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Man United's '600m bond issue to tackle debts'

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04 Jan 2010 10:21:28

Man United's '600m bond issue to tackle debts'

MANCHESTER United's owners are considering a £600m bond issue to ease the club's debts, according to reports. Sources say that club owners the Glazer family have asked two investment banks - JP Morgan and Deutsche Bank - to look at ways of reducing the club's borrowings. United was bought by the Glazers in 2005 for £790m in a deal criticised by fans for saddling the club with heavy debts. The bond issue being weighed up by the club would help it pay back some of its existing debt to banks, hedge funds and other financial institutions, which are estimated at about £700m. Annual net interest on this debt stood at £69m in 2008, which was covered by operating profits of £72m. But the main concern for the club is the £175m in loans from two hedge funds - which the Glazers are personally responsible for - which are racking up interest charges of 14.25 per cent a year, according to reports. The funds - Perry Capital and Citadel - have the right to appoint directors to United's board if the club's financial performance sinks below a certain level. Duncan Drasdo, Chief Executive of Manchester United Supporters Trust said: Why would any potential bond investor be prepared to take on this risk if the return is going to be less than the current lenders receive now and in an environment where the risk is clearly much higher than the time at which these loans were first negotiated? He added: Despite the extra income from TV and the huge ticket price rises they have been clawing back expenditure both at Manchester United as well as at the Tampa Bay Buccaneers where fan discontent is starting to mirror that at Old Trafford. Is the situation much worse than we thought? The club could even look to raise more than £600m if there is appetite among investors, according to reports. Spokesmen for United and the Glazers declined to comment yesterday, while JP Morgan and Deutsche Bank were unavailable. Receive the business newsletter every weekday direct to your inbox. Not registered? Enter your email address into the box below to sign up for an MEN passport. Email Address: div.business-newsletter{background-color: #eee;clear: right;padding: 10px;}


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