Manchester United’s owners the Glazer family may struggle to sell their £500 million bond to the City, with many investors steering clear of the self-proclaimed “high risk” notes issue. The bond issue, which will yield investors an assumed 9.25 per cent annual return before maturing in 2017, is aimed at refinancing some of United’s £700 million debt.
“Most traditional high-yield investors won’t touch this,” Jonathan Moore, a high-yield analyst at Evolution Securities told Bloomberg yesterday.
“It’s unrated, so some investors can’t take it, and there’s a very busy new-issue calendar so there are plenty of alternatives. Most people just won’t focus on something with far too much leverage, limited free cash flow and lumpy earnings.”
Indeed, a general air of skepticism about the notes issue pervades the City, with Virgin Media also selling a similar sized bond. Although United’s financial planning, contained in a 322 page document issued to potential investors, suggests the club is selling the bonds at just over nine per cent interest, the market may push the price up to 9.5 per cent.
United may need to find £70 million per season in debt repayments and interest, with 9.5 per cent equating to roughly £45 million in interest repayments on the bond alone per year. Additionally the Glazer family is taking £70 million in club cash immediately to repay a portion of the Payment in Kind (PIK) loans they are responsible for.
“This will be a difficult sale,” said Tatjana Greil Castro of asset management firm Muzinich & Co told Bloomberg.
“My first reaction is that I’m skeptical. It’s a sector thing, all based on how well they’re doing on the pitch and other things they can’t fully control.”
14 thoughts on “City insiders: don’t touch Glazers’ bond”
Good GOD man”you ask the opinion or actually publish the opinion of Jonathan Moore !! he is a nobody in the world of banking. This does you no credit, ask JP Morgan, Credit Suisse, Goldmans or some other notable bank and you will find that there is a huge appetite for the issue and it will sell. Why are you knocking your own club and publishing nonsense?
It’s a legitimate quote from Bloomberg and I think their editorial standards are pretty high. Quite why you think this is “knocking my own club” I’m not sure. JP Morgan are underwriting it, so I would hope they’ll have some kind of appetite. After all they’ll now be getting 9.5% now rather than 5% LIBOR they have been.
Also you have the same IP address as Lloyd, our friendly Glazer PR who likes to post on these boards. Coincidence?
No I am not Lloyd and from what I have seen he can stand up for himself, maybe he too is on Be Broadband? While you seem to enjoy knocking the clubs owners and anyone who supports them would it not be better to support the club and owners? Would the club not be better off if you showed some support but of course it is easier to speak ill of the owners because you know they will not respond to stupidity. OK so drop JP Morgan how about some other bank with some credibility, Credit Suisse, Goldmans. OF course you will not ask them, firstly they will back the issue and secondly they will tell you so. Something you will not like because it supports the clubs action.
If any of the ‘leading’ banks that you mention come out and publicly back the bond and say its a wonderful idea I’m happy to quote them. But that’s really not the point. It is legitimate for a Manchester United fans’ website to criticise the owners for indebting the club to the tune of 700m.
I’d like to know what positives you see in this. To put it another way – what have the Glazers ever done for us?
You have a socialist outlook by asking “what have the Glazers ever done for us?” they do not have to do anything for us, they owe us nothing. They own the club and as far as I can see have increased revenues substantially. As a public company the club was never going to be left alone with no debt and pathetic revenues it was always going to be a prime target. If anyone should be criticized it should be Edwards, he is the one who took millions out of the club, it was plain stupid to float a club raise no money from the market to fund it leave it without debt and massive potential for revenues. Under the Glazers we have won quite a bit including the CL and runner up in the CL. So its not all bad but you just want hand outs, buy big names, spend on bigger and better players and stadiums but you do not want to pay for it.
What a very odd argument. Who’s asking for handouts? United fans built this club by paying money at the turnstiles, buying shirts and other merchandise and since 1992 paying for Sky Sports subscriptions. In its 132-year history, the club has never had a rich owner who invested his own money in funding the team.
Let’s be really clear the Glazers have invested not a penny of their own money in United’s infrastructure or playing staff. So to credit them with any success on the pitch is nonsense, which even the Glazers’ own PR stooge would stop short of. The person to thank for that is Sir Alex Ferguson.
The club was run very profitably and able to spend healthily in the transfer market before the family took over, while keeping ticket prices reasonable. Four years of the Glazers and the club’s in massive debt, transfer spending can only be from borrowed money and ticket prices have almost doubled.
You talk about revenues so let’s talk about where that’s come from. By far the largest increase is in media rights: the new Sky contract and Champions League money. The first is through collective bargaining, the second based on two finals in two years. If god forbid United is knocked out by Milan we’ll see a drop in revenues next year. The second largest increase in revenues has been in matchday – a direct result of the massive increase in ticket prices. Third is commercial – which we can attribute to the Glazers. That’s a 13m increase over four years. I’m thinking 700m debt for a 13m increase in commercial turnover isn’t a great deal for the club.
So I’ll ask again. What have the Glazers ever done for us?
Same IP address, same a**hole. Hats off Ed for bothering to converse with the tool.
Robert, How well do you know Jonathan Moore then to make that conclusion? Do you work in the high yield bond market?
David P actually I know the firm he works for quite well. I would say better than most if not all on this site. Ed you never jumped on this and put it up , wonder why maybe because it says the bond issue is good. http://www.citywire.co.uk/personal/-/news/money-property-and-tax/content.aspx?ID=376647&Page=1
I read that – didn’t seem like a ‘news’ story. There’s nothing new in there. “It was an interesting presentation and not a bad business but the yield price is not right, especially when a lot of other companies are coming to the market offering much better value.” – this is being said time and again so we’ll see when the price is finally set next week. United may well end up paying a yield of 9.5 or 10% rather than 8%. That’s millions of pounds each year.
You’re not the only one who knows the City, difference is you’re struggling to articulate any kind of coherent argument.
I do not need an argument. The bond will get away and prove you wrong but that’s not new.
And here’s another one Robert, from Fred Done one of the best known local businessmen. http://www.crainsmanchesterbusiness.co.uk/article/20100115/FREE/100119899/1012
“As an investment, I would not touch it with a barge pole.”
In any case the bond will be subscribed up to £500m because in context it’s a tiny fraction of the £45 billion new bond market this year but United will have to raise the yield to do it, possibly up to 10%. That’s going to cost millions more – possibly up to £50 million a year in interest. Plus the interest on the remaining PIK loans, and £100 million of principal debt left, means United’s total interest outlay won’t be much less than the £70 million it is now. That’s without paying down debt which the Glazers have no intention of doing before they asset strip the club and f*ck off between now and maturity of the bond.
£720+ million debt right now. £300 million drained out of the club in interest and ‘payments’ to the mercenary Glazers in their 4 1/2 years in charge. Ticket prices doubled. Net transfer spending negative.
“The material theft of a Manchester institution,” Andy Walsh called it and he was right.
I’ll ask again Robert, for a final time, what have the Glazers ever done for us?
Robert, I am actually a client of his firm as well and he has a decent reputation. He’s a former Morgan Stanley analyst of many years and speaks to a lot of buy side funds like mine – we find him very credible. The point he was making as I read his actual note to clients (which I think was overblown by the press) is that the deal doesn’t look great value relative to other high yield bond deals at the moment and will struggle to get support from such investors. I’ve no doubt the deal will get done (at the right price) because they are marketing it globally so there will be funds in Asia and US, as well as some here, who will buy it. It’s “only” £500mm at the end of the day. Virgin Media raised £1.5bn last week with ease.