Manchester United's Glazer family to pay off PIK loans
- Published
Manchester United generated revenues of £278m during the last financial year
Manchester United's American owners are to pay off their high interest payment-in-kind (PIK) loans, estimated to be worth around £220m.
The loans were borrowed from three US hedge funds to help finance the Glazer family's £790m takeover in 2005.
The BBC understands the club's joint chairman Joel Glazer has written to the lenders and said the loan would be paid in full on 22 November.
The football club's total debts are estimated at more than £720m.
Reduced loans
It is not yet clear how the Glazer family were able to raise the money to pay off the PIK loans.
They are understood to have given the Citadel, Och Ziff and Perry Capital hedge funds seven days' notice of the repayment.
The PIK loans were significantly reduced as part of a refinancing in 2006 but since then have been accruing interest at extremely punitive rates.
Earlier this year the rate rose to 16.25% and although the Glazers are liable for the debt, supporters have long suspected money from the club would eventually be used to start paying them off.
As part of a £526m bond refinancing in January, the Glazers were given the freedom to take up to £70m from the club's revenues to pay down the PIKs.
The Glazer family borrowed the money from three hedge funds
By notifying the lenders they intend to pay them off in full next Monday, the Glazers will reduce a lot of the financial pressure on the club.
The club's parent company, Red Football Limited, is due to publish financial results for the first quarter on Tuesday, but those figures are not expected to include details of how the PIKs, which sit on the accounts of Red Football Joint Venture Ltd, have been redeemed.
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 over £100m of cash reserves.
But taking money from the club at a time when many supporters feel there should be more investment in the team will only add to the opposition to the Glazers at Old Trafford.
If the money hasn't been taken out in that way then the Glazers may have borrowed the money from other financial institutions at more affordable rates to refinance the PIKs.