Man Utd goes offshore in $100m plus share push

4th July 2012

From Old Trafford to the Caymans

Now investors are asked to stump up at least $100m (around £67m) for shares in a newly re-floated Caymans Islands based Man U via an Initial Public Offering in New York. It could be a lot more if interest is sufficient – only a preliminary prospectus has been filed with the New York stock exchange.   This lacks a number of essential figures including most of the costs of raising the money (other than some $27,000 for basic filing expenses) although clearly the effort of a prospectus and New York listing is not worthwhile for just $100m. The IPO replaces aborted attempts to raise a reputed £1.7bn last year in Hong Kong and £1bn more recently in Singapore.

But fans with nothing to do until the new season starts in August can spend their time perusing the densely printed hundred plus pages which offer substantial insights into the team, its finances, and into the generally crazy world of football investment.

Debt at Greece-plus rates

The cash raised will help to pay off the club's £423m debt, the vast majority of which is at interest rates that would cause even Greek bankers to blanch.  The prospectus says: " Our primary sources of indebtedness consist of our pound sterling denominated 8.75% senior secured notes due 2017 and our US dollar denominated 8.375% senior secured notes due 2017."  There is a £40m "mark to market" loss on interest rate swaps.

Servicing that debt is pricey – £51.3m in 2011 although that was a great improvement on the £110.3m in 2010. Put in context – it's still around 25% of the £200m plus player wage bill, by far the greatest components of the overall £272.7m employee benefit bill.  That rose 15.8% last year – reflecting higher player wages and success bonuses rather than any generosity from the owning Glazer family towards the non-unionised catering or ground staff.  Of the 32 players listed with first team experience, only 11 would qualify for England.

The shares are not due to pay a dividend any time soon. And those Man U fans who think they can affect the rule of the Glazers via investor pressure had better think again.

Glazers 10 votes – others one vote

For  what is becoming a common practice in technology, the Glazers will have B shares with ten times the voting power of the equity issued to new investors.

But it is relocation of the club's financial holding company to the Cayman Islands that will raise eyebrows.

For not only do the Caymans offer tax benefits, they also promise protection against troublesome shareholders. The prospectus is full of the differences between Cayman Islands law and Delaware law – the latter is generally considered the most friendly towards corporates in the US – with Man U's new home offering the Glazers more protection than Delaware.

Minority shareholder rights reduced

The prospectus says: "These [Cayman] rights differ in certain respects from the rights of shareholders in typical US corporations. In particular, the laws of the Cayman Islands relating to the protection of the interests of minority shareholders differ in some respects from those established under statutes or judicial precedent in existence in the United States. The laws of the Cayman Island provide only limited circumstances under which shareholders of companies may bring derivative actions and (except in limited circumstances) do not afford appraisal rights to dissenting shareholders in the form typically available to shareholders of a US corporation other than in limited circumstances in relation to certain mergers."

And even in those "limited circumstances", it might be tough to collect the winnings from a favourable judgement.

The prospectus admits: "The majority of our directors and executive officers are not residents of the United States, and the majority of our assets and the assets of these persons are located outside the United States. As a result, it may be difficult or impossible for investors to effect service of process upon us within the United States or other jurisdictions, including judgements predicated upon the civil liability provisions of the federal securities laws of the United States.

 

Suing is difficult

"In particular, investors should be aware that there is uncertainty as to whether the courts of the Cayman Islands would recognize and enforce judgments of United States courts obtained against us or our directors or management as well as against the selling shareholder predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States or entertain original actions brought in the Cayman Islands courts against us or our directors or officers as well as against the selling shareholder predicated upon the securities laws of the United States or any state in the United States. As a result of the difficulty associated with enforcing a judgment against us, you may not be able to collect any damages awarded by either a US or foreign court."

 

The share register is out of bounds

And don't even expect to be able to inspect the share register – even if you turn up on in the Caymans. The prospectus warns: "Our shareholders will have no general right under Cayman Islands law to inspect or obtain copies of our list of shareholders or corporate records except our amended and restated memorandum and articles of association."

The Glazers and their advisers restate many times just how successful the team and its worldwide branding have been. They list the sponsors – current shirt sponsor Aon pays £19.6m a year compared to the £8m Vodafone paid in 2000.

