United debt tops £700 mln

Manchester United’s parent company’s debts have topped 700 million pounds, accounts filed on Wednesday revealed.

Red Football Joint Venture Ltd, the company owned by United’s American owners the Glazer family, had total debts of 716.5 million pounds (1.17 billion dollars) at the end of June 2009, up from 699 million pounds a year earlier.

The figures will intensify mounting concern among the club’s supporters that the cost of servicing United’s debt is acting as a brake on investment in players.

Almost one third of the debt is in the form of ‘payment in kind’ loans from hedge funds which have to be repaid at a 14.25 percent rate of interest.

The amount of Red Football’s debt in this form increased from 175 million pounds to 202 million in the 12 months to June 2009 and accounted for a substantial proportion of the 68.5 million pounds the company paid in interest over the year.

The sale of Cristiano Ronaldo to Real Madrid for 80 million pounds ensured that the company was in profit, but only to the tune of 6.4 million pounds, compared with a loss of 47 million pounds in 2008.

The Glazers last week unveiled plans to restructure the company’s debts by issuing a 500 million pound bond.

If fully subscribed, the bond should enable the parent company to reduce the cost of financing its debt but it seems inevitable that the heavy debt burden will continue to weigh heavily on United for years to come.