Manchester United is exploring a bond issue as part of efforts to refinance its £700-million ($1.2-billion Canadian) debt, with the English Premier League champions in talks with two banks about how to reorganize its borrowings.
JPMorgan and Deutsche Bank are advising the football club on its options. It is one of a number of clubs whose debts have alarmed football authorities.
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People familiar with the situation said the options under consideration included the issue of high-yield bonds. These would be used to refinance bank debt or payment-in-kind notes - an instrument that allows borrowers to roll over cash interest payments - which helped Malcolm Glazer, the US sports franchise owner, and his family take over Man United in 2005 in a £790-million leveraged buy-out.
The club would be the latest company to take advantage of the recovery in bond markets to refinance debt. There is no suggestion the Glazers are looking to reduce their equity holding or that banks have formally been appointed to issue a bond. Man United and the banks declined to comment.
Man United has not been able to refinance its debts since July 2006, when it redeemed £275-million of payment-in-kind notes held by three hedge funds.
The club, which was on Sunday knocked out of the FA Cup by Leeds United, last reported accounts for the year ending June 30 2008. These showed Red Football Joint Venture, its immediate holding company, with borrowings of £699-million. The loans were split between £519-million of secured bank loans and £175m in payment-in-kind notes. There were £5-million in other borrowings.
The club made revenues of £257-million in the 2007-08 season, giving it a pre-tax profit of £66-million.
Copyright The Financial Times Limited 2010.