IMF, Brian Cowen, Budget cuts and General Elections... these are all issues which have dominated the Irish and global news over the past week or so. With this in mind would you spare me a minute as I return to more pressing matters, they are of course the financial state of Manchester United...
Last time I posted my blog, United were in the midst of relinguishing their hold on Wayne Rooney and seemingly cashing in on their prized asset in a bid to pay some of their mounting debt. Only one day after the blog was posted, Wayne Rooney had signed a new deal worth £180,000 a week. So what does this mean?? Are the Glazers about to loosen their purse strings and spend some cash on players? Or is this an investment and Rooney will meerly be sold in the summer for an exorbitant amount of cash??
On novermber 19th, a number of weeks after the Rooney debacle,the Glazer family announced they are to pay off £243.7 million Payment in Kind (PIK) debt, which is owed by Manchester United’s parent company Red Football Joint Venture (RFJV). The move, which reportedly will involve “money from outside the club”, will eliminate the PIK debt that carries a punitive interest rate of 16.25 per cent annually. PIK loans in leveraged buy-outs typically carry a substantially higher interest and fee burden than senior loans.So great news for all fans of Manchester United one may suspect...
The fallout of this move by the Glazers has almost left more unanswered questions than before. As the Glazers continue to refuse to address the public or the fans it is extremely difficult to retrieve these unanswered questions, the main one being... Where is the money coming from?? Bloomberg reported that the money for PIK repayment will not come from club sources, although no further details have emerged about how the family intends to afford the £243.7 million redemption costs. A Glazer family spokesperson did tell the BBC that the family has not sold any equity in the club to repay the debt, leaving refinancing by far the most likely option given the perilous state of the Americans’ US business empire.
So although this looks encouraging at first, it could likely mean that the Glazers have refinanced once again and may have plunged United into further debt.In fact it is entirely possible that The Glazers are using United owned assets as collateral. Old Trafford could still be sold and and United’s training base at Carrington transfered to a Glazer holding company under the terms of the January bond. Sale- and lease-back arrangements could net the family more than £400 million but forever burden the club with punitive rental costs. Nothing in today’s PIK refinancing suggests an asset-lock is – or ever will be – in place.
So, much mystery remains over the Americans ownership of Manchester United. Much like the Irish peoples relationship with our fair state, the loyal Manchester United supporters remain in the dark over the financial future of the club. On the bright side at least it will be Old Trafford being repossessed and not their homes, although for many this is just as terrifying a thought.
http://www.telegraph.co.uk/sport/football/teams/manchester-united/8138910/Glazers-repayment-of-220m-payment-in-kind-loans-at-Manchester-United-leaves-more-questions-than-answers.html
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