PROOF
Last updated : 28 October 2004 By Editor
Andrew Cave in the Torygraph has seen proof of Glazer's plan to increase the
price of tickets at Old Trafford as well as allow the manager to have an annual
transfer kitty of only £10 million. Just further proof that Glazer's plans pose nothing but trouble for the club in the long run. So while Glazer might have been put off for now he may just be looking to find ways to fund his bid in the future.
Malcolm Glazer, the American sports tycoon stalking Manchester United, is
planning to raise £500m of debt to finance a takeover that analysts say
could risk the club going into bankruptcy, according to documents seen by
The Telegraph.
Talks between United and Mr Glazer were terminated on Monday with the
Premiership club saying it was uncomfortable that the American's plans
involved loading up the debt-free club with significant borrowings.
However, Mr Glazer has built a 28pc stake in United and is still understood
to be considering his next move.
The documents detail funding plans drawn up with the help of investment
bankers at JP Morgan.
However, a spokesman for Mr Glazer said: "None of this is true. This has not
come from anyone with any insight into the Glazer camp."
According to the documents the plans involve a takeover of United at 310p a
share, valuing the company at £815m. Advisory fees would bring Mr Glazer's
total cost of the takeover to £850m.
The documents reveal that JP Morgan and other debt advisers put together a
£500m bridge financing.
That would later be refinanced through an issue of high-yield bonds
estimated at about £150m, a similar amount of senior debt through a
syndicated loan and a sale and leaseback of United's Old Trafford stadium to
raise about £175m.
Mr Glazer's plans also envisage a £15m improvement in sponsorship revenues
per season through selling the naming rights to the stadium.
Clinching deals with the club's existing sponsors for example could lead to
a Nike Old Trafford or a Vodafone Theatre of Dreams.
Mr Glazer is also planning to limit Sir Alex Ferguson's spending on players
to £10m a season and to raise ticket prices aggressively to improve revenue.
Analysts said last night that even if Mr Glazer is successful in raising his
planned debt, he would still have a funding gap of about £135m in order to
meet the £850m cost of the deal. His existing stake in United is worth about
£240m, but a large amount of the money used to fund his stock purchases is
understood to have come from a loan from Germany's Commerzbank.
One banker who analysed the documents said: "The company would initially
have £500m of debt in place post transaction that they would hope to reduce
quickly through refinancing in the capital markets.
"Through implementing aggressive sponsorship and revenue enhancing
strategies, it would aim to reduce the burden to £290m within about a year.
"The refinancing of the debt could well be achievable but my concerns are in
the ability to increase earnings and generate additional cash through a sale
and leaseback."
Noting that sources close to Mr. Glazer have said that a sale and leaseback
is not being considered, he added: "If one piece of the jigsaw does not fit
at this early stage then the debt will very quickly become crippling.
"The debt struggles to be repaid even in the aggressive scenario that has
been outlined, meaning that if one part of the plan falls through, the club
could end up bankrupt."
The financial plan also assumes that United's performances on the pitch
match the club's record over the past decade.
"By any stretch of the imagination, that is a huge ask, even for a club of
Man United's stature," the banker added.
