United owners to pay off £220 million loan
The future of the Glazer family's ownership of Manchester United is shrouded in further mystery after it was announced that a £220 million loan they owe as part of their takeover of the club will be paid off on November 22.
Speculation is mounting about where the cash to pay off the loan has come from in the light of United's increasingly tightly-geared finances. October 8 saw the club's financial figures met with dismay when a record loss of £83.6 million for the year ending June 30 was announced.
However, the awarding of a highly lucrative contract to Wayne Rooney in recent weeks looked a shift from a previously parsimonious policy of cost-cutting, and came after Rooney had demanded the club match his own ambitions in the transfer market.
The £220 million payment-in-kind (PIK) loan was taken out in August 2006 as a consolidation of the Glazer family's £790 million takeover that took place in May 2005. Now, according to a corporate filing by Red Football Joint Venture Ltd, the club's parent company, that loan will be exorcised in one payment. The source of these funds is yet to come to light though there is some speculation that new investment has been attracted to the Glazers, whose American-based business interests are said not to be in particularly rude health.
The PIK loan was initially taken out as a £138 million facility with exceptionally high interest of 14.25%, which in turn was raised to 16.25% as the club breached a debt-to-earnings ratio agreement. The loan was due to mature in 2017 when the Glazers would have owed almost £600 million though the family themselves purchased between 15% and 20% of the debt in 2008. According to Bloomberg, the money for repaying the PIK will not come from the club itself, despite a controversial January bond issue that allows the Glazers to take a one-time £70 million from the club. A refinancing via a different loan arrangement is mooted as a possible source of the £220 million.
While the Green-and-Gold protests that publicly levelled anger at the Glazer family may have lost their initial impact of early this year, suspicion of the Floridian owners remains rife among United supporters. The bond issue threw some light on the financial state of Manchester United, and was met with dismay and anger among fan activists.
A 'Red Knights' group of well-connected financiers and economists expressed interest in purchasing the club back in February but that approach coolled as it became clear the current owners had no intention of selling. A price of £1.5 billion is widely quoted as the threshold expected for a wholesale buy-out of the club.
News of the Glazers' move has not appeased the supporters groups who have been so opposed to the American owners since their controversial takeover in 2005, with Manchester United Supporters' Trust chief executive Duncan Drasdo calling for more transparency.
"Now is the time for the Glazers to finally come clean and tell the truth about what is going on at Manchester United and what their plans are," Drasdo said. "What have they got to hide? No more secrecy. No more spin. Just tell the fans the truth.''