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Wednesday's night exit of Manchester United from the Champions League poses funding problems for their American owners. With the Glazers' business plan for the club targeting a 50 per cent increase in revenues over the next five years and a trebling of operating profits, early Champions League elimination was the last thing the family wanted. The club has probably made about £15 already from its participation in the Champions League this season, but the defeat will knock £3m off this year's profits. If the club had gone on to win the tournament, it could have won an extra £15-£20 million. The highly leveraged deal through which the Glazers bought United included a debt package of £540m, with £265m secured against the family's assets, including United, and the remaining £275m coming from high yield securities known as 'pay in kind' or Piks. Interest on the Piks is rolled up every year and with an annual yield of around 12 per cent the Glazers could find the £275m has grown to almost £500m within five years. The family will eventually be able to refinance the loans and replace them with a cheaper form of debt, although this will be difficult if the club's profits continue to fall. The presence of Piks could complicate a refinancing. In the worst case scenario, Pik holders could replace equity owners of a company if it runs into trouble. The Champions League exit will also hit plans to find a high profile sponsor to replace Vodafone. Oliver Butler of international sports consultancy Sport + Markt commented, 'The biggest driver of sport sponsorship revenues is a sustained and continuous presence in the Champions League which can provide brands with a great way to communicate. There are a number of other clubs out there looking for shirt sponsors such as AC Milan, Liverpool and Barcelona and they are still in the Champions League.'
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