The Financial Cost of the Manchester United Floatation

Share Article

Currencies Direct look at the floatation of Manchester United on the New York Stock Exchange, and tries to understand its financial cost.

After detours to Singapore and Hong Kong, the Glazer family were finally able to float Manchester United Football Club on the New York stock exchange. The purpose of this move was to pay off some of the £423 million debt that the Glazer family unceremoniously placed on the club in 2005 to fund their controversial takeover.

So how will the floatation of one of the UKs leading football clubs help to reduce their debt? Well, by asking someone else to pay for it of course.

The Glazers were willing to sell shares to the value of 10% of the football club, with each share to be sold for $16-$20 each. The family will then look to raise approximately £233 million to pay off part of the overwhelming debt saddled upon Manchester United, although this was still below the $333 million they initially hoped for. But with fairly little of the club being sold, the Glazer family will retain an overwhelming majority through their company Red Football LLC.

The Manchester United company that shareholders are being asked to invest in is registered in the tax-haven of the Cayman Islands. Investors will then be asked to purchase class A shares in the company, but these will carry a tenth of the voting rights than the shares that the Glazers are issuing themselves. There are also no plans to pay any of these new shareholders dividends.

The Glazers are, therefore, asking shareholders to invest in Manchester United, something that they describe as “one of the world’s leading brands”, in the hope that the shares will increase in value.

The Glazer family certainly need to start paying off this debt. For instance, in the year that ended the 30th June 2011, the club paid out £51.3 million interest. But this unfortunately pales in comparison to the incredible £108.6 million paid out the year up until 30th June 2010, when the Glazers last refinanced. This figure includes the £16.4 million and £19.3 million lost on dollar-to-pound exchange rates.

Currencies Direct are aware that the latest stock floatation in New York may well net the club millions of pounds, but it is also set to incur plenty of cost. Firstly, Manchester United is going to lose a lot of money in currency exchange, especially considering the vast sums that are being transferred. This is not to mention the cost of paying a whole host of lawyers to produce a 231-page registration document in preparation for the Manchester United float.

So while Manchester United is looking to service their debt, an unnecessary debt one could argue, it seems that they will also incur a whole lot of costs in the progress. Let’s hope that this football institution can one day head out of the red and into the black.

For more information regarding exchange rates, visit the Currencies Direct website.

About Currencies Direct

Currencies Direct is one of Europe’s leading non-bank providers of currency exchange payment services. Since its formation in 1996 Currencies Direct has evolved and positioned from being an innovative service provider of foreign exchange for consumers and high net worth individuals into a dynamic and pioneering ‘business to business’ fully integrated treasury solution service provider.

Head quartered in the City of London (United Kingdom) with operations in Europe, Africa, Asia and the United States, Currencies Direct is part of the Azibo Group, a privately owned investment company.

Share article on social media or email:

View article via:

Pdf Print

Contact Author

Wendy Mitchell