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Glazers could take 130m from Man Utd.

Tue 19th Jan 2010 | Money & Finance

The Glazers stand to earn nearly £130m from the bond issue of Manchester United Football Club.

In an article in the Guardian (19/01/2010), it was revealed that 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.

It also states the bond's terms which notes 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.

 

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