Glazer tightens grip with new Man United deal


Manchester United has finalised a £660 million (€960 million) debt refinancing that cuts its annual interest bill and strengthens the Glazer family's grip on the football club.

As part of the deal Manchester United has halved to £135 million the amount it owes in the form of risky payment-in-kind (PIK) notes, sources said.

The refinancing, 14 months after Malcolm Glazer, the US financier, and his family took control after a bitter takeover battle, reflects Manchester United's improving financial prospects.

It recently signed up a new shirt sponsor and the Premier League agreed to a new broadcasting contract. The Glazer move also demonstrates the ever-improving terms on offer in the leveraged finance markets.

According to people familiar with the package, Manchester United's annual interest charge will fall to £62 million, compared with £90 million under the old deal, even though its overall borrowings will rise from £580 million to £660 million.

The drop is due to the club's decision to redeem £275 million in PIK notes held by three hedge fund investors - Perry Capital, Och-Ziff Capital Management and Citadel. The notes were accruing interest at £63 million a year and could have forced the Glazers to hand over part of their stake if they were not fully repaid.

After the refinancing Manchester United owes £135 million in the form of PIK notes. But these will accrue interest at a lower rate and have less demanding covenants. In the past year Manchester United has agreed to a four-year, £56.5 million sponsorship deal with American International Group, the insurance giant, and has expanded the capacity of its Old Trafford stadium to 76,000.

The increased revenues are expected to help boost the club's earnings before interest, tax, depreciation and amortisation by as much as 50 per cent this financial year. This does not include the benefit of the Premier League's improved broadcasting deal, which begins in the 2007-08 season. The forecasts assume the club qualifies for the Champions League and reaches the knock-out stages.

Manchester United has not yet reported its results for the year to the end of June 2006, though these are expected to show a rise in ebitda from the previous 12 months when the club earned about £43 million.

The club and the Glazer family declined to comment on the refinancing, which was arranged by JP Morgan Chase.

But a spokesman for the Glazers said the amended structure would continue to provide Sir Alex Ferguson, Manchester United's manager, with "sufficient funds in the transfer market".