United's Bankers JP Morgan Agree: Ronaldo Cash Is Going to Pay the PIKs

Anders RedContributor IMarch 27, 2010

One of the fans’ central accusations (from information in the bond prospectus) is that the vast majority of the proceeds United received from selling Cristiano Ronaldo to Real Madrid were going to be used to repay some of the Glazer family’s toxic “Payment In Kind” (“PIK”) loans. 

A research report published in the last few days shows this payment is the central assumption of no less than the Glazers’ own bankers, JP Morgan.

“We have £100m in the bank” says David Gill.  “It is available to the manager.”

People like me say the bond prospectus is very clear that £70m will soon be sucked out of the club to pay the Glazers’ own debts (I strongly believe this will take place after  March 31 so it doesn’t appear in the accounts until August).

Now the credit (bond) research team at JP Morgan, the lead investment bank on the bond syndicate and the Glazers’ advisers, have published a research note on the bonds (available on my website).  I’ll write more about this note next week, but one stark assumption stands out:

Under all three scenarios [of different on pitch performance], we assume the £70m carve-out of the restricted payments basket leaves the bondholder group [i.e., is paid out of Red Football Ltd. to the Glazers’ parent company]. (page 21)

And where is that £70m going?  They kindly tell us (my emphasis):

We have adjusted MUFC's balance sheet cash for the £70 RP carveout (Restricted cash). We have given this benefit to the Red Football Joint Venture PIK debt , and have assumed it accrues at 14.25% per annum. (footnote on pages 24, 25, 26)

So if there was any doubt, JP Morgan believes the bulk of the Ronaldo money will be used to pay the PIKs (although they point out, as I have, that the money is currently on United’s balance sheet).

I asked David Gill about this subject in my open letter.  He declined to reply ,of course.  It’s pretty sad we had to wait for JP Morgan to answer it for him……

Our club has received an incredible windfall from the Ronaldo sale.

Here’s what we could have done with this windfall; we could give Fergie £30m in cash to spend on new players, take the remaining £40m and fund a 20 percent cut in all ticket prices in the Stretty, scoreboard end, Family Stand and NT3 (annual cost £4m) and guarantee that these ticket prices will only rise with inflation for 10 YEARS!

At a time when its core working class support is being priced out of going to the match, that’s the sort of thing a football club would do…..

Tell your mates, tell your family, tell everyone.  The Glazers are going to take the Ronnie money. And you didn’t hear it from some mad bloke on the net; Manchester United’s bankers said so.


Total 2008/9 ticket revenue (30 home game season) £90.2m (source: Bond Prospectus).  My analysis (available on request) shows 21% of this is derived from non-exec tickets in the Stretford End (West Stand), Scoreboard End (East Stand ) and North Stand Tier 3. 
These areas therefore contribute £18.9m per annum.  A 20% cut would cost c. £4m per annum, and £40m could guarantee these lower prices (increasing only by inflation thereafter) for ten years.  Alternatively a 10% cut could be guaranteed for 20 years.