Thursday 23 February 2017

Manchester United owners take £23m out of club

Paul Kelso

Keep it in the family: Manchester United's Joel, Avram and Bryan Glazer Photo: Getty Images
Keep it in the family: Manchester United's Joel, Avram and Bryan Glazer Photo: Getty Images

The Glazer family and companies they control have taken £23m in personal loans and consultancy fees out of Manchester United since they took over in 2006, and could receive a further £42m over the next seven years.

Documents circulated to potential investors on Monday reveal that family members have effectively used United as a bank, borrowing £10m from the club at favourable rates since 2006.



Companies related to the family and their trusts have also charged United £13m in consultancy, management and administration fees in the same period, and could be paid a further £42m over the seven-year term of a bond issue announced on Monday.

The disclosures, which will further outrage supporters opposed to the Glazers’ role at the club, come in the prospectus for the £500m bond issue officially launched in an attempt to refinance the club’s towering £700m debts.

The document reveals that in November 2008 Manchester United Limited lent its directors the aggregate sum of £10m at an interest rate of 5.5pc rising to 7.5pc, significantly cheaper than commercial rates. The loans were made to Avram, Joel, Bryan, Edward and Kevin Glazer, and Darcie Glazer Kassewitz, are members of the Glazer family.

Companies directly affiliated to the Glazers and their family trusts have also taken substantial fees consultancy fees from the club in the last three years. The prospectus discloses that SLP Partners, a consultancy firm related to the family and family trusts, received a fee of £2.9m last year.

Manchester United Limited has also paid “affiliates” of the Glazers and the family trusts an aggregate of £10m in “memorandum, management and administration fees” since 2006, the prospectus reveals. Unnamed companies controlled by the Glazers could also be paid up to £6m-a-year for the seven-year term of the bond for “administration and management” services, the prospectus states.

The Glazers have been fiercely criticised for loading United with debts of £700m at a cost of more than £260m in interest since their 2006 takeover, and the revelation that they have borrowed personally from the club as well as profiting through consultancy companies will deepen disquiet.

Supporter groups have already reacted angrily to confirmation of the bond issue, which signals a significant switch in the family’s strategy for dealing with the club’s debt. The prospectus, in which the club is obliged to reveal a complete picture of its finances, contains a number of other insights into the state of the club under the Glazers.

These include: United securing an increased credit facility, up from £50m to £75m, to be used for working capital and player acquisition; taking £37m from shirt sponsor AON upfront in the first year of a four-year £80m deal; facing investigation by Her Majesty’s Revenue and Customs over tax payments worth up to £5.3m in relation to players’ image rights, and the matter may go to court; losing £35m through misguided interest-rate hedging positions. The disclosures came as United attempted to tempt investors by revealing improved financial results for 2009. The £80m sale of Ronaldo to Real Madrid enabled the club’s holding company, Red Football Limited, to record a pre-tax profit of £48.2m in contrast to a £21.4m loss in 2008.

The bond issue will be used to pay off the club’s “senior loans” to banks, which stand at £509m and cost the club £41.9m in interest last year. Crucially, it should allow the family to focus on repaying the more expensive 'Payment-in-Kind’ loans from hedge funds, which stand at £200m.

Under the current structure the banks are understood to have first call on any capital repayments, meaning the Glazer’s are unable to reduce the PIK loans. If the bond issue is successful they will face no such restrictions. The bond issue allows for £70m to be used to pay off PIK loans immediately.

The PIK interest is not paid off each year but is “rolled-up”, causing the loans to grow from £138m in 2006 to £202m this year.

By the time they are due to be repaid in 2017 they will have risen to £589m.

The bond is expected to offer investors a return of around 8.5pc.

Telegraph.co.uk

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