United’s £500m bond leaves investors nursing losses

February 3, 2010

Manchester United’s 500-million-pound (800-million-dollar) bond, the centrepiece of the club’s recent refinancing, has become one of the worst performing issues of the year.

The bond was fully subscribed, enabling the club to slightly reduce its debt-servicing costs and enjoy greater flexibility on future spending plans.

But investors have been left nursing paper losses which could make it hard for United to return to the bond market in the future, according to the Financial Times.

The bid price of United’s 250 million pounds of sterling-denominated bonds has dipped to 93 percent of face value while those denominated in dollars (425 million) were on offer for 94.5 percent of face value.

Bankers and analysts said the decline reflected over-pricing at the launch and the lack of a credit rating.

“In a benign credit market, Manchester United is one of the worst performing bonds since the beginning of 2009,” Suki Mann, a credit strategist at Societe Generale told the FT.

The bond issued by United has proved unpopular with fans because of controversial provisions contained in the prospectus.

These include the possibility of United’s Old Trafford stadium and Carrington training ground being sold and then leased back to the club, as well as authorising the transfer of funds from United’s reserves to the club’s parent company, Red Football Joint Venture Ltd.

The most recent accounts for Red Football, owned by the US-based Glazer family, showed that it had debts of 719 million pounds, including over 200 million owed to hedge funds in the form of ‘payment in kind (PIK)’ notes on which the interest rate now exceeds 16 percent.

United’s chief executive David Gill said at the weekend he was “100 percent convinced” the sale and leaseback of Old Trafford and Carrington would never happen and stressed that the Glazers, not the club, were responsible for repaying the PIK notes.

Gill also insisted that the club’s finances were not preventing United boss Sir Alex Ferguson from strengthening his squad, as many fans suspect.

LONDON (AFP)

Tags: bid price, bond market, centrepiece, controversial provisions, David Gill, dollar bond, financial times, Glazer, glazer family, glazers, launch, london, Manchester, manchester united, old trafford stadium, paper losses, payment in kind, pik notes, red football, sale and leaseback, sir alex ferguson, societe generale

United chiefs allow Fergie to splash cash on players

July 23, 2009

Manchester United manager Alex Ferguson has been told he can spend up to 60 million pounds on new players.

Ferguson has been relatively quiet in the transfer market since the end of the last season despite losing Cristiano Ronaldo and Carlos Tevez.

The Scot paid 16 million pounds for Wigan’s Antonio Valencia, three million pounds for Bordeaux starlet Gabriel Obertan and landed Michael Owen on a free transfer from Newcastle before insisting he wouldn’t be making any more signings.

That angered some United fans, who claim United’s owners, the Glazer family, have weakened the club’s financial position by amassing huge debts when they bought the Premier League champions.

Glazer family spokesman Tehsin Nayani conceded that United have to fund interest payments of 43.3 million pounds a year to service the 750 million pounds loan used to buy the club.

But he insists their financial position remains healthy enough for Ferguson to spend big on players if he wants.

“We do have debt service and carry a significant amount of debt,” Nayani told the Sun. “But our interest payments are around 43.3 million pounds a year while our operating profit was 80 million pounds topped by an extra 25 million pounds from transfer profits.

“So we are talking about a net amount of about 60 million pounds. That’s cash that can be reinvested in the squad, doing up the toilets or new carpets.

“The point is there is money coming into United. One thing that is certain, because of globalisation and the growing middle classes in India and the Far East, the appeal of football is set to grow. We are part of that story.”

United have been criticised over their failure to make a big signing while neighbours rivals Manchester City have been splashing the cash with a host of expensive new arrivals.

Yet Nayani claims Ferguson is selective regarding his transfer policy and that he will not pay over-the-odds or fund excessive salaries.

“The truth is a lot more prosaic than that,” Nayani added. “The delay is because the manager has not been able to locate the players that he believes fit into the Manchester United mindset, ones that are motivated to play for United.

“You don’t want mercenaries, to pay over the odds for players not willing to give their all for the club.”

LONDON (AFP)