A year after borrowing big to take over Manchester United, the Glazer family has reportedly refinanced the loans the club needed to get back into the private sector.
Buying out the shareholders meant taking on debts of about £275 million, some of it in Payment In Kind (PIK) notes that are expensive to service.
The PIKs are mainly with U.S. hedge funds, including Citadel and Remy Capital, and carry rates of around 20 percent. They also give the holders the right to seize the club if the payments lapse.
The United board worked with the financiers from JP Morgan, which also lent £26.5 million (US$48.2 million) secured against assets, in a bid to cut down the cost of borrowing and raise £50 million working capital – roughly the cost of two Wayne Rooneys.
The refinancing could cut the cost of capital from 14 percent to just less than 10 percent, although the moneylenders – including JP Morgan – will still want some security.
The July 14th edition of The Daily Telegraph suggested lenders such as Royal Bank of Scotland may want to secure ticket sales.
– John Gammon