Deferring problems for another day: Barcelona’s gamble

BARCELONA were a club supposedly in steep decline, such was the state of their finances.  They were more or less forced to wave goodbye to Lionel Messi, their greatest talisman, they started looking at bargain buys and their level of indebtedness sent shock waves through European football and handed financial journalists plenty of dramatic copy.

Although nobody seriously believed Barca would be allowed to crumble, for all their rivalry, Real Madrid need Barca as much as fish need water, it was clear that years of dancing on a volcano had seriously burned their feet. Barca’s financial mess started to look like something of a Lehman Brothers moment.

Where are we now? Barca have been pulling “levers” all summer and have been as busy as anyone in the transfer market. In fact, they have out-bid and out-bought clubs who have not been staring into the fiscal abyss. Barca may be a systemic club in the structure of modern football, but it has become a little Aesop – they have spent € 150 million ahead of the new campaign.

Barca’s response to crisis has been to behave, to some extent, like a financial institution and use some of the sector’s sophisticated tools to solve an immediate problem. In 2021, president Joan Laporta said Barca were “clinically dead” and the club had debt of € 1.3 billion and their net worth was negative to the tune of almost half a billion euros. It’s a mystery how one of the most successful and popular clubs in the world, one that can generate a billion in revenues, can find itself almost broke. Depending on who you speak to, the problem may have started with the loss of Neymar to Paris Saint-Germain when Barca were almost bullied into submission and then proceeded to waste the proceeds of the sale.

The club has also been stymied by the salary caps calculated by the league, but they tried to get round this limitation by deferring some players’ wages and persuading some to take cuts, all with the aim of being able to accommodate and register star names. The wage bill, which ran to € 575 million in 2019, had to be trimmed substantially and this contributed to the departure of Luis Suarez and Lionel Messi, the latter sending shock waves through Spanish football.

Barca were never going to find it too hard to persuade anyone to lend money to them and it was no great surprise when Goldman Sachs restructured some € 600 million of debt via a 10-year bond with a competitive 2% interest rate. They had already borrowed € 80 million to cover wages. Barca also have to fund their bold Espace project that is going to cost around € 1.5 billion – financing again arranged by Goldman Sachs – but will make the Camp Nou a spectacular 100,000 arena. 

Barca didn’t have a good pandemic, in fact in 2020 they made a pre-tax loss of € 133 million and in 2021, suffered a terrifying € 555 million deficit. They do expect to book a € 100 million profit in 2021-22 after Laporta’s emergency surgery of the past year.

That has included what could be called securitisation of future earnings. The league, realising that the pandemic had exposed certain weaknesses in modern football’s business model, set about selling a stake in the entity controlling the broadcasting revenues of La Liga for a 50-year period to US private equity company CVC Capital Partners. Barcelona declined to take part, probably because they had their own plans.

Barca struck a deal with US investment firm Sixth Street Partners, who bought 25% of Barca’s La Liga media rights. This transaction will give the club a € 667 million gain, but this will mean a reduction in annual broadcasting income of around € 40 million. Laporta has said he would have preferred not to have sold the rights, but it was a case of needs must. Interestingly, the deal was brokered by Key Capital, who have close ties with Real Madrid.

At one stage, it was reported that Barca, rather presumptuously and with some degree of arrogance, wanted to sell UEFA Champions League rights, but UEFA were not impressed and pointed to the fact that such income is not guaranteed and is based on meritocracy.

The sale of future income to generate short-term cash is, without doubt, a gamble and if Barca decline on the pitch, the effect of the deal will merely have kicked the problem down the road and possibly created a bigger hurdle for the club.

Elsewhere, Barca have been trying to sell assets like a desperate financial institution. They have divested 25% of Barca Studios, their audio-visual unit, for € 100 million to crypto business Socios and they hope to sell 49% of their merchandising business for approximately € 400 million. Another landmark was the long-term agreement with Spotify, who have bought stadium naming rights and shirt sponsorship for four years. The media have reported the deal was close to € 300 million.

Laporta has, if nothing else, been proactive but nobody expected the club to be quite so active in the transfer market. Robert Lewandowski was signed from Bayern Munich for € 45 million, a prolific scorer but at the tail end of his career. Jules Koundé of Sevilla was signing for Chelsea, but Barca came in and snatched the player for € 50 million, and they lured Leeds United’s Raphinha to the Camp Nou for € 58 million. They have also acquired Andreas Christensen from Chelsea and Franck Kessie from AC Milan. Little wonder that some pundits, managers and journalists were questioning exactly how financially challenged were Barca?

