LONDON -(Dow Jones)- U.K. Premier League football club
Manchester United's planned GBP500 million high-yield bond is
already over-subscribed, part-way through investor roadshows,
thanks to interest from non-traditional investors, people familiar
with the matter said Wednesday.
The roadshows, used to drum-up investor interest, are currently
being held in the U.S., having already passed through Singapore,
Hong Kong, Edinburgh and London. They are due to finish
Thursday.
"They [Manchester United] have been out to a broad investor base
across Asia, Europe and the U.S. There is definite traction from
those investors," one of the people said.
The people said that buyers from outside the traditional
high-yield investor-base are showing interest in the bonds, with
investors from Asia, hedge funds and high net-worth individuals
identifying with Manchester United's strong brand and legacy.
"It is probably the premier sports brand in the world, so people
think there is value in that," another person familiar with the
matter said. "The company has done a very good job on the roadshow
of talking about the commercial side of things. Their presentation
is very much on the positive and on the club's growth."
However, traditional high-yield investors are showing only
limited interest in the bonds because the club does not have a
credit rating, which prevents many funds from investing.
Furthermore, the covenants included in the bond documentation are
considered too loose and the club is considered too highly
leveraged to attract the traditional high-yield funds, the people
said.
James Lee, a fixed-income analyst at Calvert Asset Management in
the U.S., said that in general, sports club-related debt doesn't
have a great history.
"For European investors, buying this bond is probably the
equivalent of an American investor investing in the National
Football League--we don't expect the teams ever to go away--but in
the U.S. we don't have that same kind of passion for soccer that
they do in Europe," he said.
Price guidance on the bond isn't due to be issued until
Thursday. Interest will run to around £43 million, payable in two
instalments. The bond is split into two tranches, with the £250
million Sterling portion paying investors 8.75 per cent.
Demand from US investors was stronger than anticipated however,
and the US dollar issue of $425 million will offer a lower rate,
8.375 per cent, indicating the strength of interest. The United
sales road-show was in the US this week, with chief-of-staff Edward
Woodward leading presentations in San Francisco and New York.
The bond issue was twice oversubscribed, a level of interest
that represents an endorsement of United’s financial position from
the unsentimental investment community. Supporters remain deeply
concerned at the use of club profits to service acquisition
debt.
The successful bond issue will allow the Glazers to pay off the
majority of the £509 million of bank debt secured against
Manchester United, and begin
reducing the £202 million “payment-in-kind” loans borrowed against
the family’s holding in Old Trafford. They were due to begin
repaying the existing bank debt in August 2013 and to have repaid
it all by 2015. The bond gives them a further two years to repay,
as well as offering them the chance to reduce the PIK debt.
Interest on the PIKs is due to increase two points to 16.25 per
cent later this year.