Manchester United's controversial £504million bond
issue has been over-subscribed. United officials, including chief
executive David Gill, have been on a whistle-stop world tour to
drum up interest in the bonds, which will run until February 1,
2017.
Plenty of doubt was cast over the prospects of controversial
American owners the Glazer family being able to sell the bonds in a
difficult market, and there were others who suggested the interest
rate would have to hit nine percent in order to achieve their
target.
In the end, £250million sold in sterling has been pinned to a
rate of 8.75%, with the remainder in dollars going for 8.375%.
It means the overall outlay will amount to just under £45million
in interest during the course of the bond, money that will come out
of group operating profits, before depreciation and amortisation of
intangible fixed assets, that are currently in excess of
£91.3million.
That figure is not touched by either the world record £80million
sale of Cristiano Ronaldo to Real Madrid, or the current interest
bill of £41.9million lodged against the club, that is actually due
to rise because of the bond.
A spokesman for the family claimed the deal brought a
"transparency" to United's finances for the next seven years.
The situation is not totally straightforward given the numerous
clauses within the prospectus issued for the bonds, which appear to
be aimed at allowing the Glazer family to take £70million out of
the cash raised by the club to set against the controversial
payment-in-kind notes, whose interest is due to rise to an
eye-bulging 16.25% next year.
However, the idea is clearly for the Glazers to reduce their
overall interest bill, rather than just United's.
And by converting the money owed to banks into a bond, it means
the club will be free of the potentially strict financial
conditions imposed by lenders.
Critics will argue that the only reason big investors are
interested is because of the interest rates and that in order to
guarantee payment, United have had to confirm they would be willing
to sell their Carrington training complex and iconic Old Trafford
stadium.
The vociferous anti-Glazer faction among the United support will
not be won over though and have launched a green and gold 'Love
United Hate Glazer' campaign ahead of Saturday's game against Hull
at Old Trafford.
Professor Simon Chadwick, head of sports business at Coventry
University, said: "On the positive side, it effectively cuts
Manchester United's owners some slack. They are released from the
strict terms and conditions that accompany bank loans.
"That could mean some leeway for making new signings, and the
annual interest payments will be fixed so there will be more
stability up to 2017.
"On the negative side they have stalled on some difficult
decisions that they will have to take in seven years' time when the
bond offer matures.
"Annual interest payments will be higher - £45million as opposed
to £41million a year.
"They need to build revenue streams to deal with this in 2017
and get rid of the debt or refinance again."