ATTEMPTS BY Manchester United’s owners to refinance the club’s €562 million debt could be hampered by a glut of similar high-yield bond offerings, City bond traders said yesterday as the club’s banks and executives started the European leg of a series of roadshows designed to spark interest.
At a meeting in Edinburgh’s Balmoral Hotel, representatives of the consortium of banks managing the deal – JP Morgan, Bank of America Merrill Lynch, Deutsche Bank, Goldman Sachs and Royal Bank of Scotland – and United executives presented the detail of the bond offer.
This week is one of the busiest launch periods for new bonds in two years, as a series of indebted companies rush to refinance bank debt with investors who have a renewed appetite for risk in the wake of the market meltdown in 2008.
City sources said the fear interest rates, currently at a historic low, would begin to rise, plus the fact fund managers had money to invest and were looking to add riskier bets to their portfolio, had combined to create a glut of new issues. But the busy period also means there are plenty of other options for potential investors at a similar price. “One of the things they will be up against is the fact there is a massive amount of supply at the moment, particularly in high-yield bonds. I’ve counted five other deals pricing today alone,” said Euan McNeil, fixed income manager at Aegon Asset Management.
“There is quite a lot of paper to come on to the market. Aside from judging the merits of the Manchester United deal on its own, there is also the relative consideration one has to make on how much money there is to go into the asset class.”
Virgin Media, UPC and Ardagh Glass are among six or seven companies to turn to the bond market to refinance their debt this week. The MU Finance roadshow that started in Hong Kong on Monday reached the UK yesterday and will continue in London today. It then moves to continental Europe and, next week, to the United States.
Through the plan, the Glazer family, who bought United in a controversial leveraged buyout in 2005, hope to refinance the €572.5 miliion in debt currently secured on the club through a series of four loans. The seven-year bond is expected to be priced at between 9 per cent and 9.5 per cent.
That will increase the amount of interest the club pays on its €562 million debt, currently fixed at just over five per cent, but will create a mechanism for the Glazers to funnel up to €79 million from United’s existing cashflow to their holding company to start paying down a €225 million hedge fund debt secured on their shareholding. Those so-called Payment in Kind notes are accumulating at a rate of 14.25 per cent a year.
Meanwhile, Portsmouth will have to wait at least another day to discover if their player registration embargo is to be lifted after the Premier League continued to consider the financial information supplied by the club during the two sides’ meeting on Tuesday.
The league’s bottom team owe €11.2 million to various English clubs for missed transfer instalments. A €7.9 million payment of television money is now due from the Premier League, and it seems almost certain that it will choose to pay this directly to those football creditors. If Portsmouth cannot make up the €3.4 million shortfall to clear the debt, various options are available to the league. It is thought one Portsmouth may have asked it to explore is to allow Avram Grant the opportunity of completing free-transfer and loan deals until the €3.4 million is cleared.
The league is thought to be losing patience with the club, so it is not clear how amenable it would be to shifting away from the blanket ban it imposed in mid-October, to allow Grant some leeway to sign new players during the transfer window.
The Premier League may simply decide to maintain the embargo but it will also be conscious Grant was able to name only 17 players for Tuesday’s FA Cup third-round replay at Coventry City, one short of a full squad. While Grant’s team offered a spirited display to force extra-time through a late equaliser, before claiming a last-gasp victory through Aaron Mokoena’s winner, the Israeli desperately requires new faces.
Grant’s lack of playing options is limiting his tactical options, ahead of Saturday’s visit by Birmingham City, who are unbeaten in 13. Grant, though, was happy with the contribution of Mokoena, whom he was forced to field in central defence against Coventry. He said, “Mokoena is one of the most professional players I have ever met.”
Guardian Service
