The British hedge fund manager Crispin Odey is making a multimillion-dollar bet that MU’s shares will fall. Moysie will prove him wrong!
Posts Tagged ‘MU’
The British hedge fund manager Crispin Odey is making a multimillion-dollar bet that MU’s shares will fall. Moysie will prove him wrong!
By conventional financial yardsticks, the club is grossly overvalued at $3bn (£1.9bn) while also carrying £368m of debt. Now that the most reliable asset is giving up front-line duties, the stock deserves to be a double “sell.”
The valuation issue is basic: revenues were only £320m last year and half that sum was paid straight out as salaries. At the operating level, profits were only £44.9m. That entire sum was then consumed by finance costs of £49.5m, leading to a pre-tax loss of £4.7m. Naturally, there was no dividend …
Ferguson kept the club in the Champions League every season and collected trophies. In doing so, he made the Glazers’ optimistic financial assumptions work.
For the record, I admire Moysie’s track record at the Toffees and respect MU for choosing him, not not some European super star
manager management consultant who only know how to spend money to win trophies. MU bought homegrown talent, not FT.
The billionaire investor George Soros has bought a stake in Manchester United football club, a US regulatory filing showed.
Mr Soros’ investment fund bought about 3.1 million Class A shares in the club, according to the Securities and Exchange Commission …
His shares equate to a 1.9% stake in the entire club, worth about [US]$40.7m (£25.8m) at Monday’s closing price.
So with Sity owned by the Arabs, EPL title is shaping up to be another Arab-Israeli conflict. Or Allah versus Yahweh. Last season, Allah won, but only because manager and strikers went to mass (Roman Catholic version).
MU’s purchase of Robin van Persie caused a little wobble in its share price because analysts said he cost too much.
MU’s shares are worth just US$5, well below the US$14 they IPOed at recently, according to an unknown US reseach team.
MU has applied to list on NYSE.
So much for SGX’s prostitution of its principles. Three cheers for the central bank. http://atans1.wordpress.com/2012/06/14/you-wont-read-this-in-our-msm-mu-frustrated-with-sgx/
“IFR said the club and its owners had become frustrated with long delays in approval from Singapore.” http://www.breakingviews.com/man-utds-ipo-transfer-keeps-owners-in-control/21023624.article
The antics of the Glaziers (the owners of MU, in case you are not into footie) in trying to ensure that post-IPO, they can “fix” minority shareholders reminds me of the PAP’s attempts in the late 1980s to restrict the choice of voters.
When faced with the possibilty of losing more than a few seats in Parly, they resorted to Group Representative Constituencies (GRCS), where voters were forced to vote for a group of MPs headed by one (possibly two) cabinet ministers, not an individual MP. Over the years, the system was used to introduce such MPs like Rin Tin Tin (aka Kate Spade), “Waz so great abt NS?” Puthu, and “No money, no dignity” Lim. GRCs worked for the PAP until this year, when the PAP lost a GRC, losing five seats. Two cabinet ministers and one junior minister lost their seats in Parly.
Well the attempt to introduce two classes of shares (with different voting rights) and when that failed, to issue non-voting preference shares (that unusually do not carry a dividend that is fixed and cumulative*) indicates that the Glazers are just as concerned as the PAP about the consequences of the unwashed masses having the vote to push them around.
Too bad for conspiracy theorists that the Glaziers are Jews. Otherwise, it could be spun that they are related to one Harry Lee, the master architect of the GRCs.
But seriously, there is a link that conspiracy theorists can spin around. Our very own SGX that has been assidiously courting, then faciltating the Glazers, is 23.5% owned by Temasek. Temasek cannot vote its Temasek shares, but that’s only a detail to conspiracy theorists. After all, a senior SGX official was from Temasek. And Temasek’s president was SGX’s ex-CEO. And conspiracy theorists know who owns Temask, don’t they?
*These characteristics make them more like common shares. The reason why preference shares carry fixed dividends and why dividends are cumulative is to make them safer investments. And to compensate holders for the absence of voting rights, and the inability to share in the gains that can accrue to ordinary shareholders. Absent dividends that are fixed and cumulative; they are like common shares absent the voting rights and the potentially unlimited upside.
