Glazer submits fresh man utd bid

Headshot

hes at it again

Glazer submits fresh man utd bid

http://news.bbc.co.uk/1/hi/business/4446249.stm

any truth in this ,i went on skysports website i dont see it there

Cianan2

If its true....

For f*ck sake, its annoying me now,this whole take over bidding crap.

PHB

If it's on BBC, its definally true
If its on Sky, its been reported by anyone

Not a bad bid:
- 20 mill transfer funds, whether this is extra I don't know, but I hope it is, cause I figure we've got 10 mill or so for a keeper.

- Commitment to the board staying the same

- Debt is much more held by Glazier, so if he defaults, he has to sell the club.

I still can't see the problem, or at least understand the problem, still don't know if the debt is owed by the club. Somewhat confusing

wheres me jumpa

i think the fear of being owned by tycoon is off putting for many. especially one that seems so ruthless, but unfortuantely its situations like this we are going to have to accept.

i think its inevitable(spelling!?) so im just hoping it works out the best for team and the club when it does happen.

Thanx 4 The Fish

Best of luck with it then, I'd imagine CE will make a few dollars out of this.

Draupnir

ce?

SteM

Draupnir wrote:

ce?

Cubic Expression.

Copied from rednews.co.uk, I found it an interesting read.......

Thoughts on Glazer developments
Thursday, April 14, 2005

(From A SU Financial Advisor)

Thoughts on Recent MUFC Takeover Developments

Executive Summary
On the surface of Glazer’s most recent reported proposal, it appears to “tick all the boxes” that the directors of the plc have mentioned in prior statements when rejecting his pervious approaches. However there are fundamental flaws in the proposal which I’ve outlined below. It is worth noting that these flaws still pose a significant threat to the longevity of the Club in terms of financial prosperity and also the Club’s stakeholders (shareholders, players, fans, etc.).

Risks
Continued use of a significant amount of debt:
Despite the reports of a reduction in the proposed portion of debt to approximately 50% of the purchase price, it is important to realise that this is still a huge chunk of debt and can only be a burden to the Club. There are in effect two forms debt (Acquisition debt and Growth debt) and it is important to understand the difference.

Growth debt is used by a Company in order to help grow the club organically – for example MUFC could, and in my view should, raise a small amount of debt to help with the development of the Club whether it is to fund the expansion of the stadium, purchase players etc. Having some Growth debt in place restricts the amount of debt a bidder can use to fund a takeover and requires him to fund predominantly with equity. If MUFC had had some manageable amount of debt in place prior to the takeover saga it is highly likely we would not have been in the situation we find ourselves today!

Acquisition debt is the worst kind and does not add any value whatsoever to the Club. It is simply an instrument that allows an acquirer to purchase the Club without putting in a large amount of equity. Once in place it is, then provided the acquirer obtains acceptances for >75% of the existing equity, he can effectively transfer the debt and the servicing of that debt onto the Club without any burden being placed on the acquirer. This in turn puts the onus very much on the stakeholders who finance the huge majority of the Club’s revenues (mainly the fans) who will be required to bear the principal burden of repayment and servicing of the debt. Obviously the acquirer’s equity will be at stake but the equity stake will be a lot less than if he also had to refinance any Growth debt that was already in place.

Either way the debt will put a strain on the Club and will mean that the Club is not only answerable to shareholders but will be answerable to Banks as well. The Banks will impose a series of covenants (financial targets/restraints) on the Club which will divert focus from the actual purpose of the Club, playing football. Many leveraged companies have ended up in bankruptcy due to the combination of over-optimistic assumptions and the punitive conditions imposed on them by having a significant amount of debt in place. A Leeds-style meltdown is a real possibility unless the debt element is much lower. I am assuming that Glazer’s bid model still contains aggressive and dangerous assumptions regarding the Club’s prospects and performance both on and off the pitch – failure of any of which to materialise could put the Club at the mercy of the Banks.

