‘Glazer: Forever In Your Debt’ read the large banner held by Manchester United fans outside Old Trafford on Saturdays. However, the Glazers managed to sell £500m of bonds on the open markets to refinance their debts, albeit not without some difficulty and at a relatively high interest rate. The first football club to sell bonds of this kind, United embarked on a week-long series of road shows across three continents.
‘Glazer: Forever In Your Debt’ read the large banner held by Manchester United fans outside Old Trafford on Saturdays. However, the Glazers managed to sell £500m of bonds on the open markets to refinance their debts, albeit not without some difficulty and at a relatively high interest rate. The first football club to sell bonds of this kind, United embarked on a week-long series of road shows across three continents. The bond issue was oversubscribed, but United chose to sell more of its bonds in dollars than in sterling and had to offer an interest rate at the high end of the expected range to attract investors. More than 50 low-risk investors such as insurers and pension funds stumped up the cash to receive a fixed interest rate of 8.75 per cent for one tranche and 8.375 per cent for the other. The annual interest bill on the bonds will be just under £45 million. The bond issue cost £15m in fees and expenses to investment bankers and lawyers, enough to buy a player.
The bond issue should now enable the Glazers to pay off the pik notes which are held by them personally. The interest rate on these will increase to 16.25 per cent in August if a debt threshold is crossed, although this could be avoided by down payments of £20m. The Glazers will be able to use up to £70 million of the £117m of cash on United’s balance sheets to start repaying the pik notes, although fans would prefer to see that money spent on players. The pik notes were originally held by three New York hedge funds but are now thought to have been acquired by about 20 so-called ‘vulture’ funds, financial institutions with an appetite for high-risk loans.