Manchester United’s American owners plan to reduce the financial pressure on the club by paying off high-interest loans, estimated to be worth £220m.
The loans were taken out with three US hedge funds to help finance the Glazer family’s £790m takeover in 2005. Joel Glazer, the club’s joint chairman, has written to the lenders to inform them the loans will be paid in full on 22 November. The football club’s total debts are estimated at more than £720m. It is not yet clear how the Glazer family were able to raise the money to pay off the PIK (payment in kind) loans but significantly it is not with funds from the club. The Glazers are most likely to have borrowed money from other financial institutions at more affordable rates to refinance the PIKs. A spokesman for the Glazer family declined to comment.
The PIK loans were significantly reduced as part of a refinancing package in 2006 but since then have been accruing interest at extremely punitive rates. Earlier this year, the rate rose to 16.25%, with supporters long since suspecting that money from the club would eventually be used to start paying them off, although the Glazers are liable for the debt. As part of a £526m bond refinancing in January, the Glazers were given the freedom to take up to £70m from the club’s revenues to pay down the PIKs.
But it seems they have not taken this option.
The club’s parent company, Red Football Limited, on Tuesday published financial results for the three months to 30 September that reveal turnover increased from £57.7m to £63.3m in comparison to the same three months in 2009. The main reason for that is a rise in commercial revenue to £24.2m, up over 25%. It was also revealed that United’s gross debt had fallen from £514.7m to £509.4m. Last month, United announced a £79.6m pre tax loss for the last financial year, mainly due to one off interest and debt charges, but despite that, the club generated revenues of £278m and have more than £100m of cash reserves. United had no debts before the Glazers, who also own American Football side the Tampa Bay Buccaneers, took control in 2005.
Their ownership of United has provoked much criticism and resulted in the setting up of breakaway fans’ club, FC United of Manchester, as well as the Green and Gold protest movement.
Many fans are continuing to boycott the team’s traditional red shirts and scarves, choosing to wear green and gold, the original colours of Newton Heath, the amateur side which was founded in 1878 and went on to become Manchester United. A mass protest was held outside Old Trafford before the final game of the 2009/2010 campaign and further demonstrations have taken place this season.
United have won three consecutive Premier League titles (2007-09), one Champions League trophy (2008), one Club World Cup (2008), three Football League Cups (2006, 09 and 10) and three FA Community Shield trophies (2007, 08 and 10) in the Glazer era.