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Man Utd loan deal stays on the bench

Manchester United has been forced to put a proposed £660m refinancing deal on ice, after falling victim to the growing turmoil in global credit markets.

The decision to postpone the Glazers' latest refinancing plan was confirmed by Man Utd's chief executive David Gill

The Glazer family, the American leisure tycoons who bought the club two years ago, had been talking to a number of banks about a new finance package, including JP Morgan, Royal Bank of Scotland and Deutsche Bank.

The move could have allowed the club to buy out the remaining tranche of high-interest loans owed to US hedge funds. The high level of debt and the high interest costs involved in the deal provoked criticism from the club's fans at the time of the original takeover.

But the soaring cost of debt in the capital markets has derailed the club's plans, adding Man Utd's name to a long list of companies that have been forced to rethink their financing plans.

KKR, the private equity giant, is this weekend locked in talks with banks on new terms for the £9bn debt package required to back its take-over of Alliance Boots. The debt package is expected to cost KKR £250m more than had previously been expected.

In the past month there have been 28 major corporate bond or loan deals pulled, worth $17bn (£8.3bn), according to research by Barings Asset Management. There were no major debt deals pulled in the year to the end of June.

advertisementSenior investment bankers believe the backlog of unsold debt building up in the world's major banks now totals £100bn.

The decision to temporarily withdraw the Glazers' latest refinancing plan was confirmed last night by David Gill, Manchester United's chief executive, who was in Macau for the latest leg of the club's pre-season tour of Asia.

Gill said the benign state of the debt markets until recent weeks had presented an opportunity to examine financing options.

"The last refinancing in August 2006 put in place a long-term structure and we have been looking at both refinancing the existing debt as well as a securitisation of [match day] revenues," he told The Sunday Telegraph. "It's correct that the debt markets have become choppier recently, so we are not going through with either of those options right now."

About £270m of the take-over financing came through expensive "payment-in-kind" (Pik) loan notes. Half of these notes were bought out as part of last year's refinancing.

According to banking sources, a full refinancing of Man Utd's existing debt was intended until two weeks ago, which would have allowed the club to cut its interest payments. It is understood that market conditions led the club to look instead at buying out the remaining £135m of Pik notes - the most costly part of the finance package. Now all refinancing plans appear to have been deferred.

A spokesman for the Glazer family insisted that there had never been a firm decision taken on whether or not to proceed with a refinancing.

He added: "Several financial institutions continue to have an informal mandate to explore various options. However, no decisions have been taken at this point. In the meantime the club is enjoying very strong performance growth."

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How come the "Man On The Street" could see this as bad but no-one else could?

Aston Villa, Manchester united, Liverpool, Newcastle, Man City and others have all been bought this way. What's the money on the top of the premiership looking like this in 10 years


Acrington Stanley


York City

Spurs (always 5th)

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