Following the news that the Glazers are redeeming the PIKs, this is now only of academic interest, but I thought it might be useful for readers to see the full terms and conditions of the PIKs. I was supplied these documents a few weeks ago in confidence by a bond market participant who is now happy for them to be published.
There are two documents:
This confirms the interest rate (14.25% rising to 16.25% if debt to EBITDA exceeds 5x), the redemption terms and other details of the loans. It shows that the PIKs can be repaid at any point with at least five business days notice. It also shows that there are no penalties for early repayment after the first two years. In other words, there is no structural reason why the PIKs could not be repaid without penalty since 16th August 2008. The issue has always been availability of funds.
This confirms that the PIKs are secured on 100% of the equity of Red Football Limited.
As I wrote yesterday, we are left with many questions about the future financial structure of the Red Football group. I think it is time the Glazers and their employees answered some questions on all this.