Manchester United - The End of an Era?

Bubbles wrote:http://news.bbc.co.uk/1/hi/business/8475317.stm

Manchester United raise £504m in bond issue

Manchester United have successfully raised £504m through a bond issue, which will cover most of what the club owe to international banks.

The deal means the Premier League club will be able to pay off nearly all their outstanding debts of £509m.

They will face an annual interest bill of £45m a year on the bonds.

The sale comes after figures showed debts at the club's parent firm, Red Football Joint Venture, rose to £716.5m ($1.17bn) in the year to June 2009.

Pounds and dollars

The bond was sold in two tranches, one of £250m with a coupon rate - or interest rate - to bond holders of 8.75%, and another tranche of $425m with a coupon rate of 8.375%.

However, unlike the debt at present secured against the club, the seven-year bonds will not mature until 1 February 2017.

The annual interest bill on the bonds is close to the £41.2m in interest paid in the last financial year.

But by converting the money owed to banks into a bond, it means the club will be free of the potentially strict financial conditions imposed by lenders.

On Thursday, it was confirmed that the club had signed a three-year sponsorship deal with Turkish Airlines to take over as the club's official carrier.

Manchester United's controversial bond issue has cost the Premier League champions £54 million.

As part of the £500m in funds raised by United last week, the club had to pay £15m in fees and expenses to investment bankers and lawyers, according to a report in The Sunday Times.

The club had also taken a £39m hit from the unwinding of interest rate hedging arrangements on the debt that has been refinanced by the bond, the newspaper added.

Although the Glazer family, the American leisure tycoons who bought the club in 2005, have managed to defer payment of some liability, the club is still paying £11m of it up front, the newspaper report added.

No one was immediately available for comment at Manchester United.

News that the bond issue has cost United so much will further upset fan groups after it emerged last week the club is saddled with rising debt partly due to high interest payments.

Debts at parent company Red Football Joint Ventures Limited hit £716.5m in the year to June 2009, its accounts showed. Net interest for the period was £68.5m.

On Saturday supporters demonstrated outside Old Trafford before the 4-0 Premier League victory over Hull City that saw United regain top spot in the standings. Fans were chanting "Glazers Out" even after Wayne Rooney opened the scoring.

United manager Alex Ferguson used his programme notes to appeal for unity in the face of the financial pressures facing the club and the opposition from fans to the Glazers.

"The family of Manchester United is under pressure as a result of all the issues and controversies surrounding the ownership and financial situation of our club that have been stirred up in the media," Ferguson wrote.

"Everyone is entitled to their opinion and to express their disapproval if they don't like what they see around them, just as it has always been the right of fans to let it be known if they are not happy with the way their team are playing.

"I'm not slow to express disapproval myself if there is something I don't agree with, even in the boardroom with the directors, but once I walk out of the meeting I get on with my job as manager of the team."

Ferguson recognised there was discontent among some fans but stressed the importance of maintaining focus.

"Some of our fans are clearly unhappy with the financial position but we mustn't allow the situation to become divisive," Ferguson added.

"The danger... is that we could be presented as being split, which would be harmful and inaccurate because I believe the vast majority of United fans are behind us and appreciate the importance of standing together in support of the team.

"I could see our opponents rubbing their hands with glee at the thought of watching us fall out among ourselves if we don't all think carefully about what we are doing.

"We must not lose our focus, which from where I stand is about building a strong football team that will win trophies. That's what we are about, or at least should be."