Glazer bankers put the squeeze on United's transfer spending

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The Independent Online

Malcolm Glazer has agreed a deal with bankers backing his £690m takeover of Manchester United that would make it difficult for the club's manager, Sir Alex Ferguson, to sign top stars of the calibre of Wayne Rooney or Rio Ferdinand.

Malcolm Glazer has agreed a deal with bankers backing his £690m takeover of Manchester United that would make it difficult for the club's manager, Sir Alex Ferguson, to sign top stars of the calibre of Wayne Rooney or Rio Ferdinand.

Under the deal with banks, led by JP Morgan, which are lending Mr Glazer £394m to finance the deal and run Man Utd, Mr Glazer has agreed to restrictions on how much can be spent on players.

Documents seen by The Independent on Sunday detail a schedule running until July 2014 which says that the net expenditure on players cannot exceed £26m a year in the 2005-06 and 2006-07 seasons, and £25m in subsequent years. A cap on the absolute amount available to spend rises from £31m to £34m. In addition, an extra £25m can be spent over the nine years.

This compares with £50.6m spent in the 2003-04 season, which included £31m for England defender Rio Ferdinand, £12.5m for French forward Louis Saha and £5.5m in fees to agents. Other recent top signings include teenage star Wayne Rooney, who cost £25m, Dutch striker Ruud van Nistelrooy, at £19.7m, and Portuguese winger Cristiano Ronaldo, costing £12m.

The annual limit is less than Mr Glazer will have to pay the bankers in interest on the loans. The banks are lending him £304m for the takover, £50m for working capital and £40m for capital expenditure. The interest payable each year is variable but at current levels would amount to around £27.8m.

This does not include the £275m cost of preferred securities, sold to three New York hedge funds - Citadel Horizon, Perry Capital and Ochs-Ziff Management. The interest on these securities is not payable until they are redeemed, which could be as far away as 2020.

Mr Glazer has not said how much he is paying in interest on these prefs, but it is estimated at anything between 12 per cent and 18 per cent. Even at 12 per cent, this works out to £33m a year. Added to the interest on the bank debt, this makes a total bill of £61m. Man Utd's operating profits in 2003-04 were £58.3m and in 2002-03 just £55.1m.

Mr Glazer has agreed to pay back £18.9m of his loans next March and then begins a repayment schedule which will see him return £5.5m in 2007, £10m in 2008 and £14m in 2009, with payments continuing to increase from there. Between 2012 and 2014, £175m of the loans become repayable.

The loans have been agreed with JP Morgan, which is going to syndicate them among other banks. Some banks may not get involved for fear of a fan backlash.

The hedge funds supporting the prefs boast three ofInstitutional Investor's 25 best-paid hedge fund managers.

Kenneth Griffin of Citadel is said to have received $240m (£131m) last year. Richard Perry of Perry Capital picked up $153m and Daniel Ochs of Ochs-Ziff got $125m.

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