United refinances high-interest debt, cuts costs
LONDON (AP) -Manchester United announced Thursday that more than $290 million of its high-interest debt has been refinanced, cutting the club's interest costs by around $15 million a year.
Fresh from winning a 20th English title and undergoing an apparently smooth managerial succession, United said it has secured a new loan from Bank of America with far lower interest rates.
United has refinanced 177.78 million pounds ($269 million) of outstanding 8.75 percent interest sterling bonds and $22.09 million of 8.375 percent dollar bonds.
The new loan from June 24 will have an estimated starting interest rate of around 2.78 percent. Interest payments should come down from around 31 million pounds to 21 million pounds per year ($31.7 million), United said in a statement.
United, which is owned by the American Glazer family and listed on the New York Stock Exchange, has approximately halved its total debts to 370 million pounds ($559.4 million) in three years.
The refinancing package appears to indicate investor confidence in both the business and the first managerial change at Old Trafford since 1986, with David Moyes replacing Alex Ferguson.
"It shows that the infrastructure is in place and the decision they made on the managerial front is viewed as, not negative, but positive,'' Majid Ishaq, managing director of financial advisory group Rothschild, told The Associated Press.
"They are in a position today where they have gone back to the market to refinance that particular part of the financing on very attractive terms because they have really delivered, and grown the underlying revenue and profitability.''
United said earlier this month it is on course to generate more than 350 million pounds ($530 million) this season after earning a record 91.7 million pounds ($139 million) in the three months to March 31. Net profit more than trebled year-on-year to 3.6 million pounds ($5.4 million) in the third quarter.
"United is unique in that they have a great historic brand, and they have managed to derive value from that history and heritage in a very commercial way,'' said Ishaq, a football finance expert. "That's a big positive for investors.''
Rob Harris can be reached at http://twitter.com/RobHarris
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