LONDON May 21 Closely watched plans by British
soccer club Manchester United to borrow against future ticket
sales could be scrapped in favour of more flexible debt options,
a person familiar with the situation said on Monday.
The top club in England's Premier League has appointed Royal
Bank of Scotland (RBS.L) and Deutsche Bank (DBKGn.DE) to start
working on a securitization, or the wrapping of its 663 million
pounds ($1.31 billion) of debt into a bond, using future ticket
sales as collateral.
But now, Manchester United and the controlling Glazer
family, is also considering a quick leveraged recapitalization,
similar to the one it carried out last August, under which the
most expensive debt tranches would be eliminated, increasing
senior debt, the source said.
"Securitization is cheaper, but it has less flexibility than
bank debt," said the source, who requested anonymity.
A securitization can place more restrictions on how a
company operates than bank debt and may be easier to negotiate
with bank lenders than bondholders, if necessary.
Securitizations also generally have longer maturities than bank
The change in capital structure is aimed at reducing the
hefty interest costs that came with the loans that financed
Malcolm Glazer's 790-million pound acquisition in 2005.
Manchester United's 150 million pound second-lien debt
tranche costs as much as 500 basis points above the London
Interbank Offered Rate (Libor), while the 375 million pounds of
senior debt cost between 212.5 and 275 basis points above Libor.
German club Schalke 04 recently signed a debt deal costing
just 160 basis points above Libor, another source familiar with
the deal said.
Manchester United also has 138 million pounds of PIK notes,
which charge a stinging 14.25 percent fixed interest rate. This
tranche was reduced last year from 338 million pounds.
A decision may be taken soon, although talks between the
club and its financial advisers about a securitization are
proceeding, the source said.
Manchester United declined to comment.
The Manchester United securitization, which is being closely
watched by other clubs, could be the catalyst for other similar
transactions, bankers say, as investor appetite for soccer
financing deals increases.
The Premier League has doubled its sales to 2 billion euros
in five years, with matches being broadcast in more than 200
US corporate giant General Electric Co (GE.N), whose finance
unit has over $230 billion assets under management, recently
said it would beef up its presence in European soccer deals.
Clubs are increasingly in need of financing as they build
new stadiums and face soaring players' salaries.