United bond leaves investors nursing losses

LONDON: Manchester United’s £500mil bond, the centrepiece of the club’s recent refinancing, has become one of the worst performing issues of the year.

The bond was fully subscribed, enabling the club to slightly reduce their debt-servicing costs and enjoy greater flexibility on future spending plans.

But investors have been left nursing paper losses which could make it hard for United to return to the bond market in the future, according to the Financial Times.

The bid price of United’s £250mil of sterling-denominated bonds has dipped to 93% of face value while those denominated in US dollars (US$425mil) were on offer for 94.5% of face value.

Bankers and analysts said the decline reflected over-pricing at the launch and the lack of a credit rating.

“In a benign credit market, Manchester United is one of the worst performing bonds since the beginning of 2009,” Suki Mann, a credit strategist at Societe Generale told the FT.

The bond issued by United has proved unpopular with fans because of controversial provisions contained in the prospectus.

These include the possibility of United’s Old Trafford Stadium and Carrington training ground being sold and then leased back to the club, as well as authorising the transfer of funds from United’s reserves to the club’s parent company, Red Football Joint Venture Ltd.

The most recent accounts for Red Football, owned by the US-based Glazer family, showed that it had debts of £719mil, including over £200mil owed to hedge funds in the form of ‘payment in kind (PIK)’ notes on which the interest rate now exceeds 16%.

United’s chief executive David Gill said at the weekend he was “100% convinced” the sale and leaseback of Old Trafford and Carrington would never happen and stressed that the Glazers, not the club, were responsible for repaying the PIK notes. — AFP

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