Didn't we sign Rooney in 2005?
Panorama: Man United - Into the Red, BBC One, Tuesday, 8 June
- Thread starter mickthered
- Start date
2004
2004, but I think I remember a Gill interview saying we spent 2005's budget a year earlier in order to acquire Rooney. We only moved for him when we did because Newcastle made a bid.
You're right. 31 august 2004. Feck me time flies.
No they are only irrelevant to you.
The headlines would be correct though if those are the results.
Anyway, until something new appears I'm bowing out of this thread as there is nothing being mentioned now that hasn't been discussed before.
The Glazers planned a net spend of £25m annually back in 2005- that is £25m plus what they get from selling player. In a report (c 2006) by their bankers, JPM, the net spend was to increase by 10% after 5 years to £27.5m to allow for transfer fee inflation; there was also mention of the odd 'superstar' fund of £25m. In the recent credit report, released earlier this year, the projected net-spend for the next 5 years is still £25m. There is no mention of a superstar fund. Now, a flat £25m over 10 years is significantly worse if you take in to account transfer fee inflation over that time. In any event, the actual net spend over the last 5 years was much lower than their allowance. The accumulated deficit to date is about £95m or the Ronaldo money plus a bit and by coincidence that was the amount of money in the club's bank account (£96m) as at 31 March 2010.
If the Glazers take £95m from the bank (and they are entitled to do so) then the 'Ronaldo money' supposedly reserved for the manager to spend now or in the future is gone. Gone to pay down a debt for which the club has no obligation. From the club’s perspective, it’s like flushing it down the loo.
Deferred income is not free cash. The deferred income (mainly from advanced ST bookings) feeds in to next year’s (from 1st July 2010) working capital cycle. Cash reserves in the club will build up in the first quarter and fall away as cash expenses arise. Cash reserves will build again towards the end of the year as advanced bookings for the next season come on board. The cash reserve balance will fluctuate throughout the year because of the mismatch of cash income and cash expenses.
If the Glazers take the £95m and we used all the deferred income for transfers then at some point in the year the club would have a negative cash position: The club would have to borrow money using the RCF.
You claim that cash at the start of the year (£150m)-net spend on players (£32.5m) - exceptional expenditure (£15m) = cash in bank at 31 march (£96m)
It looks good but it completely ignores the fact that during the same period we paid £33m in interest (includes a payment of £13m on swap loss).
Indeed, you could just as easily say this:
Cash at the start of the year (£150m)-interest (£33m) - exceptional expenditure (£15m) = cash in bank at 31 march (£96m)
And the numbers look just as good without any spend on players at all.
JPM assumes that over the next 4 years, the Aon deal will have a negative working capital impact of £9m each year. They were happy to present it this way and they are the bankers to the Glazers. You could just as easily have negative changes to working capital as positive ones. For instance, a decline in advanced ST renewals would have a negative impact.
Over the next 4 years, JPM have forecast (in their base rate scenario) an average EBITDA of less than £100m. If the Glazers take their maximum entitlements that gives the following (for each year):
£100m (EBITDA)
-£6m (management fees)
-£45m (interest)
-£23m (dividend)
-£9m (Aon deal)
-£5m (swap loss financing cost)
-£5m (maintenance expenditure)
=£7m (actual net-spend supported by an EBITDA of £100m)
All the above figures appear in the JPM credit report with the exception of the dividend. They have a planned player net-spend of £25m in its place. They conveniently ignored dividends for obvious reasons.
Now that £10m is a long way short of the £25m in the plans. The £10m can be boosted by selling players, but selling players doesn’t help the net spend figure. Additionally, the Glazers could use the £75m RCF to raise the net-spend but that is just more debt and more grief down the road.
If the Glazers are less anxious about taking their full entitlements, the situation improves for the club but the PIKs still have to be paid off.
The Glazers won't take out the maximum annual dividend if it leaves United short of cash for capex on players, especially when it wouldn't be necessary to do so. That is common sense. The PIK loan can for example be stabilised with the one-off dividend payments and then refinanced at cheaper rates with Carrington used as additional security.
