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Manchester United accused of causing 'psychological shock' to Adem Ljajic

Partizan Belgrade's Adem Ljajic will no longer be signing for Manchester United in January.

Manchester United have been accused of subjecting Adem Ljajic to "psychological shock" after pulling out of the £9m deal to sign the player dubbed 'Little Kaka' in Serbia, believing him to be too much of an expensive gamble at a time when the club's owner, Malcolm Glazer, is imposing financial cuts at Old Trafford.

Mladen Furtula, Ljajic's agent, has described the 18-year-old as "surprised" and admitted that United's decision to invoke a get-out clause not to go through with the transfer from Partizan Belgrade would "change our lives".

Goran Stevanovic, Partizan's head coach, praised Ljajic for "handling the situation well" and "overcoming the psychological shock". Savo Milosevic, the former Aston Villa striker who is running for the position of Partizan's new chairman, added: "For Ljajic, psychologically, this could have a negative impact, but I hope that this won't be the case."

The suspicion at Partizan is that United withdrew because of the club's spiralling debts under Glazer's ownership. Ivan Tomic, Partizan's sports director, said United had missed out on an "excellent, young player, a footballer of big potential". He added: "I think that they will regret this decision in future."

Ljajic, described by United as "Serbia's brightest young talent" when they announced the deal last January, was due to complete the move in next month's transfer window and has regularly visited Manchester over the last 11 months to work with his prospective new employers, the last occasion being in November when he was given no reason to believe there was a problem. Zoran Tosic, who moved in the same direction for £7.3m, has made only five substitute appearances and United fear he may have to reapply for his work permit.

A Serbia under-21 international, Ljajic had stayed in Belgrade to get some first-team experience, with Ferguson tipping him to be a big part of the next generation of United players to replace his older players – one of whom, Paul Scholes, admitted yesterday that his form had dipped this season and that he was "not making as much of a contribution as I'd like". He will assess his future next summer: "You do think about the future. I am not too sure. I'll just carry on and we'll see what happens come the end of the season."

United then announced this week , in a statement endorsed by the chief executive David Gill, that they no longer considered Ljajic good enough to make the grade. That, however, was contradicted today by the assistant manager, Mike Phelan, who said it was not because of the player's ability but because of potential work permit problems.

"We made a tentative approach to get a work permit and the word we got back from the Home Office was that we couldn't get that through in time to get Adem signed in January," Phelan said.

Glazer family hit the wall over refinancing of Manchester United

The Glazer family, the owners of Manchester United, are struggling to refinance their enormous debts amid concerns about the impact they are having on the club.

The Times understands that the Americans have been trying unsuccessfully to secure a refinancing package for part of the club’s £699 million debt for months, having failed in 2007 and last year, because of the bleak global economic climate.

Fans’ groups have cast doubt over whether they will ever see the £80 million raised from the sale of Cristiano Ronaldo, the Portugal forward, to Real Madrid last summer reinvested in the squad.

Dragan Djuric, the Partizan Belgrade president, meanwhile claimed this week that United pulled the plug on a deal to sign Adem Ljajic, the Serbia Under-21 midfield player, because “maybe they are in financial crisis”.

United dismissed Djuric’s claims and a spokesman for the Glazer family has maintained publicly that there is plenty of money available for Sir Alex Ferguson, the manager, to spend on players, but supporters are unlikely to be pacified until they see the arrival of some big names or evidence that the spiralling debt is under control. The main concern is understood to centre around the £175.5 million worth of debt that the Glazers are personally responsible for, not the £518.7 million of loans secured against the club.

It is these so-called Payment In Kind (PIK) notes, money borrowed from US hedge funds that “rolls up” at an annual interest rate of 14.25 per cent, that the Americans are believed to have been trying to refinance.

The intention was always to pay off these loans within a few years of the takeover in May 2005, but while they managed to redeem some of the original PIK debt of £275 million, the credit crunch has made this difficult.

By the time the debt matures in 2017, it will stand at £580 million unless the Glazers can pay part or all of it off before then, or secure a preferential rate of interest. With the club also facing rising capital repayments from 2013, the PIK debt is a concern. It grew from £152 million to £175.5 million in one financial year.

Previous reports that the Glazers could persuade the banks to refinance by offering securitisation against future match-day revenues are said to be wide of the mark; ticket sales are already factored into the borrowing.

As such, given that the 14.25 per cent interest rate was agreed the last and only time the Glazers have been able to refinance, in August 2006 when the financial climate was rosier, they will do well to secure a lower rate unless they have something tangible to offer would-be lenders.

It is understood that United are operating well within the financial terms set by their lenders. However, Perry Capital and Citadel — the two US hedge funds that provided the Glazers with PIK loans — get a range of rights over the club in the event that their financial performance falls beneath a certain level, including the right to appoint their own directors to the board.

Ultimately, they could seize control of the club should revenues plummet.

Documents obtained by The Times also reveal that the terms of the loan put a cap on United’s spending.

A spokesman for the Glazer family said: “We continue to keep our financial options for the club under review just like any other business.”