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Bonds: ManU scores own goal with investors

High-yield investors stayed on sidelines; Bondholders take early bath

When you are one of the world’s biggest sporting franchises you can at least be sure of investor attention when looking to raise cash. UK football club Manchester United receives more than its fair share of attention at the best of times but the 2005 buyout of the club by US-based businessman Malcolm Glazer has been the focus of comment from financiers and furious fans alike ever since.

In late January, however, Manchester United took a significant step towards refinancing the debt burden it took on with the Glazer takeover when it issued a £500 million ($809 million) seven-year (non-call three) high-yield 144a/Reg S issue. This was an audacious move by the club, which has struggled to refinance the £700 million it owes through the original senior/PIK loan facilities that were put in place for the 2005 LBO. Annual interest payments alone on the loans are £41.9 million. The £218 million PIK debt carries interest at 14.25% – due to step up to 16.5% in August – so refinancing this part of the debt stack is a priority. The Glazers are particularly keen to pay down the senior debt as the subordinated PIK tranche is secured on their own shareholding in the club.