Thursday, 16 September 2010

So they bought the PIKs in 2008, where did they get the money?

Since Bloomberg revealed that the Glazers picked up around 20% of Red Football Joint Venture's PIKs in 2008, people have been asking "where did they get the money from?".

Bloomberg believe:
"The Americans, who also own the Tampa Bay Buccaneers, may have paid as little as 12.6 million pounds ($19.6 million) for the stake if they bought it at 35 percent of full value."
A wise man who posts under the name "redloner" on various United forums has a very good answer, pointing out that the Glazers' actually borrowed £10m from Manchester United on 19th December 2008.

How very convenient.

How very modern capitalism.

You buy a business with money you don't have. You struggle to repay that money. You borrow more money from the very company you bought. You use that cash (interest rate 5.5%) to buy your own original debt (keeping the tax break on it, thanks Mssrs Darling and Osborne). You roll up the new debt at 14.25% (now 16.25%) per annum. Finally you use the company's own cash to repay those loans, the receiptsare of course tax free (because you offet them against capital losses in your property business)....

Nothing illegal, nothing wrong, either here on in the US. Just something that, funded off the worship of thousands for an incredible football club seems to me to be wrong, wrong, wrong.