Glazers' buy-back reduces Old Trafford interest burden

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The Independent Football

The mystery of how the Glazer family are sustaining the most punishing interest repayments on their £750m Manchester United debt became clearer last night after reports suggested they had wiped a significant portion of it out.

The Glazer family's debt divides into a £526m bond scheme that was launched this year and a high interest PIK (payment in kind) loan that is currently valued at around £220m. It is the PIK loan, currently running at 16.25 per cent interest annually, that is the greatest cause for concern to supporters who fear that the Glazers' ownership imperils the long-term future of the club.

However, a report by the news agency Bloomberg yesterday said that the Glazers had bought back 20 per cent of the PIK loan two years ago at a price believed to have been discounted to 35 per cent of the stake's then value. That would have effectively wiped out that part of the loan. The Glazers are thought to have picked up the loan note at the height of the financial crisis when there were cheap deals to be had for cash buyers.

The move by the Glazers to pick up part of their own debt on the cheap would have represented an astute move in the circumstances and demonstrates that they still had cash at their disposal to use in a difficult market.

In an interview with The Independent in May, the United chief executive, David Gill, reiterated the club's point that the PIK loans were the Glazer family's responsibility alone and club assets could not be used to pay them down. While the club's profits have been used to service the other part of the debt, there has been no move to use any of the club's cash – currently running at £120m – to pay off the PIKs.

However, with the value of the PIK loans escalating year on year, it has long been a source of concern as to why the Glazer family have not addressed them. If they were to use club money to pay them down, the family would be subject to a very negative reaction among the fans' groups who oppose their leveraged takeover – but then bad publicity has never seemed to affect the Glazers' decision making in the past.

According to the Bloomberg report, the Glazers could have paid as little as £12.6m for their stake of the PIK debt. The club will publish accounts by the end of next month that should give an indication of how much cash is left in the business after a summer in which the club spent relatively little in the transfer market compared with previous years.

A spokesman for the Glazer family refused to comment last night.

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