July 4th, 2012
11:02 AM GMT
London (CNN) – Here's a question for football fans - if your team was given a $100 million cash injection this summer, what would you like to see it spent on? New players? Contract extensions? Stadium improvements?
If you're a Manchester United fan, the good news is that your team is planning to get that $100 million in cash. The bad news is, all the money's going straight to servicing one of the biggest debt piles in sports.
The team revealed its plans for a $100 million public offering on the New York Stock Exchange Tuesday night, crushing hopes in Asia that the world's most popular football club would choose to float in Singapore. In filing with the SEC, however, the club also showed just how difficult it will be to keep up with its noisy neighbors (and reigning English champions) Manchester City, bankrolled by Sheikh Mansour's bottomless pockets.
As a result, the club says all proceeds from the float will go directly towards reducing the debt levels. The majority of it is due to be paid back in 2017; there's also a credit facility run by JPMorgan Europe that the club warns it may have to rely on, although it hasn't needed to do so since 2009.
Were it to borrow money that way, it would be due back in 2016, just as UEFA is phasing in its new Financial Fair Play rules. With a backdrop of tougher financial controls, stricter deficit regulations and a renewed focus on sustainable spending, the next five years could be a serious scramble for United's accounting department.
This news confirms the fears already held by some fans, many of whom have already protested against the club's American owners, the Glazer family. "Until we have more detail it is impossible to say with certainty what this will mean for Manchester United or its supporters," says a statement from the Manchester United Supporters' Trust (MUST).
"However if it turns out that the vast majority of the proceeds are used to pay off the debt that is certainly something MUST would welcome and entirely vindicates our longstanding position that [the Glazers'] debt was damaging our club."
The restructuring of the company is already under way, though again, it may not put fans at ease. Many of them will remember April 30th, 2012 as the day United lost a crucial local derby to City, ultimately handing their neighbors the Premier League title. According to the SEC filing, April 30th was also the day that Manchester United Ltd became a registered company in the Cayman Islands.
If all this stirs United fans into turning once again on the club's owners, the float itself will do little to dilute the power of the Glazer family. Much as News Corp., and more recently Google have proven, a creative organization of voting rights will help consolidate the Glazer family's hold on the club. Even once the public takes partial ownership, the Class A shares being issued will carry only one vote; the Class B shares will carry ten - that means whether or not this IPO is a success, it will still be the Glazers running the show in the boardroom.
It will be their decisions that determine just how much that ominous debt pile will hurt the future of one of the world's most popular teams.
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