United fans have protested against the Glazer's ownership of the club
By David Bond
BBC Sport Editor
Manchester United's owners the Glazer family have been hit with a steep rise in their annual debt payments after the club exceeded a limit on their overall borrowings which form part of their controversial PIK loans agreement.
The Glazers used the high interest form of financing to help raise the funds for their £790m takeover in 2005.
But the loans, originally worth £265m and taken out with three hedge funds - Citadel, Och Ziff and Perry Capital - but reduced to £138m as part of a 2006 refinancing, include strict covenants relating to net debt levels and the club's earnings.
Failure to meet the borrowers' terms by 16 August meant the annual interest rose from 14.25% to 16.25%.
Analysts predict the annual payment will now increase to about £38m, up from £25m last year. Because the interest on the loans is "rolled up" and added to the original sum borrowed the Glazers will owe around £267m on the PIK loans by 2011 - almost a £100m increase in only five years.
And although Manchester United are not directly liable for the PIK loans as they sit on the accounts of the club's parent company, Red Football Joint Venture Ltd, the sharp rise will add to fans' concerns over the American family's ownership.
It will also raise fears among supporters that the Glazers will soon use the club's revenues to start paying off the PIK borrowings.
As part of a £504m bond refinancing earlier this year, the Glazers have an option to take £95m out of the club's cash reserves. According to the most recent set of accounts published by United they have £95.9m of cash available.
Duncan Drasdo, a spokesman for Manchester United Supporters Trust (MUST), said: "The Glazers' PR people claim this PIK debt is nothing to do with Manchester United but we believe in the next 12 months accounts will start to show them taking even more money out of our club.
"They've already wasted more on interest and fees than the total sum of all season ticket money paid by every supporter in their entire five year ownership.
"On top of all that how much more will this extra interest cost us? A Chicarito per season? A Rooney over the term of the debt? Imagine what we could achieve if released from the millstone of the Glazers' ownership."
In May the Red Knights group of wealthy fans announced they had put on hold any plans to bid for United, citing the Glazers' asking price of £1.5bn as too high.
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