I am having a little difficulty understanding the current situation with regards the interest free loan of #25 million provided by NTL, and would be grateful if anyone could clear this up. As I understand we are receiving this money in return for NTL to place their logo on the team shirts for next season. As I also understand it ManU have secured a shirt deal worth #30 million with Vodaphone which is NOT a loan. Obviously something is up or I am not in full possesion of the correct facts and figures, what is the situation?

-- Anonymous, March 22, 2000

Answers

I think this is in addition to a seperate sponsorship deal and part of a 'foot in the door' media hosting package, i.e web site, NUFC TV, telephone company etc.

MANU commands a bit more muscle in the sponsorship arm wrestling stakes so I doubt ours will be anywhere near 30 pounds English million.

-- Anonymous, March 22, 2000

NTL Deal ...William Hearn

This was discussed extensively on the Communicata bbs when it was announced. I'm a little fuzzy now on the details, and seem to recall Windy, Dougal & Jonno being the experts.

This was much wider than a corporate sponsorship deal, although part of the deal was indeed that the NTL logo would be worn on the Toon shirts. NTL bought all Drugless's personal shareholding (quite small), and increased their overall equity holding in the plc to about 10%.

The deal assigns them various media rights which I don't recall being widely elaborated upon. At the time, FF said they would be "managing all future media-related aspects of the business", but its not clear in my mind as to what 'rights' they now actually own, and will derive revenue from. My assumption is that they will get the rights to the cable TV channel that will be developed - ie. pay-per-view - although the revenue generated may well be shared between them.

In exchange for the media rights, and the sponsorship element, NTL are to provide an interest-free loan - #25 million I believe - to be made available in several chunks. There are prescribed uses for some of this money, for the Youth Academy etc.

I seem to recall Dougal telling us that the loan was contingent on the Toon retaining PL status. I also believe that at some point in the future, the #25 million will be converted into shares, further increasing their shareholding in the club.

-- Anonymous, March 22, 2000

not a bad summation Clarky (nee Graham!)

-- Anonymous, March 22, 2000

William (Billy) Graham ...to: Tynedale Man

I think I should change my monica to William Graham - the baddest, meanest Border reiver of them all!

-- Anonymous, March 22, 2000

I think it said in the annual report that the loan would be repaid in shares valued @#1.50ish. At 60P so far that makes it a good deal for the club.

How it affects NTLs max %ge allowed I don't know.

-- Anonymous, March 22, 2000

The number of shares will be increased to dilute the NTL holding so that it is never more than the legal limit of 9.9%.

-- Anonymous, March 23, 2000

***tedium warning*** pass over quickly if financial stuff gives you the yawns.
The deal between NTL's subsidiary, Premium TV and NUFC is a partnership, whereby NUFC get 70% of the net revenues generated by the partnership, and an interest free #25M loan, as stated above, repayable in five years.
NTL get the exclusive rights to act as agent for all NUFC's media/sponsorship deals and more shares in five years when the loan is repaid. Depending on what the price of the shares is in five years, the equivalent repayment may be valued at more or less that #25M. The deal was struck using #1.55 per share. So if shares are worth less than 1.55, then the #25M seems better value, as we wouldn't be able to sell the shares to the market and make #25M. If the shares are more than #1.55, NTL make a profit (less the interest foregone of course).
So NTL will use Newcastle as an advertising vehicle and means of promoting their general cable/media interests, whilst trying to get the best deals in selling sponsorship/rights etc to NUFC. They'll take a slice of the pie in return (no agent worth his salt would do it for free), and will end up owning nearlly 20% of NUFC.
Going back to the original question, it's unclear whether the media partnership sold the main sponsorship rights (ie shirts etc.) to NTL for a fee, or whether it was for free. Probably free.
So what have NUFC done? They've got #25M up front, with an annual saving of #2M on interest payments. They've got someone with a media powerhouse to promote the club and maximise media/sponsorship revenues for mutual benefit. They've lost the ability to negotiate on their own behalf, and the revenue from the previous main sponsors (anyone know how much this was?), and they'll end up with NTL owning near 20% and the power and influence that that implies. Let's just hope we can trust NTL. NUFC is now their commodity and brand and will no doubt be americanised to some extent

-- Anonymous, March 23, 2000

To MacBeth. If you're right, it's better news. What I've read isn't totally clear as to whether the 9.999% is in addition to the 9.8% they presently own, or the total holding after the further share issue in 5 years. What would be the implications if they owned more then 10%? Would it have to go to the Monopolies and Mergers/DTI or whatever?

-- Anonymous, March 23, 2000

Windy

Am I correct in thinking the conversion of the loan into equity would be accomplished by issuing new shares - thereby diluting all existing shareholders?

-- Anonymous, March 23, 2000

Clarky

Well, yes, I think, if the Articles of Incorporation allow it. I've been trying to work it out too, but please don't treat me as an expert - I'm not an accountant or anything. (well a failed one, to tell you the truth) As a plc they wouldn't want to piss of their shareholders too much - and that include the pension funds etc. not just the likes of us. So there must be something more to it.

Re MacBeth's point, the new issue must take NTL to near 20%. They wouldn't be paying #25M for a fraction of a % more of a holding in the company, and if they're doing it at the equivalent #1.55 per share, the overall share issue would be huge for the increase in overall holding to still stay below 10%.

Right, that's killed the bbs off for the afternoon, I'm sure ;-)

-- Anonymous, March 23, 2000