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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