Manchester United have taken out a bumper £140million loan in order to buy players in the summer transfer window after being hit hard by the coronavirus pandemic.
No football has been played in the Premier League since mid-March, heavily impacting broadcasting and matchday revenues across the league.
Based on government guidance and agreed medical protocols, play is expected to resume in June but finances have been hit hard with no matches for two months and counting.
United, therefore, have drawn £140m of their £150m syndicated revolving credit facility (RCF) in order to spend some cash in the next transfer window.
The club said it precautionarily drew funds from the RCF to increase its cash position, preserve financial flexibility and maintain liquidity during the crisis.
The secured RCF, which matures in April 2025, pays a margin ranging from 125bp to 175bp over Libor/Euribor, depending on leverage. Bank of America is facility agent and security trustee on the revolver.
Historically the RCF has been undrawn during the summer transfer window, but if the club looked to buy players with values substantially more than the players being sold, it could use cash from the facility to meet its needs.
Manchester United's main cash requirements stem from the payment of transfer fees, capital expenditure for the improvement of facilities at Old Trafford and the club's training complex, payment of interest on borrowings, employee benefit expenses, and the payment of dividends.
These expenses are normally met through a combination of operating cash flow and proceeds from the transfer fees.
The news of United's loan comes just days after club chief Ed Woodward warned that the worst of the fallout from the coronavirus pandemic has yet to hit the club.
United's latest financial results, released last Thursday, showed a drop in broadcasting, matchday and retail revenue, as well as a sharp rise in the club's net debt to £429.1million.
But Woodward admitted that the next two sets of quarterly results, covering the majority of the lockdown period and the cancellation of the club's summer tour, will make for even grimmer reading.
'These are unprecedented times,' admitted United's executive vice-chairman. 'Clearly, it has caused significant disruption to our operations, including the postponement of all matches since mid-March and the temporary closure of our retail, catering and visitor facilities at Old Trafford.
'Our third quarter results published today reflect a partial impact that the pandemic has had on the club, while the greater impact will be in the current quarter and likely beyond.
'Our club is built on a solid foundation. We remain one of the most popular teams in the most followed global sport and have created a strong financial base with diverse revenue streams.
'However, the repercussions of the pandemic are now being felt widely across the football community,
'We must recognise that this crisis will not disappear overnight and that the world which emerges will be different from how it was before.
'There are still profound challenges ahead, and for football as a whole, and it is safe to say it will not be business as usual for some time.'
Source: m.allfootballapp.com