TheFly said:
Yes, I did but thanks.
That was why we kept buying players and expanding the stadium otherwise the tax man would have taken the 40%.
There is a good chance the south-stand will be expanded in 5 years or so time, when the current expansion comes off the bottom line.
Does anyone know if the £275m MU Ltd debt will mean NO tax is payed on operating profits for the next XX years.... thus if we are making £50m profit a year, as we did last year then that £50m COULD pay off a huge chunk of the debt in one go with crafty accounting etc???
Interest on debt is deductible from profits before tax, but not capital repayments, so no - crafty accounting could not pay off any of the debt.
Really, you should be comparing dividends and taxation before the takeover to interest payments now - that's the comparison we need to make.
2004 - Corporation Tax = £8.6M, Dividends = 7.0M --- Total = 15.6M
2005 - Corporation Tax = £4.2M, Dividends = 3.4M --- Total = 7.6M
Now the current debt:
J P Morgan £55m over 7 years @ LIBOR + 2.75% pa (7.35)
J P Morgan £62.5m over 7.5/8 years @LIBOR + 3.25% pa (7.85)
J P Morgan £62.5m over 8.5/9 years @ LIBOR + 3.75% pa (8.35)
J P Morgan £85m over 10 years @ LIBOR + 6.5% pa (11.10)
J P Morgan £18.9m overdraft to 31/03/2006 @ LIBOR + 2.75% pa (7.35)
J P Morgan £50m revolving credit over 7 years @ LIBOR + 2.75% pa (7.35)
J P Morgan £40m capital facility over 7 years @ LIBOR + 2.75% pa (7.35)
LIBOR currently stands at 4.60%. The bracketed figures indicate rate payable. Ignoring capital repayment, the interest payable alone at the given rates is £31,610,000.
However, this is only the bank debt; it doesn't take into account the hedge funds. 30m a year is only the start of it.
Citadel Horizon, Perry Capital and OZ Management have also provided funding of £275m via the purchase of Preferred Securities in Red Joint Venture, which is one of the ultimate holding companies of Manchester United Limited, via Red Football etc. The interest payable on this loan is rolled up for payment at a later date. The estimated interest rate is 14% to 20% per annum, due to the higher risk involved. At 14% pa, interest is therefore rolling up at £38,500,000 each year.
(The information quoted can be found on pages 6, 68 and 69 of the official offer document issued by NM Rothschild.)
So, your "£30m and everything's sweet" approach doesn't really fly. It's £70m, so there's still a £40m hole even if your analysis of the additional revenue is correct and even if the hedge funds are raping us at the lowest estimated interest rate.
In any case, the true comparison should be with the status quo before the takeover. £7m of fans' money leaving the company in 2004-5 has become £70m in 2005-6. Still, as long as there's fools in the world, people like Glazer will always be able to make a buck off them. Don't feed the greed.