Tuesday, 25 May 2010

Half “The Equalizer” and half “Josh Lyman”?





I hear on the grapevine that select print and broadcast journalists are being invited into 50 Pall Mall, Manchester United's London office, for off the record briefings by Edward Woodward. Woodward is United's brilliantly named but oddly titled "Chief of Staff". I've never had the pleasure of meeting him as he came on board from JP Morgan after the takeover, but I can't help imagining him as a cross between:



and.....






























Anyway, the message from the Chief of Staff is that all is well with United's finances. On the thorny subject of the PIKS, let me quote the BBC's David Bond (who is clearly one of the chosen few invited to hear the gospel) in his latest blog (my emphasis):



"One of the reasons why the Glazers took out a £500m bond to refinance what they call their "senior debt" (a term which basically tells you it has priority over the PIKs) earlier this year was to free them from the restrictions which prevented them from taking cash out of the club to pay off the PIKs.
The bond has now liberated them and, with the club predicting cash reserves of £150m by June, the money is there to start paying them off.

And yet, they don't expect to start removing cash from United's hugely successful commercial operation in the near future - certainly not before the end of the current financial year which closes on 31 June [sic].
Why? Implausible as it may seem the Glazers are apparently comfortable with the loan. They view it as a tax deductible, benign security."

So that's OK then. A debt instrument ratcheting up at 16.25% per annum and heading towards £600m by the end of its life in 2017 is "benign". As for the tax deductible nature of the instrument, the c. £26m of interest added to the PIKS in the last financial year saves a whole £7.3m in corporation tax. Well worth the risk I'm sure you'll agree!

Anyway, it's nice to hear that all is well. How very reassuring during the period when the club is asking fans to renew their season tickets....

PS. Q3 results confirmed for Friday at 12.30pm.

PPS. Wouldn't it be nice if United's senior management would talk to the supporters customers for a change?

LUHG

9 comments:

simpson said...

excellent work.

i hope we get our club back from the glazers in this summer.but if we do get then there is lots of work 2 do and make sure this never happen again.

LUHG

brownie said...

Great stuff yet again Anders.

Diem said...

"As for the tax deductible nature of the instrument, the c. £26m of interest added to the PIKS in the last financial year saves a whole £7.3m in corporation tax"

Given the US levies extra-territorial tax on people (i.e. you're liable for all your global income), I wonder if they're performing any overseas accounting shenanigans, booking a loss against the forthcoming repayments required.

I'm sure you refer to the liability structure somewhere (sorry, I tried looking back through the archives, think they're secured against the Glazers, rather than the club?), which would give them legal cover for such actions.

andersred said...

Diem,

Interesting thought (as usual). My knowledge of US personal tax is very limited.

RFJV is owned by Red Football Shareholder Ltd. It is owned by Red Football LP (of Nevada). The General Partner of RF LP is Red Football General Partner. The officers of RF GP are Joel and Avram but I assumed it is owned by the whole family. Is it possible to look up the structure and capture RFS's losses and offset them against personal tax? In the UK, income losses in LLPs can only be offset vs. income from "the same trade" (to badly summarise thousands of words of tax law)!


There is another Nevada entity which I found, Red Bonds LLC. It has 6 "managing members":

JOEL M. GLAZER IRREVOCABLE EXEMPT TRUST DATED AUGUST 22, 2006

AVRAM GLAZER IRREVOCABLE EXEMPT TRUST DATED AUGUST 22, 2006

BRYAN G. GLAZER IRREVOCABLE EXEMPT TRUST DATED AUGUST 22, 2006

DARCIE S. GLAZER IRREVOCABLE EXEMPT TRUST DATED AUGUST 22, 2006

KEVIN GLAZER IRREVOCABLE EXEMPT FAMILY TRUST DATED SEPTEMBER 18, 2006

EDWARD S. GLAZER IRREVOCABLE EXEMPT TRUST DATED AUGUST 22, 2006

Note the date (except on Kevin's). It's the date the PIKS came into existence.

RFJV's accounts say the PIKS are secured on RFJV's equity holding in RF....

The plot thickens!

anders

Ian S said...

Andy, the original ownership tree was like this;-

"Red Shareholder Limited is a wholly owned subsidiary of Red Football Partnership (a Reno-based company)

The general partner of Red Football Partnership is Malcolm I Glazer General Partnership Inc and the limited partner of Red Football Partnership is Malcolm Glazer Revocable Trust.

The sole shareholder of Malcolm I Glazer General Partnership is Malcolm Glazer Revocable Trust (of which the principal beneficiary is Malcolm Glazer)."

Does that appear to have changed since the 2006 refinance?

andersred said...

Hi Ian,

Yes, the disclosure you posted was in the offer document and RFS 2006 accounts.

A year later, after the refinancing and (I hate to point out) after Malcolm was incapacitated by two strokes, the wording changed and has remained the same since. To quote the bond prospectus:

"The ultimate parent undertaking of the Issuer and controlling party is Red Football Limited
Partnership, a limited partnership formed in the state of Nevada, United States of America
whose general partner is Red Football General Partner, Inc. a corporation formed in the state
of Nevada, United States of America. Red Football Limited Partnership and Red Football
General Partner, Inc. are controlled by family trusts affiliated with the Glazer family."

So there has been a diversification of ownership from Malcolm's trust to a series of family trusts....

anders

simpson said...

here is another glazers stunt 2 fool fans.

http://www.telegraph.co.uk/sport/football/leagues/premierleague/manutd/7765397/Glazer-family-to-keep-cash-in-Manchester-United-coffers-for-now.html

Anonymous said...

Anders,
thanks for your blog.
Is there any truth in the rumours of a bid from the Middle East. eg Qatar??

and what are your thoughts on the Fair Play Rules?

Thanks again

Rob Cameron said...

Once again a sobering post that outlines the reality of the burden of debt that our club is carrying. The net circa £(18m)as a corporation tax offset is another example that beggers belief.
Your closing comments about supporters, sorry customers, of the club, sorry Brand demonstrate the mindset of the current ownership.