10 questions for the Red Knights
The Red Knights group of wealthy Manchester United supporters will unveil their plans to buy the club, with supporters set to discover how the investors will finance a summer bid. The Knights will offer the Glazers around £700 million for the club, with the £500 million bond retained. But the minimal details pose more questions than answers…
How many Knights are there and will their details be revealed?
Is transparency part of the bid? To date we know that following people are part of the group: Goldman Sachs’ Jim O’Neil (above), Keith Harris from Seymour Pierce, Paul Marshall of Marshall Wace, Freshfields’ Mark Rawlinson, former United chairman Sir Roy Gardner, Richard Hytner of Saatchi & Saatchi and Jon Aisbitt, the chairman of MAN Group. Additionally the group’s advisor is Nomura Bank’s Guy Dawson. However, reports suggest there are up to 40 investors in the group. Will supporters be give details of each investor and how much they are bringing to the table?
What’s the finance behind the bid?
Reports suggest that a £1.2 billion bid is on the cards for the club, which will retain the debt held by the football club but not its parent company. This will enable the Glazer family to pay off their Payment in King (PiK) loans and make a substantial premium on the 2005 purchase price. Structured as such, United will still have a £500 milllion bond on the books after the Glazers have long gone. But is there any other debt within the bid or have the Knights raised the £700 million themselves?
Why retain the bond and how will it be paid back?
The decision to keep the bond within any bid means that the club will continue to pay interest on the notes until maturation in 2017 and must then refinance or pay down the principle of more than £500 milllion. It’s a very expensive decision to make, with the club paying £45 million in interest per year for the next seven seasons. Early redemption is expensive but retaining the bond is even more so. Does this mean the Knights have not raised enough money to pay off the bond?
What dividends and salaries will the Knights remove from the club?
It is safe to assume the Red Knights are not going to buy the club as a philanthropic exercise and will require an annual dividend on their outlay. How much will this dividend be on top of the bond interest payments and what will the club keep as profits? Profits will then pay off the bond in 2017 and be invested in the football transfer market.
Are the Knights calling for a boycott?
If the Glazers refuse to sell at £1.2 billion will the Knights raise their bid or up the stakes by calling for a boycott of season ticket renewals? How much money do the Knights have in the kitty for a bid and if it’s more than £1.2 billion why is the bond being retained as part of the bid? The Manchester United Supporters Trust (MUST) has refused to back a boycott but there appears little other leverage the Knights or supporters have if the Glazer family is unwilling to sell at £1.2 billion.
How much are fans expected to put into a bid?
Earlier reports suggest that the Knights will ask supporters to find up to £200 million as part of the bid. It’s a sum that equates to more than £1,300 per MUST member, which is probably highly unrealistic. If fans cannot put up the cash who will front the money before a special rights issue at a later date allows fans to buy into the club?
What say will fans have in the future running of the club?
Under new ownership will fans have a say in the club’s management? It’s a question that is as yet unanswered by the Knights, although the group has intimated fans are central to the bid and future of the club. The Glazer family’s secrecy and bullying tactics have alienated many supporters. Will the club become more supporter-centric in the future?
What restrictions are there on future sale of Knights’ shares?
Without restrictions on future sale of individual Knights’ shareholdings, resale of the club to a single, possibly leveraged, investor is a very real possibility. Under the PLC structure United had more than 35,000 shareholders but over time consolidation allowed the Glazer family to build a block of more than 30 per cent and launch a bid for the club. How will the Knights make sure that this never happens again and do any restrictions on share sale mean there is no exit strategy for investors?
What will the new board look like?
The club’s board includes Joel and Avram Glazer as co-chairmen, alongside Chief executive David Gill. In addition to Chief operating officer Michael Bolingbroke and Commercial director Richard Arnold there are another four Glazer family members on the board. While it is widely expected the Knights will ask David Gill to stay on as ceo, Bolingbroke and Arnold, together with the Glazer family will leave the club. What role will prominent Knights such as O’Neil want in the club? Harris, for example, has held a long-term ambition to act as the club’s chairman.