Couldn't happen to a nicer club..............
http://www.guardian.co.uk/football/2010/jan/19/manchester-united-finance-the-glazers
Glazers could take £130m out of Manchester United next year
* David Conn and Owen Gibson
* guardian.co.uk, Tuesday 19 January 2010
The Glazer family, who own Manchester United, can take almost £130m cash
out of the club next year alone if enough lenders sign up for the bond
they have launched to borrow £500m for United.
Nestling in the small print of the 322-page bond prospectus are
provisions allowing the Glazers to take £70m out of the club's cash
reserves, which includes the money they have received from selling
players such as Cristiano Ronaldo. The document also reserves for the
Glazers the legal right to pay £25m out of the club in a dividend, and
half of what is termed "consolidated net income". This is effectively
the club's cash profits, which based on the most recent accounts would
have meant £23m being paid out last year.
The bond's terms also note that the Glazers will have the right for £6m
a year to be paid to companies they own "for administration and
management services", and a further £3m "in respect of services provided
by directors, officers or employees" of companies the Glazers use to
hold their shares in United.
That money, added to the £70m and £25m one-off payments, plus the half
of United's cash profit they can take out each year (equating to £23m
last year), add up to £127m next year alone.
That huge figure is in addition to the straightforward payment of
interest (yield) on the £500m the club will have borrowed via the bond,
which at a mooted 9%, will be £45m. That will bring the total taken out
of United to service the Glazers' borrowings, which were loaded on to
the club after the family bought the club in 2005, to £172m next year alone.
It has become increasingly clear since the prospectus was launched last
week that its principal purpose is to allow the Glazers to take cash out
of United to reduce the amounts they owe in "payments in kind" to hedge
funds, which are running at a punitive £14.25% interest. Standing at
£175m in the year to 30 June, 2008, the "payments" accrued £25m interest
in the year to 30 June, 2009, and so stand now at over £200m. That debt
is secured on the United shares the Glazer family own, and it is clear
their financial priority is to use United's giant turnover and profits
to pay down that debt before the interest "rolls up" dramatically.
A calculation of the total cash which the bond would entail being paid
out of United in dividend payments, the yield from the bond, management
fees and the possible requirement for the club to lease the Carrington
training ground, is more than £500m between next year and the maturity
of the bond in 2017.
If the bond issue is fully taken up by lenders, it will mean that since
the Glazer family bought United in May 2005 for £810m – £540m of it
borrowed from banks and hedge funds – their takeover will have already
cost United £340m in cash. That comprises £220m in bank interest plus
"early-repayment premiums" made when the borrowings were first
refinanced in August 2006. A further £120m will have been incurred in
fees paid to bankers, lawyers and other professionals – the fees for
this bond issue are noted as £15m – plus £35m incurred by the club's
interest rate hedging arrangements.
On top of that, the "payments" have incurred interest payable of around
£124m since the Glazers first borrowed the money to buy United.
A Glazer family spokesman, who also speaks for United on financial
matters, declined to comment.
Nick Towle, chair of the Manchester United Supporters' Trust, said: "It
is a shocking picture. These are immense amounts of money being leaked
out of United to pay banks, lawyers, the Glazers themselves and
interest, to pay for a takeover none of the supporters, or the United
board itself, wanted.
"United's success and profits could have been used to keep ticket prices
affordable or invest in the team but instead we see this heartbreaking
waste, just because one family ultimately hopes to make a profit from
the club."
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