The controversy doesn’t stop there, however. According to Cadena Cope, Barca may have falsely inflated their accounts and this is what is preventing them from registering their new players. For example, the deal with Sixth Street, which Barca have declared as around € 667 million, is being reported as € 517 million by the US company. At Barcelona, day-to-day activity is a soap opera.

As the new season gets underway, with Barca hosting Rayo Vallecano, the fans will be expecting something more compelling in the coming months. With the players they have signed to reinforce their squad, they should make a better job of challenging Real Madrid for the La Liga title. With so much of the future seemingly mortgaged, there is not much scope for error.

Didn’t we tell you? Ronaldo and Manchester United

THE SAGA of Cristiano Ronaldo and Manchester United drags on, each party not particularly happy to prolong the agony, but nobody coming forward to take the player off the club’s hands. He’s 37, not part of anybody’s idea of the future and he currently earns close to £ 27 million per year. That’s an expensive luxury item for any football club to indulge.

Haven’t the footballing public got tired of characters like Ronaldo yet? In any other walk of time, he would be considered a pain in the butt, an example of the hubris that exists in the game and an especially poor case of the star culture that plagues the Premier League. Clubs were supposed to be bigger than the individual, but Ronaldo, and his entourage of media and PR acolytes, always make the narrative about him. He was an exceptional talent, for sure, but this is not a player who is willing to compromise and run down his career enjoying himself at a less challenging level. One could be impressed by that, but in looking for more glory, he is also frantically seeking a place to continue his relationship with the UEFA Champions League. It is not going to happen.

Manchester United were seduced into signing him last season. The club has a desperate look about it at the moment and if they felt that bringing Ronaldo home would be a statement of intent, they were wrong. The second coming of CR7 was doomed from the start, a flag of convenience for the player, a shot-in-the arm for the publicity department at Old Trafford. But it was never going to work because this wasn’t about the team, or about the club’s future plans, this was all about keeping those myths going.

Look at the shambles that has become Manchester United, from their poor transfer market activity to the ill-thought appointment of Ralf Rangnick, the wrong man for the wrong job. Now, Erik Ten Hag has the task of trying to stop the decay of the club, sort out who is going and staying and also clear the decks of Ronaldo. Ten Hag is a capable man and would doubtless have been successful at most other Premier clubs, the question is, can anyone be truly successful at a club that has lost its way and is now chasing its local rivals, City and Liverpool, both of whom have better game plans?.

“Ronaldo represents the antithesis of the values that are the hallmarks of our Atléti” – Atlético Madrid fans when news broke of a possible deal.

City, in particular, must be laughing. United seemingly signed Ronaldo because they thought City were going to snap him up and in doing so, steal “their man” from under their nose. How Guardiola would have handled CR7 is anyone’s guess, but how do you fit a player who plays his own tune into a “system team” like City?

Ronaldo’s arrival back at Old Trafford was greeted with near hysteria by many fans and players. Regardless of any concerns about slotting a high maintenance individual into a relatively young squad, all the masses could see was the return of Ronaldo, the spectacular goals that have trademarked his career and the undoubted charisma. Nobody seemed to take into consideration the disruption, the preening and posturing and the requirements of the team ethic. “We’ve got one of the all-time greats”. But he was 36, had spent three years in Serie A and he was bloody expensive.

It also continued United’s trend of signing big names at the end of their career. Ronaldo followed Zlatan Ibrahimovic and Edinson Cavani, all wonderful players in their prime, but hardly the stuff of forward thinking. It is hard to see United as a modern version of Southampton when players like Mick Channon, Kevin Keegan, Mick Mills and Alan Ball enjoyed late-career flurries on the south coast.

Erik Ten Hag doesn’t need Ronaldo because he’s a coach trying to make his name at the biggest club he’s ever likely to manage. Some United fans have credited Ten Hag with developing and playing youngsters, but it should be noted that Ajax develop players as part of their DNA, it is a part of their culture, and Ten Hag happened to be the most recent beneficiary. For United to benefit from that kind of philosophy, it has to be there in the first place. It is not something Ten Hag necessarily brings to the club. Ten Hag has the skills to make United successful again, but he should be doing it without the distraction of Ronaldo. If the problem persists and let’s face it, Ronaldo wants out of Old Trafford, so how can a meaningful relationship exist?, then Ten Hag will not be working in the right environment. And at this precise moment, United need all the help they can get.