Yahoo Finance Barcelona, revealed to be almost $1.5B in debt, seems determined to fly too close to the sun
The first thing you should know about the shocking amount of debt Barcelona has been revealed to find itself in is that finances in soccer are complicated. The other thing is that it’s common for soccer’s mega-clubs to carry hundreds of millions of dollars in debt at any given time.
Manchester United has owed nearly $700 million ever since the American Glazer family bought it out in a leveraged hostile takeover in 2003. Chelsea technically owes more than a billion dollars to its Russian oligarch owner Roman Abramovich, who bought the club the same year but has always written down his investments as debt.
Real Madrid and Barcelona are in the debt of various creditors by several hundred million dollars as a matter of routine. It is simply how they operate. It’s a financial brinksmanship that is bedrock to the business of soccer. Debts seldom get paid down, only services and restructured.
Nevertheless, Monday’s report in Spanish newspaper El Mundo that Barcelona’s debt had swollen to almost $1.5 billion (with $887 million coming due in the near future) was startling for the sheer size of it.
Particularly stunning was the amount still outstanding on transfers for players who either arrived years ago or are already gone. Again, it isn’t unusual to buy players on credit, but here too the volume is breathtaking. Barca has $238 million in outstanding transfer fees to other clubs, while it is owed just under $72 million. It owes $48 million from its purchase of Philippe Coutinho from Liverpool, and there is $58 million still unpaid for Ajax’s Frenkie de Jong.
That isn’t to say Barcelona owes Ajax and Liverpool directly. According to Dutch magazine Voetbal International, Ajax and Liverpool both sold that debt to a third party which guaranteed the transfer, paid out the selling club in a lump sum – minus a commission – and will collect the remaining installments from Barca.
A few years ago, Barcelona undertook a concerted and public push through new businesses offices around the world, a major investment in new digital products and a planned stadium renovation, to become the first club to reach a billion euros in revenue. In 2018-19, the last full season before the pandemic, Barca fell just short. But last season, the income declined while expenses stood firm, barely diminished from the year before. Barca expects to run a small profit during the current fiscal year, but its spiraling debt poses an existential threat to the club – especially with so much of it coming due soon.
But it still spends a gargantuan 74 percent of revenue directly on its payroll, above La Liga’s 70 percent cap and far more than the 50 percent that is recommended for a healthy soccer club. In a sense, Barcelona had to break revenue records because it also had obligations to the biggest wage bill in any sport.
The pandemic rammed into that delicate equilibrium and knocked it way off kilter, costing the club almost $243 million in projected revenue. It’s little wonder that some voices inside the club suggested that letting Lionel Messi walk in their contract dispute last summer – or better yet, selling him – wouldn’t have been such a bad thing, considering his reported $94 million salary, before bonuses.
Earlier in the pandemic, Barcelona players agreed to defer as much as 70 percent in salary, but that really only added onto the debt. And the precarious finances mean the club can’t afford badly needed reinforcement during this January transfer window.
Still, manager Ronald Koeman, charged with seeing a flawed team through this difficult campaign, says the squad is unaffected by the news of the crisis. “We trained well today and the players don’t look worried,” he said ahead of Wednesday’s Copa del Rey match with Rayo Vallecano.
But this being Barcelona, the matter has inevitably turned political. The financial mess is central in the club’s presidential election, which was just pushed back to March because of the pandemic’s resurgence in Spain. The last president, Josep Maria Bartomeu, was forced to resign to answer for the spiraling results, both sporting and financial.
Victor Font, a front-runner who had already promised to get Messi to stay when his contract runs out this summer, capitalized to promote a plan in the SPORT media outlet. He says he would reduce costs and refinance the short-term debt to stave off bankruptcy. All while preserving the club’s all-fan-owned model by avoiding the sale of a stake to an investor.
He may succeed. Or someone else might. But this entire episode will remain remarkable even if Barca staves off ruin yet again. After all, it will have been the richest, most-admired, most-envied club in soccer that came the closest to its demise.
Because Barcelona is determined to find out just how closely it can fly to the sun.
Leander Schaerlaeckens is a Yahoo Sports soccer columnist and a sports communication lecturer at Marist College. Follow him on Twitter @LeanderAlphabet.
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