Net cash inflow from operations has been higher than EBITDA in every year since 2005, so I therefore think it's very likely that it won't be £9m lower than EBITDA going forward.
Net cash inflow from operations has been higher than EBITDA in every year since 2005, so I therefore think it's very likely that it won't be £9m lower than EBITDA going forward.
Translation- 'you've been well and truly fecked!!'
Have you actually seen the full terms of the PIK loan?
Also, how do you expect Carrington to be worth enough as additional security given the bond constraints on it? It's not as if it can be taken by the hedge fund and used for other purposes like housing or other redevelopment.
In any event, it's difficult to see how better refinance terms could be reached; we're still in the credit crunch shadow and we have 2 higher priority debts on the books- the 500+ bond and the £75m RCF.
Perhaps, GCHQ, you could come up with a rate and justify it?
Also, the £75m RCF would enable the club to borrow (to boost player net spend) at a rate lower than the PIK. Why retain dividends costing 14+% pa, if you can borrow for player capex at a lower rate?
Own up URR - who is writing your posts? 
No, I haven't seen the full terms of the PIK loan. What's your point anyway? Are you saying that the PIK loan can't be repaid (and therefore refinanced) with a new loan? That would be a ridiculous claim if that's your point.
We know Carrington can very easily be transferred to RFJV Limited with the club paying a peppercorn rent. Now in the event of a default on a refinanced loan, Carrington would clearly be a very valuable asset to sell on/or lease to new owners of the club.
I'd justify a lower rate of interest because a) the operating performance of the club/Red Football Limited has greatly improved since 2006, b) Carrington is there as additional security, c) the restrictive bank loan convenants on the senior debt have been removed and d) the borrowing method could be different to the PIK loan which would allow for a lower interest rate.
As for your last point, you wouldn't want to rely too heavily on the RCF because that's obviously how you run into cashflow problems. I personally see there being enough available cash from the club's annual operations to a) service the bond interest, b) service the refinanced PIK loan interest and c) to allow for adequate player and maintenance capex.
They would be far more likely to try pay off the PIK debts before spending the money on players.
If its a choice between £20 million off the PIK notes and £20 million on a new striker, I can guarantee which one they will go for.
And its not the player...
His point is, if you don't know whats contained in it, then stop running about telling people what can and can't be done with the PIK notes.
Telling him to hush on a topic he isn't fully versed in is a bit fecking rich coming from you. Still, I guess he could just have made it up instead......
I've sought counsel with a financial friend - beats pushing on blindly like you and GCHQ are doing.Own up URR - who is writing your posts?
The point is that you haven't a clue what can and can't be done under the rules of the PIK. You have no idea of any penalty clauses, refinancing dates or other intracacies associated with them yet you seem happy to state things as fact.
Andersred estimates Carrington's worth with the bond attached to it, to a third party buyer, as £25m - £30m. How is that meant to securitise the PIKs?
I can say with total confidence that the terms & conditions of the PIK loan allow for it be fully refinanced with new borrowing/finance now that the restrictive bank loan convenants have been removed by the successful bond issuance.I've sought counsel with a financial friend - beats pushing on blindly like you and GCHQ are doing.
The point is that you haven't a clue what can and can't be done under the rules of the PIK. You have no idea of any penalty clauses, refinancing dates or other intracacies associated with them yet you seem happy to state things as fact.
Andersred estimates Carrington's worth with the bond attached to it, to a third party buyer, as £25m - £30m. How is that meant to securitise the PIKs?
Are you seriously suggesting that the terms & conditions of the PIK loan mean that it can never be repaid and that it will simply be converted into the full shareholding of Red Football Limited when it matures in 2017? That would be completely insane. Please tell me either your friend or yourself understands that?
This reminds of when MUST stated back in 2005 that the Glazers' business model was doomed to failure within three years but crucially without mentioning that the short-term high interest rate loan was always going to be refinanced shortly after the Glazers took control of the club.
Your point about early redemption fees is fair enough to some degree but you have to appreciate that the PIK loan was taken out four years ago and as such any penalty fee is now likely to be nominal (3% standard fee). As for refinancing dates, yes, it's certainly possible that there are only specific dates throughout the year that the loan could be repaid but clearly that doesn't prevent the Glazers from refinancing the loan.