To be fair though, if the company is liquidated, the preferential shareholders will have priority over ordinary shareholders when assets are divided. Unless the Glaziers have gotten rid of this too,
I was searching high and low for this figure, given all the publicity on all other types of other numbers, EBITA, revenues, operating profit etc which ran into hundreds of millions. Example http://www.channelnewsasia.com/cna/cgi-bin/search/search_7days.pl?status=&search=Manchester%20United&id=1150542
It is only sterling 9.8m (S$19.1m).
Unlike in HK, a loss-making co can list here.
Or the reason why no new stars are required at MU?
Andy Green (an analyst in the City of London) is the Manchester United supporter who first uncovered the extent of the Glazers’ debts. They are £1.1bn in debt – £400m more than previously known – after borrowing extensively against their shopping mall business, he believes to provide equity for their MU bid. It’s like using an overdraft or credit card to pay for the equity portion of yr mortgage.
First Allied is a private business and its accounts are not publicly available. But Mr Green discovered that the Glazers’ shopping mall mortgages had been bundled with other loans as Commercial Mortgage Backed Securities.
Those bundles are publicly traded and therefore require the Glazers to provide detailed information on all the mortgages, which are then publicly available in the US.
Mr Green found mortgages – confirmed by the BBC – on 63 of 64 First Allied shopping centres, totalling £388m ($570m).
Most of those were taken out with Lehman Brothers before the US investment banking giant went bankrupt, triggering the global banking crisis in 2008.
While Lehmans collapsed, the Glazers’ mortgage debt lived on and many of those shopping centres are not generating enough income to keep up with interest payments.
With falling commercial property values, many are also now in negative equity.
Banks have put 28 of the shopping centres on a watch list, meaning they are worried about the loans.
Four shopping centres – one each in Ohio, New Mexico, Texas and Georgia – have already gone bankrupt.
When they bought Manchester United in 2005, the Glazer family borrowed £500m and paid the remaining £272 million in cash.
Mr Green found that the Glazers had remortgaged 25 of their shopping centres in the six months before the takeover.
He believes the family borrowed against their US properties to pay for United: “At the time when they had to present a huge amount of cash over here in the UK they borrowed a huge amount of extra money in the US and publicly they didn’t buy anything else that year.”
A spokesman for the family did not respond to questions about the mortgages taken out by First Allied.
But with properties now worth about £380m ($550m) but mortgages valued at £395m ($570m), the shopping mall company now appears to be worth next to nothing.
That financial picture has analyst Mr Green questioning how the Glazers will service their £1.1bn debt.
The Red Knights have said that they will not overpay for MU. The group of wealthy businessmen is believed to value the club at no more than £1bn … talks with potential investors “have reinforced our belief it is wrong to offer above fair value”. BBC story
So waz the point of continuing with their plans to bid for MU.? The Glazers have already reportedly rejected a £1.5bn bid from some Arabs. http://atans1.wordpress.com/2010/05/08/gold-green-glazers-give-finger-to-fans/
But at least the Red Knights are spending their own money, unlike, one can reasonably assume on what has been made public, the independent directors of Sino-Environment who went around making sure the corporate governance boxes were ticked while the company was collapsing around them.
The revelation [that the Glazers had turned down a £1.5bn bid by an Arab consortium late last year] represents depressing news for those fans who have been campaigning for the Glazers’ removal and had hoped that the hostility shown towards the Americans would help to persuade them to sever their ties with the club. More than 150,000 people have joined the Manchester United Supporters’ Trust, the group co-ordinating the anti-Glazer movement, and the protests have become increasingly voluble since the release of a bond prospectus in January that laid bare the Glazers’ business model.
The Glazer family are said to be unmoved by the animosity and thick-skinned enough not to allow it to affect their planning. They are described as enjoying the prestige of being associated with a winning team. That paints a bleak picture for the former United director Jim O’Neill, now the chief economist at Goldman Sachs, who had been hoping to move into power at Old Trafford via the Red Knights, the group of “high net value individuals” that also includes the former Football League chairman Keith Harris.
