self-funding but increasingly swimming in cash. Of course it would be naive to think that Glazers won't soon be in a position to start taking substantial dividends, but there may be several reasons why they might want to keep some level of debt/leverage at the club level.

Season ticket prices aren't being increased next season so in real terms at least, that's a cut. Probably partly in response to the change in manager I'd have thought.

Just goes to show that whatever they were paying Ferguson, he was well worth it. A rare genuine example of the much vaunted "talent" at the helm of one of our top companies.

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  • 242 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
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      • Even
      • up 2.5%
      • up 5%



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