As for Carrington, Andersred admitted himself that he really doesn't know how much it's worth. I've personally seen some estimates that it's worth £40m-£50m. I've never said that Carrington was going to fully securitise the refinanced PIK loan but clearly if we were looking at new borrowing of say £130m then it would make a considerable difference in terms of securing a lower rate of interest.
Make your mind up. In this post you're seemingly questioning whether the PIK loan can be repaid and then in your post above this one you're saying that the Glazers would prioritize repaying some of the PIK loan over signing a new player.
Fair enough - I did notice a complete change in posting style!I've sought counsel with a financial friend - beats pushing on blindly like you and GCHQ are doing.
Feel free to get your 'financial friend' to have a look at any of my views - I'm sure he will tell you it is all correct
Great posts URR/financial friend!
I take it you've seen the terms and conditions then?
Obviously PIKs have different Ts and Cs in each case, such as earliest refinancing date, refinancing fee, etc.
Are you seriously acting stupid or just doing it to try and brush aside what I wrote?
As if anyone would take out a loan that could never be repaid.
The suggestion is simply that there is no way of knowing, without seeing the terms and conditions of the PIKs what can and cannot be done. Think about mortgages - different types of mortgages aside, even fixed rate mortgages have different terms and conditions from product to product and even from person to person for certain credit histories. You don't know if there's an early refinancing penalty fee for example.
No, you really need to learn to read.
I have said that we do not know the full terms and conditions laid down in the PIKs and there is the possibility that they could use funds for other things rather than pay off hte PIK notes. YOu have said this is illegal and not possible because the PIK notes don't allow for that to happen.
Now you're saying you don't know what the terms and conditions are.
It therefore follows that if you don't know what the T+Cs are , you cant say what they do and do not allow.
He he. UnitedRoad's showing up GHQ and all.
Well then it's a pointless suggestion because even if there is an early redemption fee, it simply won't be large enough to make any notable difference to the Glazers' refinancing plans.Are you seriously acting stupid or just doing it to try and brush aside what I wrote?
As if anyone would take out a loan that could never be repaid.
The suggestion is simply that there is no way of knowing, without seeing the terms and conditions of the PIKs what can and cannot be done. Think about mortgages - different types of mortgages aside, even fixed rate mortgages have different terms and conditions from product to product and even from person to person for certain credit histories. You don't know if there's an early refinancing penalty fee for example.
It's common sense, Fred. The PIK note convenants will not allow for the dividend payments to be used for anything other than repaying that debt.
Hardly. His financial friend is just making techincal points which aren't relevant to Red Football/RFJV Limited's financials.
Its becoming a regular thing now, he really needs to save some face and give up. The vast majority of our fans know that the Glazers cannot afford to sustain our great club and if they had any thought for the fans they would put the club on the market before they do any more damage
As you said in another thread, you dont deal in speculation.
Given you dont know whats in the PIK note T+Cs you are purely speculating.
The PIK debts are worth £200 million. The value of United is £1.2 billion. if you seriously believe the Glazers would tie up their entire business value against a £200 million debt then you are more stupid than I thought.
Yes there will be provisions to prevent them taking everything out and fecking off, but as you say, once they meet a certain criteria then anything over and above that is theirs to do what they want with, and its not completely out the question that they have provisions in place where they can gain access to surplus funds without having to clear off the PIK debts first.
How would you know? When you look at the previous refinancing, they've taken yet more tens of millions of dead money out of the club. Say it's £20m. That's more money dumped out of capex on players or stadium improvements, or dumped on ticket prices to cover it.
Thing you'll find it's the bond convenant, not the PIK note convenants. Besides which, I thought consensus on here was already that the debts that could be paid off was (necessarily/intentionally?) ambigious.
I still don't see what value Carrington can have as a security. Given the PIKs are already secured against RFJV's assets, which is its total ownership off all shares in Manchester United, the owners of, erm, Carrington, then what good will it do securing the PIKs against all of Manchester United plus part of it again? That's like me taking out a mortgage on my property then seeing if I can secure the same mortgage against my gargage, which is already part of said property. It simply doesn't stack up.