Manchester United suffer new blow as accounts reveal £716m debts
Manchester United paid £68.5m in interest last year as the club’s total debts passed £700 million for the first time, reaching £716m according to new figures.
Accounts for United’s holding company Red Football Joint Ventures Limited for the year to June 2009 reveal that the total debt secured against United and the Glazer family’s holding increased by £17m.
The debts accrued £68,504,000 in interest, largely paid for by the £80m sale of Cristiano Ronaldo to Real Madrid. The net effect of the interest burden on the club was to reduce Red Football Joint Venture Limited’s profit to just £6m, while the Glazers' ultimate holding company recorded a loss of £19m.
The increase in the total debt burden is explained by interest on expensive payment-in-kind loans that grow by 14.25 pc a year rather than being paid off annually. Last year the PIK loans grew by £26.3m, totalling £202,094,000 by the end of the financial year.
The majority of the debt, £509m, is owed to a consortium of banks, and cost the club £42,106,000 in interest. A further £5m relates to MUTV.
The Glazers are seeking to refinance the senior loans to the banks with a £500m bond issue launched last week. The cash and dividends they are permitted to draw from the bond will allow them to reduce the PIK loans and ultimately make the debt more manageable.
The Glazers' plans have provoked huge anger among supporters who accuse the family of milking the club to service their heavily-leverage acquisition, and diverting money from transfer funds.
The latest figures, spelling out the full scale of the debt burden loaded onto Old Trafford by the Americans, is likely to add to the unease.