But how much will percolate through to investors is uncertain. With many US fingers burnt in Facebook and other IPOs, they may be wary of this one.

Scoring more than the minimum $100m may prove more difficult than anything on the Old Trafford field.

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10 thoughts on “Man Utd goes offshore in $100m plus share push”

  1. Andy Zarse says:

    I said the other day Barroso and his cries of Portugal being “on track” is really from Yorkshire and he actually saying “on t’rack”.

    On Lisbon Mooar baht ‘at,

    On Lisbon Mooar baht ‘at

    Tha’s been a cooartin’ Wolfgang Schauble,

    Tha’s bahn’ to catch thy deeath o`euro

    On Lisbon mooar baht’ at”

    1. Anonymous says:

      Hi Andy
      The idea of Barroso being from Yorkshire is all too much for me! I could take Olli Rehn as a Man United fan but Barosso telling us about Yorkshire cricket would be too much!

  2. Midge says:

    Hi Shaun Portugal on track and that track seems as Talking Heads said was The road to nowhere.
    Russell Indexes say they will be the first major index provider to relegate Greek equities to emerging markets status.Wasn’t Greece on track and have we got another candidate in Portugal?

    1. Anonymous says:

      Hi Midge

      As far as I recall they are all “on track” except when they are not which is all of the time! My track would be AC/DCs Highway to Hell.

      Whilst the absolute position in Greece is worse at least in the good years pre credit crunch she did manage some decent economic growth which Portugal failed to do. So it is not impossible that when all this plays out that Portugal could end up being worse off. A horrible thought but her leaders do seem bent on a type of self-destruction for her whilst excluding themselves from it of course.

      Just to add as I was replying right on cue the EuroGroup has declared Greece to be on track…

  3. Anonymous says:

    On and on it goes. I have followed your updates for some time now and therefore have seen you accurately forecast Portugal’s decline and depression. Why didn’t those in charge see it?
    Also how long can it go on?

    1. Anonymous says:

      Hi Josephine
      I am sorry to say that it appears endless as Greece continues to plung downwards. There has to come a point when it gets worse more slowly and then turns upwards but I fear that the whole programme is delaying rather than helping that.

  4. Rods says:

    Hi Shaun,

    Another frank breakdown of all that is wrong in Southern Europe. They need a Beppe party at their next elections.

    Why should Brussels or the Portuguese Government care at this suffering is just for the little people!

    Like US 1930’s deflation and countries staying too long in the Gold Standard, history is not going to look kindly on what the Trokia have imposed on the PIIGS.

    I see the drug companies have now stopped supplying Greece, where their Government is so far behind on payments, so there are now massive shortages of basic medicines.

    1. Anonymous says:

      Hi Rods

      i recall that unpaid drugs bills were an issue for the Greek state and the pharmaceutical companies when I first started blogging about her situation 3+ years ago. Not much has changed has it? That sort of thing is so depressing as the Eurogroup has just declared her to be yes you guessed it on track!

      Today’s number: Unpaid bills by the Greek government in January 2013 amounted to 8.7 billion Euros.

  5. forbin says:

    Hi Shaun,

    Portugal – ah yes one country I’d like to see rid of the Euro.

    Brilliant country and love the people

    I used to love holidaying there but since the Euro bounced the prices up I can no longer afford it ( yet along the UK wage deflation and price inflation!!)

    Will they need bailout again – more than likely but its Spain that worries me the most – lots of hidden so far debt ….

    Forbin,

    This morning there was an article on the BBC infotainment ( or news as it once was ) channel – Special funding scheme shown to lower rates . Was it me or did they deliberatley choose dates to show it “working” ? sneaky me thinks !

    1. Anonymous says:

      Hi Forbin
      I like Portugal too and have Portuguese friends in London except I believe that things could be done to make it better whereas they seem to have almost given up. Very sad…
      As to the Funding for Lending Scheme I nearly abandoned what I had already written on Portugal and switched horse as it was a shocker! I will discuss in more detail in future blogs but if you indulge me for a few million for all the supposed effort the two taxpayer subsidised banks RBS and Lloyds have so far lent £8 billion less. Appalling.
      Oh and exactly like Japan..

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