Glazers in no rush to pay off Man Utd debt
With the interest rate due to jump to 16.25% in August, you would think the Glazer family, Manchester United's unpopular American owners, would be anxious to start paying off their notorious payment in kind (PIK)loans as soon as possible.
But it is understood there are no immediate plans to start using United's bulging cash reserves to pay off the £225m chunk of debt - even though their £500m bond refinancing earlier this year has given them the freedom to do so.
Team building is more important than debt repayment, says a source close to the Glazers.
Now, if this were you or I and we had a mortgage on our house which was costing us more than 16% in interest a year, I reckon we wouldn't waste too much time in paying it off.
The Glazers have been subject to sustained protests at Old Trafford
The Glazers originally borrowed the money from three hedge funds - Och Ziff, Citadel and Perry Capital - at the time of their £800m takeover in 2005. It was one of three tranches of money, worth about £275m, to complete the buyout.
Unlike other forms of borrowing, these loans came with extremely expensive strings attached. Rather than pay off the loan and the interest each year, the interest simply rolls up and is added to the final bill.
Even allowing for the £175m which was paid off at the time of the Glazers' first refinancing in 2006, it is estimated that by the time the loans mature they will be worth £600m.
One of the reasons why the Glazers took out a £500m bond to refinance what they call their "senior debt" (a term which basically tells you it has priority over the PIKs) earlier this year was to free them from the restrictions which prevented them from taking cash out of the club to pay off the PIKs.
The bond has now liberated them and, with the club predicting cash reserves of £150m by June, the money is there to start paying them off.
And yet, they don't expect to start removing cash from United's hugely successful commercial operation in the near future - certainly not before the end of the current financial year which closes on 30 June.
Why? Implausible as it may seem the Glazers are apparently comfortable with the loan. They view it as a tax deductible, benign security.
Plus, the club's owners have obviously been shaken by the Green and Gold campaign prompted by a possible takeover bid from the Red Knights even though that campaign seems to be running out of steam, according to my colleague, BBC business editor Robert Peston.
Despite that, they know taking money out of the club to pay off their controversial debts at this moment in time would be a huge public relations disaster.
A series of recent off the record briefings with journalists - unheard of in the five years the Glazers have owned the club - demonstrate a desire to close what they see as the reality gap between the public perception of United as a business crushed by their weighty debts and what is really going on.
The Glazers believe their 2007 commercial shake-up is starting to pay off with that part of the business forecast to overtake matchday and media revenue in the next few years.
In 2008/09 matchday revenue - ticketing, hospitality, programmes etc - was the biggest earner for United with £109m, or 39% of their income; second was media with £99.7m, or 36%; with commercial third with £69.9m, or 25%.
United's decision to divide up their sponsorship rights globally has turned out to be a masterstroke. For example, they have sold mobile marketing rights to six territories - South Africa, Indonesia, Nigeria, Saudi Arabia, India and Malyasia.
Each company pay United for the right to use the club's badge and players to promote their products and services and give them a share of sales.
But then United can use the new mobile users to raise even more money by charging customers for a subscription to the club's mobile content services including clips, news alerts and ringtones.
Make no mistake - with United's global reach this is a licence to print money and must be extremely alarming for the rest of the Premier League teams.
United's ability to make money - witness the new four year £88m shirt sponsorship deal with Aon which starts next season - remains unrivalled. Last year (08/09) they brought in £288m in revenue.
But no matter what the club say, whether in public or private, they are held back by the Glazers' enormous acquisition debts.
And until they start paying them off, it's difficult to see how they can turn these vast mountains of cash to their advantage at the same time as winning the trust of United's most loyal supporters.