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Barcelona’s new president Sandro Rosell revealed earlier this week that the football club is having to take out a €150million loan in order to ease financial debts. Despite the enormity of the football club which generates high income via merchandise sales and tickets it is in a real financial mess as mass spending on new players and wages has contributed to their red status.
Dmytro Chygrynskiy was sold back to Shakhtar Donestk for €15 million as a financial necessity and clearly illustrates The Blaugrana’s problems if they have to sell players to ease their finance worries. Despite their huge debt which is believed to be in the region of €326 million, the football club has seen their revenue rise via marketing and player transfers. The size of the debt is worrying to see but Rosell has assured that the club will be able to pay for the important necessities such as wages for the players, staff and personnel.
The La Liga champions are as you know not the only major European outfit in the red. There are a number of clubs across the continent who are putting their existence on the line with the undertaking of heavy loans resulting in high interest payments.
Manchester United is a proven example. They are arguably the biggest football club in the world along with Real Madrid where both clubs sit at the top of the football rich list as they generate the most revenue and income through their marketing policy and sale of tickets. Despite that impressive statistic it does somewhat disguise the turbulence with their figures as both clubs are in heavy debt.
Since Manchester United was bought by the Glazers in 2005 the club has been slumped into severe financial woe. They bought the club by loaning money from banks which now sits on their balance sheets which is bringing interest payments up.
The debt of the Manchester club is actually far greater than all thirty-six clubs in Germany’s top two divisions. That is a frightening fact.
Barcelona’s debt is small change in comparison to United. They are paying over £40million alone in interest due to the size of their debt which is bringing it up. The Glazers have revealed that they are refinancing the club but this will only be a short term fix. In the long run it is impossible to see how this debt will be wiped clean unless it’s sold on.
The Premier League is without a doubt the most lucrative and watched championship in the world. The money which is generated by television rights alone is astonishing. The BSkyB contract is massive and sees all twenty football clubs given an equal share of money. In Spain’s La Liga the football clubs have to negotiate their own contracts. Unfortunately Real Madrid and Barcelona between them recoup more than half of the money that is available leaving the other eighteen clubs to fight over the scraps.
Chelsea Limited sees their debt stand at £726million. Owner Roman Abramovich took over the club in 2003 with the vision of bringing trophies to Stamford Bridge which he has certainly achieved over the last seven years. Large amounts of money were spent on bringing players in as the Russian billionaire began his football monopoly. In order to do this he loaned his money into a holding company, Chelsea Limited, who then loaned it onto Chelsea PLC who run the football club.
Last year the loans from the holding company to Chelsea PLC were converted into shares. However Abramovich’s loan to Chelsea Limited, the holding company which owns Chelsea PLC was not. That means the loan still remains but it does not loom within the club but in Chelsea Limited. Therefore Chelsea as a football club is more or less debt-free unlike its holding company. Complicated circumstances indeed.
Abramovich is entitled to call in his debt whenever he feels as long as he gives eighteen months notice. Unlike United no interest has to be paid so the figure will stand at what is or increase depending on Abramovich’s willingness to inject more cash into the club. The huge loans he has undertaken to run The Blues in the last seven years have not been written off.
Once again it seems impossible to see how this loan is going to be wiped clean in the coming years. With UEFA now implementing rules threatening clubs to sort out their financial predicaments in the next few years it would seem that some are bound to face severe consequences unless they sort out their mess.
Real Madrid is one of the largest debtor’s in world football. When Florentino Perez won his second term as President last summer he lived up to his word of bringing in a mass influx of football stars. They did arrive with heavy price tags. He shattered the world record transfer twice in the space of a week as he lured Kaka and Cristiano Ronaldo to the Spanish capital. In total the club spent £360million on new talent in the summer of 2009.
Some of the clubs real-estate assets have had to be sold on in order to ease their financial difficulties. Perez is doing his utmost to cut back on costs to try and bring debts down but is also spending large sums on new stars with Angel di Maria being the latest big money addition to Los Blancos.
Their financial worries will hardly damage the club in the long term. Their domestic television contract is by far the richest in the world which stands at just over €1billion with MediaPro and are helped greatly by tax legislation. The fact that Madrid is such an enormous entity in Spain means they are not faced with pressure from banks in order to pay back debts unlike in England and other countries. Their status is formidable with a high political influence.
The power Madrid and Barcelona have in their domestic league is pretty undisputed. Due to the enormity of both clubs their financial predicaments do not face harsh consequences like it does for others.
Valencia has had to sell their star players David Villa and David Silva to help eliminate the risk of being liquidised. They have debts of more than €500 million and were bailed out by the regional Government when they agreed to guarantee a loan of €74 million in August last year. Again this is just heaping more and more high figures into their books resulting in higher interest payments. Los Che is in a real mess and has been for the last few years. The importance of qualifying for the Champions League last season was pivotal in bringing in higher income.
Despite all the worries that elude the football clubs it is the fans who are suffering the most. They are having to sit back and witness the predicaments their beloved clubs face and can’t help but worry about the possible repercussions.
UEFA are now taking a stance over the debts at last but it will be interesting to see if they do live up to their word of expelling teams from European competitions if their debts are not sorted out. It is a growing and unhealthy trend in European football and it needs to be addressed by the hierarchy.
Below is a table ranking the ten most indebted clubs in Europe. Manchester United sit at the top of pile accompanied by two other English outfits within the top four emphasising the superior debt levels in England’s top flight. Surprisingly Fulham Football Club also make the list with debts just under £200million.
Also The Football Association of England itself is in catastrophic debt. The rebuilding of the new Wembley has contributed greatly to their woe as it has put a £350million millstone over its neck alone. With just an annual turnover of £300million it doesn’t even come close to easing their financial woes as the undertaking of other projects has pushed them further into the red.