Manchester United’s American owners plan to reduce the financial burden on the club by paying off high-interest loans, reported to be worth £220m.
The loans were taken out with three US hedge funds to help finance the Glazer family’s £790m takeover in 2005.
Joel Glazer, the club’s joint chairman, has written to the lenders to inform them the loans will be paid in full on 22 November. The document says Red Football will “pre-pay 100% of the outstanding loan on November 22”.
It is unclear how the Glazer family were able to raise the money to pay off the PIK (payment in kind) loans but it is not with funds taken from the club.
The Glazers are reported to have borrowed money from other financial institutions at more affordable rates to refinance the PIKs.
A spokesman for the Glazer family declined to comment.
The PIK loans were significantly reduced as part of a refinancing package in 2006 but since then have been accruing interest at high rates.
By notifying the lenders they intend to pay the loans off in full next Monday, the Glazers will reduce the financial pressure on the club.
Despite making a £79.6m pre tax loss for the last financial year, mainly due to one off interest and debt charges, United generated revenues of £278m and have more than £100m of cash reserves.
Their ownership of United has provoked much criticism and resulted in the setting up of breakaway fans’ club, FC United of Manchester, as well as the Green and Gold protest movement.
The move to repay the high interest loan may help to reassure United fans. Chief executive David Gill last month insisted supporters should not be unduly worried by the figures.
Gill said: “I can’t speak for any other club, but the United fans should not be concerned.
“We have a long-term financing structure in place, excellent revenues that are growing, we are controlling our costs – total wages are 46% of turnover – and we can afford the interest on our long-term finance.
“In our opinion if something changed in the ownership this club will survive and continue – it is covering the financing cost more than adequately.
“We still have cash to invest in players and to give good contracts to players and we are comfortable with the business model.”
