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Knights ready for long siege

SPECULATORS have begun to buy bonds in Manchester United in a gamble that the Red Knights will be able to launch an offer to buy the club from the Glazer family.

The news comes after the Knights -- millionaire football fans who want to force out the Glazers -- laid the groundwork for a long battle yesterday, pleading with fans around the world to join the Manchester United Supporters' Trust to show their support for a bid.

The Knights released a statement saying that their proposals are at "an early stage" and that the group needs to find at least £1bn before it can launch an offer. However, speculation in the club's bonds indicates that the financial markets are giving some credence to the prospects of a bid. Jonathan Moore, an analyst for Evolution Securities, who advises hedge funds, pension funds and rich individuals, said yesterday that he had been contacted by speculators interested in buying bonds.

"I've talked with a number of investors in London who are trying to weigh up the possibilities of a deal," Moore said. "The key factor is whether the Glazers would be willing to sell."

Investors have deserted the club's bond issue since it was launched last month because of fears that Manchester United are not paying a high enough interest rate on their loan to make the risk of funding such a heavily indebted club worthwhile. The falling value of the bond could create an opportunity for speculators to make a quick profit if a bid by the Knights -- which is still a long shot -- ever emerges.

"The bonds have traded up to around 95p since the Red Knights thing came out, previously they were at 93p," Moore said.

Should a takeover deal happen, bondholders will be paid out at 101p for every bond they own, yielding a significant profit for those who bought in at 93p.

The club explained their first full set of financial results to bond investors yesterday. The results show that Manchester United slashed spending on players and on the Old Trafford stadium last year as it moved to deal with the £716m debt mountain.

In the first six months of 2009 the club spent £24.9m on new players, compared with £29.7m the previous year.

The biggest chunk of the 2009 money was spent on the final instalment of the transfer fee for Dimitar Berbatov, the Bulgaria forward who joined the club in 2008. The reduction in transfer activity came despite an increase in revenue from £47.9m in 2008 to £52.6m last year.


Despite the growth, the Red Knights group remains concerned about the club's debt level. It is understood that the Knights' takeover bid was largely prompted by the club's £500m bond issue that laid bare their finances.

Moore said that the biggest threat to the club remains the £200m of outstanding high-interest or PIK loans, which attract a 14.75pc interest rate.

David Gill, the Manchester United chief executive, who has had conversations with Uefa about its proposed rules to curb debt levels, said yesterday at the European Club Association press conference in Manchester that the new debt regime should not be a problem for Premiership clubs. "The Premier League is one of the wealthiest leagues in the world and there is no reason why they should not be able to comply with the rules," Gill said.

One of the Red Knights front men, Jim O'Neill, the chief economist of Goldman Sachs, is a close friend of Gill and Alex Ferguson, the United manager. He served briefly on the club's board of directors in 2004-05.