Manchester United is planning a bond sale to reduce its massive debts after avoiding an annual loss only by selling Cristiano Ronaldo to Real Madrid for a world-record transfer fee.
United said Monday it hoped to raise 500 million pounds ($808 million) from the issue of the seven-year bonds, which could pay off a majority of the debt burden incurred by Malcolm Glazer's 2005 takeover of English football's most famous team.
The Premier League champion posted a pretax profit of 48.2 million pounds ($78 million) for the year ending June 30, 2009, compared to a loss of 21.4 million for the previous 12 months.
But interest payments on its borrowings would have left United with another loss had it not sold Ronaldo to Madrid for 80 million pounds.
The bond sale could significantly reduce the interest payments on its debt, the majority of which is in secured bank loans of 509.5 million pounds ($823.7 million). United released results Monday showing it paid 41.9 million pounds ($67.8 million) in interest on those bank loans alone.
U.K. interest rates have been set at 0.5 percent for the past year as Britain recovers from the global credit crisis, so the 7 or 8 percent annual return the bonds are expected to yield could attract significant interest from investors.
"What the Glazers are trying to do is to give the club a bit more financial security," said Roy Kaitcer, client director for Brewin Dolphin stockbrokers in Manchester. "If you thought that Man United weren't going to go bust, that interest rate compares favorably to what you could get from a bank."
Analysts expect the bonds to be priced at the end of next week.
United said turnover increased by 9 percent to 278.5 million pounds ($449.6 million) in a season in which it won a record-equaling third straight Premier League title and again reached the Champions League final.
The club's total debt includes a payment-in-kind loan which the Glazer family, who also own the NFL's Tampa Bay Buccaneers, took out as part of debt restructuring a year after Glazer's 790 million-pound takeover.
That loan is accruing interest of 14 percent.
The total debt of Red Football Joint Venture Ltd., the club's trading name, was 699 million pounds at the end of June 2008, according to full accounts released last year. The company did not supply details on the total debt in Monday's statement.
