(from BBC)
Manchester United's American owners are to pay off
their high interest payment-in-kind (PIK) loans, estimated to be
worth around £220m.
The loans were borrowed from three US hedge funds to help
finance the Glazer family's £790m takeover in 2005.
The BBC understands the club's joint chairman Joel Glazer has
written to the lenders and said the loan would be paid in full on
November 22.
The football club's total debts are estimated at more than
£720m.
Reduced loans
It is not yet clear how the Glazer family were able to raise the
money to pay off the PIK loans.
They are understood to have given the Citadel, Och Ziff and
Perry Capital hedge funds seven days' notice of the repayment.
The PIK loans were significantly reduced as part of a
refinancing in 2006 but since then have been accruing interest at
extremely punitive rates.
Earlier this year the rate rose to 16.25% and although the
Glazers are liable for the debt, supporters have long suspected
money from the club would eventually be used to start paying them
off.
As part of a £526m bond refinancing in January, the Glazers were
given the freedom to take up to £70m from the club's revenues to
pay down the PIKs.
By notifying the lenders they intend to pay them off in full
next Monday, the Glazers will reduce a lot of the financial
pressure on the club.
The club's parent company, Red Football Limited, is due to
publish financial results for the first quarter on Tuesday, but
those figures are not expected to include details of how the PIKs,
which sit on the accounts of Red Football Joint Venture Ltd, have
been redeemed.
Despite making a £79.6m pre tax loss for the last financial
year, mainly due to one off interest and debt charges, United
generated revenues of £278m and have over £100m of cash
reserves.
But taking money from the club at a time when many supporters
feel there should be more investment in the team will only add to
the opposition to the Glazers at Old Trafford.
If the money hasn't been taken out in that way then the Glazers
may have borrowed the money from other financial institutions at
more affordable rates to refinance the PIKs.
good news or bad?
