Hedge funds’ control of Man U draws closer
When Malcolm Glazer bought UK Premiership football club Manchester United in May, alarm bells rang. The £790.3 million ($1.4 billion) deal was partly funded by a high-cost loan of £275 million from three US hedge funds, and subject to strict ebitda targets over the first two years.
debate a debt
conversion at Manchester United
For the year to July 2006, the Manchester United Group has to make 85% of £57.1 million, and 85% of £89.1 million the year after, or the hedge funds will have the right to appoint 25% of the board – a move that could involve hedge funds dictating a new manager, or even a sale of the Old Trafford stadium in order to maintain debt repayment schedules.
Such targets seemed likely to be struggle enough for Glazer, but recent events at the club have further exacerbated Manchester United’s woes. First, shirt sponsor Vodafone terminated its £9 million a year contract two years early at the end of November. Second, in December the club failed to make it into the knockout stages of Europe’s most lucrative club competition for the first time in a decade. Man U’s exit from the Champions League is estimated to have knocked £3 million off full-year profits, not to speak of the further £15 million it would have won had it gone on to win.
According to a source close to the club, Manchester United has been desperately touting for sponsorship replacements but is unable to find a company prepared to match the £15 million to £20 million price tag demanded by the Glazers.