(WFI) Manchester United’s owners have started paying a new higher band of interest on a loan they took out to refinance their purchase of England’s biggest club.
The controversial Glazer family will now face a 16.25 per cent rate on their heavily leveraged purchase of the club, up two per cent on the loan they agreed in 2007 according to financial wire service, Bloomberg.
The new rate is due on £200 million ($312 million) of payment-in-kind (PIK) notes due in 2017. Financial experts consider this form of financing expedient in certain circumstances, but a short-term measure as the rate of interest can quickly become onerous.
According to Bloomberg the loan is set to reach £267million by the end of June 2011 and £310million a year later.
United CEO David Gill has claimed that the Glazers, rather than United, are liable for this portion of the club’s debt. This is in contrast to the £504 million bond sale completed by United in January.
United’s massive debt pile has instigated huge supporter protests, with fans believing that the interest payments has impaired the club’s ability to compete in the transfer market. There is also widespread unrest at increased ticket prices.
A statement on the Manchester United Supporters Trust (MUST) website said, quoting the Financial Times, that the increase in the interest rate was triggered by the Glazers’ failure to keep the amount of debt down to targets struck in 2006.
“The Glazer family have failed to repay a single penny of “their” debts in the last four years, their US businesses are struggling and the only source of cash is our football club,” said MUST.
“The bond issue allows the Glazers to take hundreds of millions of pounds out of the club to pay down the PIKs, despite David Gill telling us that they our “their responsibility”.
“The rise in the PIK interest rate this week, caused by the Glazers’ inability to hit their own targets, is another sad chapter in the story of the Glazers’ exploitation of Manchester United.”
This latest development comes on the heels of a blow for the Glazers’ NFL franchise, the Tampa Bay Buccaneers.
Poor ticket sales forced a TV black out for the Buccaneers pre-season match against Miami Dolphins. NFL rules demand a TV blackout for a 75-mile radius around a stadium if the game does not sell out 72 hours before kickoff, although occurrences of blackouts are rare. This week’s TV no-show is the first in a run of 261 preseason, regular season and postseason games for the Florida outfit.
High ticket prices – even after a price cuts earlier this year – the poor state of the local economy and years of underachievement following the Buccaneers’ 2002 Super Bowl win have been blamed on the black out. Nevertheless the Glazers’ critics have jumped on the issue as further evidence of mismanagement of their sports empire.
By INSIDER’s James Corbett.
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