Glazers Family, the owners of Manchester United, has announced a payment of £220 million outstanding loan by the club.
The Glazers Family takeover of Manchester United was worth £760 million, which took place in 2005. The loan was taken in 2006 by the owners in order to consolidate their payment to the previous owners.
The current owners of Manchester United are already in a lot of trouble. This announced payment on 22
November has made the owners more mysterious than before. Manchester United announced a record loss of £83.6 million for their last financial year, so no one is sure about the source of this payment. However, it is rumoured that a refinancing through
some new company is on the table, which would not solve the problems of Manchester United.
The future of Manchester United in the European competitions is getting gloomy with each passing day. The club is under a lot of financial pressure, which calls for a tight control on the finances of the club. In this scenario, it is almost impossible that
United is able to pay this huge sum in one single instalment, especially after the announcement of record losses. There is no doubt that the club is not making any profits at the moment, so the only possibility left is of refinancing and taking loan from some
other company, because the other ventures of the company are not going well either.
Already the club has further deteriorated their financial condition by giving Wayne Rooney a new deal worth much more than their previous contract. This is not great news for the financial administrators in charge of United, who are looking for ways to break
even the club’s income and expenditures. Apparently, Rooney decided to stay back after getting funds authorised for the next transfer window. In the end, this whole drama, surrounding a single player has not been fruitful for the Glazers family, who are apparently
not willing to let the player go and willing to pay big sums instead.
These are the issues that have created a cloud of mystery around this new development. The only positive that can come out of this repayment is that the new interest rate is lower than the previous one being paid by the club. The Glazers family took the
payment-in-kind loan in August of 2006 in order to generate funds to complete their takeover. The initial interest rate that United was paying on this loan was 14.25%. However, the club failed to fulfil one clause, i.e. they failed to bring the debt-to-earnings
ratio down. Due to this infringement of the clause the interest was raised to 16.25%.
The high wage bills at Manchester United did not help, as it worsened the club’s earnings in their last two financial years. The family purchased around 15% of the debt in 2008, but it did not bring the ratio in control. In January of this year, the owners
got drawings out of Manchester United worth £70 million, but it was not used to solve the financial crisis of the club.
In the end, it seems that Manchester United is going for refinancing which would bring the interest rate down and reduce the loan payments to the new financing company.
Already the fans of Manchester United are not looking happy with the reforms of the Glazers Family. The drawings issue did little to improve this relationship. Infact, it further infuriated the fans. However, the owners have shown no intention of leaving
the club despite the interest being shown by some other ventures.
Due to the financial regulations imposed by UEFA, the first priority of every club is to find ways to improve their financial health. This remains the top priority of all the big clubs of Europe, who have all been showing poor financial health. This new
development also seems to be an episode in the whole ‘break-even’ drama.
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