United Debt

Hi guys, I don't post very often but this time I really have to.

Most guys don't seem to understand modern finance so I will explain it simply. It is my field and I work with company take overs and share trading on a daily basis.

1) United has no debt. This is not my imaginings or delusion, the debt is the Glazers, on their name, transferred onto the holding company that owns United. In layman's terms, if you wanted to buy a local McDonald's you would take a loan from the bank. The loan would be on your name. The loan would be paid off by the income you earn generated through the business. This does not mean the business is in debt. The loan was taken in a personal capacity. I know the debt is effectively being financed by United the club, however the debt is still the Glazers'.

2) Any proceeds from floatation will belong to the Glazers not to the club. I am operating under the assumption that the Glazers own 100% of the shares to MUFC. Now if they sell 25% of shares as is being reported, the proceeds will belong to the Glazers to do with as they please. They would be able to a) pay off some or all of the debt that THEY owe, b) use the money for their own business ventures, c) pocket the cash. If they do not pay off the debt however they will be in a tricky position. Being only 75% owners of the club they cannot use all the club's profits to pay interest on their loans. They can use dividends declared or they could make arrangements to maintain interest payments as part of the structure of the deal.

3) The Glazers plan on selling shares not bonds. Bonds are a type of debt, shares are equity. Therefore the shares will not add to any interest payments and if the Board do not declare a dividend then there will not be any money leaving the club. The shares could be preference shares meaning that dividend will have to be paid but shareholders will have NO voting rights or it could be shares that pay no dividend ever meaning potential investors only make a return on capital gains when they decide to sell shares.

4) The Glazers will still control the board, will be able to declare dividends and maybe (depending on the deal) continue to service their debt using the clubs profits.

The most likely senario is: The Glazers sell 25% of the clubs shares for roughly 500mil, they use this to pay off their debt. Rumours claim the debt is between 400 - 600mil. The Glazers maintain control of the board and start to issue a healthy dividend. Shares sold would probably be preference shares with a low dividend.

Any proceeds of the floation can NOT be used by the club to fund player purchases as the money would be the Glazers and they would effectively be giving the money to the club which is obviously against the FFP rules (not like they'd ever do that anyway).

One last thing, like every business, a huge percentage of profits are reinvested into the business (called the retention ratio) and this is basically player purchases. If they Glazers do not take a dividend then all profits would remain within the club.

Sorry for the long post but I hope that explains everything clearly and logically.