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18 Aug 2011

With gross debts of £515m and annual interest payments of £45m it looks like a no-brainer for Manchester United's owners, the ultra-secretive Glazer family, to try to raise a large sum of money with a partial flotation in Asia.

Initial estimates suggest the Americans could bring in anywhere between £400m and £600m for selling off 25 to 30 per cent of the club's parent company.

That would value the club at around £1.7bn and not only potentially help reduce the bond the Glazers took out in January 2010 but pay down any other private debts the Glazers have.

Despite announcing the controversial and hugely expensive PIK loans which helped them acquire the club back in 2005 had been paid off last November, the suspicion in the City and among United fans groups is that the loan was simply transferred from one group of hedge funds to another single hedge fund.

So raising some cash would clearly be hugely beneficial to a family which has been pilloried for burdening the Premier League's trophy asset with too much debt.

But while United's global commercial strategy - where the club split their commercial rights up territory by territory to maximise revenue - has been a huge success, this latest plan is not a guaranteed winner.

First of all, whatever valuation the initial public offering (share offer) places on the club, once traded the share price will be subject to the forces and whims of the market. United's share price could plummet if huge numbers of shares are dumped by speculators after the float or stock markets are rocked by another round of global slumps.

That could wipe millions of pounds off the club's value undermining the Glazer's prized $2bn overall price tag for the club.

Secondly - and although the Glazers will retain a large majority stake of between 70 and 75 per cent - by making such a large chunk of the share capital available on the open market, are the Glazers risking one or two large shareholders buying big stakes in the club which could become an awkward challenge to their authority?

I am told that some of the rich investors interested in the failed Red Knights bid to raise the money for a takeover bid came from Asia.

Singapore-based businessman Peter Lim is thought to retain an interest and the Glazers might worry that a bloc of significant shareholders interested in building bigger stakes over time could lead to the sort of instability being witnessed at Arsenal.

The final potential drawback for the Glazers comes with the disclosure requirements associated with lisiting on a stock market. United were a PLC quoted company in London until the Glazers took the club private following their takeover.

The lack of transparency might have enraged fans but for the owners and executives of the club it not only allowed them to maintain a cloak of secrecy around the club's financial affairs but removed a layer of costs and bureaucracy. Chief executive David Gill is known to despise the reporting requirements that come with a stock market listing.

In reality the need to keep bondholders informed of the club's financial performance once every three months has already forced United and the Glazers to be more open.

And there are doubts over exactly how much disclosure will be required in Singapore. That's one theory for the Glazers abandoning well advanced plans to float in Hong Kong (the club actually registered with the stock exchange there, I am reliably told).

The Premier League are watching the latest developments at Old Trafford closely but are only officially informed at the point when more than 10 per cent of the club's shares are sold to one investor or entity.

Privately they have no concerns over the plans even though some might argue it further erodes the club's ties to Manchester and England. They didn't block Birmingham's float in Hong Kong, for example.

But ultimately fans will worry most about where the money from any float will go. If it is used to pay off debts then opposition to the Glazers - already wavering in the face of the club's continued success and summer recruitment - will weaken.

If, however, it is not clear what the cash is being used for then that will just add to concerns and suspicion over the Glazers' ownership and their plans for the future.


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