An offer from the Red Knights is anticipated in the coming weeks but, even if it is substantially higher than the £800m initially discussed, the Glazers will reject it out of hand and offer no indication of a price that might tempt them to consider a sale. This could be seen as a negotiating tactic, but the Glazers’ message is “thanks but no thanks”.
..the Glazers are already thinking far enough ahead to be talking about refinancing their debts in 2017. They accept they could have been more open with the supporters and are aware of the misgivings about the £700m worth of debts they have brought to the club. They also hope to be at Old Trafford more next season. Avi Glazer has been a regular visitor but his brother Bryan has found it harder because his children are younger.
The CEO stressed that United’s debts of £500m are a “misconception” because the club has about £140m in cash available, over half of which was generated by Cristiano Ronaldo’s world record £80m transfer from United to Real Madrid last summer.
And he confirmed manager Sir Alex Ferguson can spend all £80m on new players, should he wish to expand the squad.
Err but how come the price of the junk bonds that MU issued recently have collapsed? Days after they were were issued they fell five percentage points. Buyers are looking at a loss, if they sell.
Previous posts on MU
Why MU may have no money for new players even though it raised £504m via junk bonds. The bonds were sold in two tranches, one of £250m with a coupon rate of 8.75%, and another tranche of US$425m with a rate of 8.375%
“Glazers could take £130m out of Manchester United next year
• Small print in bond offer reveals shock provisions
• Owners able to get cut of money from player sales”
And an MU fan and journalist puts the knife into the Glazers.
If no regular decent runs in Champs League and FA Cup could end up bit like Leeds. Third run KO is not a decent run.
But isn’t Liverpool a better candidate to be another Leeds? Relegated to Europa League, not challenging for EPL top 4 position, no $ for players. The problem is MU’s debt: more than £700m, bigger than that of any other EPL club. And growing: it could amount to £1.1b by 2017 according to a Guardian piece (Warning: not an easy read if not into finance.). By contrast Liverpool’s debt is only £350m (though like MU’s rising).
It’s all because of the $ owing to three hedge funds. By the time that debt is due for repayment, in August 2017, the accumulated capital will have risen from an initial £138m when the Glazers refinanced in August 2006, to £580m. Then there is another £524m of bank and other borrowings which United owed at June 2008.
MU analysed in this article (warning: another boring read if not into finance) by Robert Peston, BBC’s financial editor. So that footie fans can focus on games, the impt bits of his analysis:
“One banker with a close knowledge of the club put it like this to me: Manchester Utd as a business is a delicately balanced financial machine, which works when the team is winning and revenues are pouring in, but where there is not much of a financial cushion to absorb the inevitable occasional flop.
‘He said that the huge debt that was taken on when the Glazer family bought the club was predicated on the basis that Man Utd would have decent runs in the Champions League and FA Cup in most years – which of course is typically what has happened.”
As lawyers who are fans of MU should know,when MU (when it was a listed company) became the target of a highly leveraged buy-out offer by the Glazers, the directors sought legal advice on their duties towards shareholders and MU.
They were advised that directors owe a duty to the company and not its individual shareholders. In many instances, the distinction is not significant, since what is good for the corporation will also benefit its shareholders. Maximising the return to shareholders (or creating “shareholder value”), in many cases, does not conflict with the interests of the company.
But there may be situations where the interests of the company and shareholders may conflict.
The interests of shareholders may lie in realizing a short-term gain on their investment, something which the directors may decide is not the in the interest of the company in the long term. For example, the debts that MU incurred in going private, might have prevented the club from buying the players MU needed to win trophies. It didn’t happen at MU; despite its debts MU has the wagga (dosh) to buy players. But the example of Liverpool FC shows that this fear was reasonable and legitimate.
The interests of majority shareholders may not also be the same as the interests of the company. Controlling shareholders may want the corporation to take certain action that may be in its interest, but not necessarily in the best interests of the corporation. Hedge funds, with a controlling stake, may want the company to pay a high dividend because they (the controlling shareholders) want to maximise the returns to their investors. But the company may need the cash to expand its production lines.
The correct answers to these kinds of issues depend very much on the facts of each situation: something the independent directors of Sin0-Environment are finding out the hard way.