United to pay off £220m loan

2010-11-16 12:44

London - Manchester United's American owners have agreed to pay off more than one-third of the club's debts, a person familiar with the situation said on Monday.

The Glazer family will pay off around 220 million pounds of high interest loans used to fund the 2005 takeover the club, the person said on condition of anonymity because an official announcement is yet to be made.

United is set to confirm plans to repay the loan when the latest set of accounts for one of its holding companies, Red Football Ltd., is released on Tuesday.

It is unclear where the Glazer family obtained the funds to pay off the payment-in-kind loans, which carry an interest rate of 16.25 percent.

United had no debts before Tampa Bay Buccaneers owner Malcolm Glazer bought the famous English club in a leveraged buyout worth 790 million pounds.

Even repaying the PIK loans leaves the club with debts of around 520 million pounds, after bank loans were turned into a seven-year bond issue earlier this year to replace long-term financing and reduce debts to hedge funds.

United chief executive David Gill said earlier this year that the PIK loans are "something that the family, the owners, have put in place and they will ensure is repaid or is part of their overall financial planning in due course, but that is nothing to do with the club."

Forbes magazine recently estimated that United is worth $1.8 billion - ranking the 18-time English champions as the most valuable football team for the sixth straight year.

In October, United posted an annual net loss of 83.6 million pounds for the year ending June 30 after costs associated with the huge debts wiped out record revenues.

Those financial results provided more ammunition for the protest movement which fans launched in January in a bid to force out the Glazer family.

A third of the way through the Premier League season, United is third in the standings - three points behind defending champions Chelsea.