United facing interest rise worries
Red Football Joint Venture Ltd, which is owned by the Glazer family, filed accounts today for the year ending June 2009 showing their overall debt has gone past the £700million mark for the first time, increasing by £17million from £699million. The biggest rise has come in the 'payment in kind' (PIK) loans, which have had an interest rate of 14.25% which is simply added to the existing debt. The debt from the PIKs has increased by £27million to £202million and the accounts reveal the situation is due to get even worse in August when a new 16.25% rate kicks in. The situation accounts for the urgency with which the Glazer family are seeking a cash injection from a £500million bond issue to refinance the PIK loans in particular. The overall debt figures, not contained in the prospectus for a £500million bond issue released last week, are bound to worry fans, some of whom are already taking up fresh protest action against the Glazers. The accounts also reveal that the £80million received from Cristiano Ronaldo's sale has led to a decent profit for Red Football. The company paid out £68.5million in interest on their debts in 2009 but, unlike the previous year when interest payments were similar, they returned an overall profit of £6.4million in 2009. In 2008, they returned a £47million loss. The profit can be almost entirely explained by the sale of Ronaldo to Real Madrid in June for £80million. Red Football's accounts record an £80.7million profit on "disposal of players" compared to a £21million profit in 2008. A spokesman for the Glazer family insisted that the debt did not have a bearing on the operation of the club. He told Press Association Sport: "The club has a £50million surplus to work with once the interest payments have been made." Manchester United's accounts also show their chief executive David Gill was paid £1.8million last year. The accounts also confirm that six of Malcolm Glazer's children, who are all directors of Red Football, were each given loans worth £1.67million from United's parent company. Keith Harris, the head of Seymour Pierce merchant bank who has been involved in four Premier League club takeovers, questioned the wisdom of such a practice. Harris told The Guardian: "You would not expect directors to be borrowing money at a company of United's size and, although it is now allowed legally, it is generally still frowned upon because it does not create a good impression of the directors' governance of the company."