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Manchester United's Aon Deal Not Big Enough to Appease Bond Investors

You'd think that Manchester United's £80 million deal with Aon for the lead sponsor slot on its team shirts would have made the club rich. But no, just like last year -- when it lost £21.4 million -- the club is struggling to keep its financial head above water.

Man Utd. also sold striker Cristiano Ronaldo to Real Madrid for £80 million, and BusinessWeek reports that Aon paid a £35.9 million advance on its contract. But the club reported 2009 net income of just £25.6 million on revenues of £278.5 million. Those revenues inched up from last year's £256.2 million take.

With growth of just under 9 percent and margins of around 10 percent during a recession, you'd think that makes Man Utd a solid financial proposition. The Aon deal was about 40 percent more than AIG paid for the same rights.

But Wall Street is unimpressed. Still saddled by £608 million in debt from Malcolm Glazer's 2005 buyout of the club, Man Utd is looking to raise £500 million in a sale of junk bonds. Here's the reaction from investors:

Tatjana Greil Castro, Evolution Securities: "Most traditional high-yield investors won't touch this ... It's unrated, so some investors can't take it, and there's a very busy new-issue calendar so there are plenty of alternatives. Most people just won't focus on something with far too much leverage, limited free cash flow and lumpy earnings.

Jean-Luc Petit, BT Investment Management: "This looks like a fairly risky type of investment considering the amount of leverage the American owners have ... I don't think mainstream bond fund managers would be that interested in investing in Manchester United."

More numbers here and here.

BNET's Global Football Sponsorship Deal League:

  1. Bayern Munich: £25.5 million a year (through 2013) with Deutsche Telekom/T-Home
  2. Liverpool: £20 million a year (£81 million over four years) with Standard Chartered
  3. Manchester United: £20 million a year (£80 million over four years) with Aon
  4. Real Madrid: £18.3 million a year (£55 million over three years) with
  5. Juventus: £15 million a year (£75 million over five years) with Tamoil
  6. Chelsea: £12.5 million a year (£37.5 million over three years) with Samsung
  7. Manchester City: £8m a year (£24 million over three years) with Etihad Airways.
  8. Arsenal: £6.7 million a year (£100 million over 15 years) with Emirates