LONDON: Manchester United’s total debt has risen to £716.5 million (US$1.17 billion) and could rise even more over the next year, according to club accounts released Wednesday.
The Premier League champions said last week that they had reduced their bank debt to £509 million (US$829 million), but the overall increase in the debts of the Glazer-family owned Red Football Joint Venture Ltd. rose £17 million largely because of the punitive interest rates on its so-called payment-in-kind loan.
That debt for the year ending June 30, 2009, increased £27 million to £202 million (US$329 million).
And the interest rate on the PIK loan, which was initially for £138 million (US$258 million) in August 2006, is scheduled to rise from an already high 14.25 percent to 16.25 percent in August.
United hopes to refinance its debt and reduce interest payments through a £500 million (US$815 million) bond sale it announced last week.
The overall debt was not contained in the prospectus United issued for the bond sale.
United paid more than £68 million (US$110.7 million) in interest last year, almost as much as the world-record £80 million (US$131.7 million) it received from Real Madrid in July for Cristiano Ronaldo.
Manager Alex Ferguson has repeatedly said that the debt of the club’s holding company, which results from Malcolm Glazer’s 2005 takeover, does not impinge upon his running of the team or budget to sign new players.
Red Football said in the report filed to Companies House, the government agency with which businesses must be registered, that one of the four key elements to increasing income was “maintaining playing success.”
But United has spent less than a quarter of the fee it got for Ronaldo, bringing in Ecuador international Antonio Valencia, French prospect Gabriel Obertan and free transfer Michael Owen.
The sale of Ronaldo meant that United made an overall profit of £6.4 million (US$10.4 million), compared to a £42.7 million (US$59.3 million) loss 12 months earlier. - AP