Preferred Stock/Quasi Debt
The Glazer camp has been extremely clever at this juncture. They are proposing to use a form of equity called Preferred Stock (they could use a multitude of names for it including Class B shares, Mezzanine, Convertible Stock etc.). Whatever spin they place on this form of equity it is designed to do several things:
- Confuse the regular shareholder into believing that it is in fact equity: Preferred stock is in fact senior to common stock (that which is listed on the stock exchange) and will mean that the main loser will be the small shareholder whose shares will rank junior to the Preferred Stock should he not sell out or be forced to sell.
- The preferred stock may also carry higher voting rights so that the smaller shareholder does not have any say in the running of the Club. The Banks have ways of structuring these asset classes in order to “screw” over the little guy!
- Most importantly - allow extra debt to be hidden from the initial acquisition structure: For example on Day 1 the purchase structure is 50% debt and 50% ‘equity’. Over two to three years the debt portion is reduced through repayments so that the debt portion is now only 30%. What is important to realise is that Preferred Stock has a PIK (Paid In Kind) element meaning that rather than receive cash dividends or interest the Preferred Stock element will either attract cumulative ‘interest’ at an annual rate of 10-12% which is rolled up, or the holders will receive additional preferred stock to the value of the ‘interest’ accrued. So if the Preferred stock element is £200 million on Day 1 in three years time it could amount to almost £300 million. So despite repaying the debt portion, the Preferred Stock element (Quasi Debt) is growing. This is where it gets interesting as at a certain point in time, usually when a leverage covenant has been met (probably total debt/capitalisation {debt + equity}) the preferred stock will “flip” into debt (it could also flip into equity it all depends on what risk appetite the banks believe investors are looking for). This structure is typical of a leveraged transaction and hides a significant portion of debt from us all – in reality it is there lurking in the background and will surface a few years down the line. Through this method Glazer could still put a significant amount of debt on the Company but make it appear like he is considering the views of the MUFC stakeholders. I can assure you that this is not the case and that it is all about making a financial return.

Conclusions
I can only echo what I have written in the past in terms of defence strategies and in the case of the structure described above:
- The preferred stock (or whatever they choose to call it) is a smoke screen for more debt. I do not believe that Glazer will be committing any more equity to the Club than previously mentioned, he will simply be looking at creating a more complicated structure that will use “smoke & mirrors” to confuse the average stakeholder. We can counter this through disseminating as much information as possible about Quasi debt/Preferred Stock and Acquisition debt versus Growth debt. The more knowledge the fans have the better for us.
- Glazer’s seems to be making promises now about not raising ticket prices too much and not selling the stadium but in a few years time when he is struggling to repay the debt the Banks could step in and force him to do this. Promises are very short lived in the world of finance!

PHB

Hmm, interesting

Jivin Turkey

wheres me jumpa wrote:

the fear of being owned by tycoon is off putting for many

If McManus and Magnier were American they would be classed as "tycoons".

jonny68

He`ll never take Man United,he`s not wanted by the fans,even in the unlikely event where he does take control his life will be made hell by United fans..i really dont think he knows what the average United fan feels about all this.

Blackjack

That article is being a smidge misleading. Preference shares hardly ever carry voting rights, and usually carry a higher return (or are first in line for payment of dividends) than regular shares.

I can't help feeling that Shareholders United regret the tactics they employed against Magnier and McManus now that Glazier is making these moves.

Perhaps the 2 from Cubic would have been preferrable to them now instead of Glazier?

SteM

Blackjack wrote:

That article is being a smidge misleading. Preference shares hardly ever carry voting rights, and usually carry a higher return (or are first in line for payment of dividends) than regular shares.

Well, to be fair to the guy that wrote it he does say...

The preferred stock may also carry higher voting rights

It was written before Glazer launched his latest bid.

Blackjack

Yeah, I realised that, hence the "Smidge" thing. I would not expect any less, given where he was expecting it to be published.
Before any animosity starts, I would expect the same in any clubs situations, not just Man U's. However, if the fans want to do with the club what they want, the only way to do so is to buy the shares, not just have the media publish the story.

ziggy

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