The Glazer family are set to send a clear signal to Manchester United’s suitors by initialising a second round of refinancing. According to reports, talks have taken place between the family and their advisors about the possibility of getting rid of the controversial payment in kind loans (PIK). This will be the first time the Glazers have publicly acknowledged concern for the loans that carry an eye-watering 14.25% interest rate and could end up costing £588m by the time they are paid back in 2017.
The PIK loans were taken out alongside more traditional bank loans by the Glazer’s to finance their 2005 takeover of the club and represent £202m of the clubs total £717m debt. The remaining £507m is owed to those who invested in the clubs recent bond issue. The news comes after Keith Harris – the man fronting the wealthy consortium of United fans dubbed the Red Knights – talked up their chances of securing a takeover. In an interview with the News of The World he explained why he thinks the Glazers will have to sell: “They have to service the debt and that costs £43m per year. They need the profits to pay the interest, to deal with reinvestment in the squad and if they think that all those things can’t be assured from revenue then they must be scratching their heads thinking ‘How are we going to handle this?”
He also expressed his concern that the financial pressures on the club, and the current economic climate making it difficult to borrow money will lead to more high profile player departures in the future: “You put all those into the mix and it might not be this season, but let’s say the Glazers have to meet an interest bill and they haven’t got the cash flow through the business, then there’s only one asset they can sell and that’s amongst the players.” It has been reported the Knights were already considering buying the PIK loans in a bid to gain leverage over the American owners by effectively becoming one of their main creditors. The option of buying up a proportion of the recently issued bonds is also being discussed.
The Glazers determination to retain control of the club will be a blow to the increasingly vocal section of Manchester supporters desperate to see them sell. The clubs’ annual report showed that the company owned by the family, Red Football Joint Venture Ltd paid £68.5m in interest in 2009, returning a profit of £6.4m, an improvement on a £47m loss the previous year. The improved results did little to cheer the green and gold clad masses at Old Trafford, with the surplus almost entirely attributable to the £80m sale of star player Cristiano Ronaldo. The disappointment of failing to secure a permanent deal for Carlos Tevez, who has flourished at bitter rivals Manchester City, and the failure to buy a world-class replacement for Ronaldo in the two windows since his departure has fuelled an ever growing sense of dissatisfaction surrounding the Club.
Membership of the Manchester United Supporters Trust (MUST) has swelled to over 140 000 in recent months and is fully behind the Red Knight party. Duncan Drasdo, the group’s chief executive was invited to a meeting with the Knights recently in a move that will do much to further their image as a consortium with the fans best interests at heart. Despite this the owners have remained steadfast, saying in a recent statement that: “Manchester United is not for sale, and its business as usual.” To achieve their goal the Knights will have to not only break the Glazers resolve but also ensure the interests of potentially 40 ‘top tier’ investors, who will put a reported £10m each into the club are met. Momentum may be building by the Knights still have a long way to go on their quest to conquer Old Trafford.