Refinancing
The debt taken on by the Glazers to finance the club was split between the club and the family; between £265 million and £275 million was secured against Manchester United's assets. This loan was provided by three New York hedge funds: Citadel, Och-Ziff Capital Management and Perry Capital. The total amount was £660 million, on which interest payments came to £62 million a year. The club stated, "The value of Manchester United has increased in the last year, which is why lenders want to invest in the club... 'This move represents good housekeeping and it ensures that Sir Alex Ferguson will be provided with sufficient funds to compete in the transfer market.'" The Manchester United Supporters Trust responded, "'The amount of money needed to be repaid overall is huge... 'The interest payment is one thing but what about the actual £660 million? It is difficult to see how these sums can be reached without significant increases in ticket prices, which, as we always suspected, means the fans will effectively be paying for someone to borrow money to own their club.'" Under the terms of the Glazers' refinancing, as they were unable to repay bondholders by 16 August 2010, the overall interest rate on the loans rose from 14.25% to 16.25%, resulting in annual payments of around £38 million.
On 11 January 2010, shortly before an announcement that Red Football's debt had increased to £716.5 million ($1.17 billion), Manchester United announced their intention to refinance the debt through a bond issue worth approximately £500 million. They managed to raise £504 million in just under two weeks, meaning that they were able to pay off almost all of the £509 million owed to international banks. The bonds were issued in two tranches, one with a coupon rate of 8.75% worth £250 million, and the other with a coupon rate of 8.375% worth $425 million. The annual interest payable on the bond came to approximately £45 million per annum, with the bond due to mature on 1 February 2017. Contained within the bond prospectus were covenants that would allow the Glazers to filter large sums of money out of the club to repay the PIKs by 2015. These include the carving out of £95 million in cash, the sale and lease-back of the Trafford Training Centre at Carrington, and the ability of the Glazers to pay themselves 50% of the Consolidated Net Income of the club every year.
On 16 November 2010, it was revealed that the Glazers were to pay off the remaining £220 million contained within the PIK loans by 22 November 2010. The loans were by then accruing interest at a rate of 16.25%, as the club's overall debt had exceeded its earnings before interest, taxes, depreciation and amortization (EBITDA) by more than five times. However, the club claimed that none of its own money had been put towards the repayment, raising questions as to how the Glazer family had raised the funds; suggested methods include the sale of a minority stake in the club to a third party, the sale of some or all of the family's other businesses, and – the most likely option – the refinancing of the PIKs with another loan at a lower interest rate.
Read more about this topic: Glazer Ownership Of Manchester United