Manchester United took their £500m bond roadshow to the City of London, meeting investors at the Grocers’ Hall, one of the numerous historic guild headquarters that lie in the shadow of the Bank of England.
It seems apt given that Manchester United was run by a family of Cheshire meat packers for 40 years before being taken over by a Floridian family who have used the club as a cash machine.
As potential investors trooped in to hear David Gill’s sales pitch on behalf of the Glazers, the bigger question on many City minds is whether the bond issue signals the beginning of the end of the family’s tenure at Old Trafford.
The primary purpose of the bond is to buy the Glazer’s both money and time.
In the short term they need cash, and lots of it, to ease the burden of the payment-in-kind loans that currently stand at £200m and will balloon by another £30m this year.
In the medium-term they need to push back repayment of the £500m of “senior debt” owed to banks, which they are currently due to start repaying in 2013.
The £500m bond, maturing in 2017, will allow them to do both. More intriguingly, it may also offer them an insight into their long-term objective: a profitable sale of the club.
To achieve that they need to find a buyer, and the bond issue gives them the perfect opportunity to meet the candidates without having to put up the ‘For Sale’ signs.
The roadshow, which began in Asia on Monday and will reach the USA next week, has allowed the Glazers to bring together institutional investors, hedge-funds and representatives of the super-rich on three continents.
At the moment all that they are being offered is a bond, but down the line there may be much more on the table. At the very least the Glazers and their advisors can establish a short-list of serious potential buyers who will effectively already have a stake in the club having taken a slice of the bond.
All of which raises the question, what would United cost? Given that the Glazers put in £250m of their own money when they bought the club in 2005, and have since borrowed £700m, then £1 billion would seem a likely starting price.
Even that might be low. The Glazer’s believe that they have added great value to the club by driving up revenues and might well consider £50m a skinny profit on their investment. So try £1.1billion and be prepared to get to £1.2billion very quickly.
At that price in the current climate the shortlist of buyers will be very short indeed.