Barcelona's $1.3bn debt

every source has a source

the athletic barcelona are in financial

crisis

their debt has passed 1.2 billion euros

much of it repayable in the short term

but how does a club that made almost 1

billion euros in 2018-19

end up facing the very real prospect of

bankruptcy

barcelona's debt issues have roots in

financial risk-taking

poor decision-making and the

consequences of the global pandemic

the club has suffered turbulent changes

of presidency in the last decade

and the recent arrest of former

president joseph maria bartomeu

but what makes it all the more difficult

to grasp is just how much the club turns

over

their broadcasting take was worth almost

a quarter of a billion euros in 2020

their huge commercial department has

generated over 700 million euros in the

last two years

and merchandising is now run in-house

generating greater revenues

but despite this the club's

dysfunctional approach has left it

heavily in debt

and unsustainably so and the reason is

that a lot of barcelona's debt falls for

repayment in the short

term an eye-watering 730 million euros

according to the athletic around 130

million of transfer fees and crucially

some 266 million in bank loans is due

some of it as early as the summer of

2021.

now transfer debt is an increasingly

common phenomenon in european football

it's like buying a sofa and paying it

off in installments but with footballers

barcelona's transfer debt stands at

around 320 million euros

and includes outstanding payments for

philippe coutinho

frankie deyoung malcolm a player bought

from bordeaux who left barcelona in

august 2019

and ature vidal another who has been and

gone having joined in 2018.

barcelona are also owed quite a lot of

transfer money but the net transfer debt

is still about 155 million euros

so while some other clubs have more debt

or a worse debt

to earnings ratio their loans might be

to owners which could be repayable on

demand

or on very long term terms with banks

real madrid's losses amounted to just

over 100 million euros last year with

falling revenues across the board

but they have a far more sustainable

wages to turnover ratio

and their debt is only around 354

million euros with bank loans for

stadium redevelopment not due until the

summer of 2023.

this means there's no immediate risk of

a knock on the door demanding the money

now

and that's not quite the case with

barcelona

the club has the highest revenue in la

liga 729 million euros according to

their 2020 accounts

split between broadcasting match day

revenue commercial and

other sources of income but they also

have the highest expenditure

and with the largest debt in la liga

this is how a club can both make the

most money

and have the greatest losses barcelona

reported a loss of almost 100 million

euros in 2020

but this is set to grow and because debt

needs to be serviced while it also sits

on the books and counts against

cash reserves and assets on the club's

balance sheet

money is always flowing out if income

doesn't cover this

then loss is accrue which requires more

borrowing and the cycle continues

when pep guardiola was appointed head

coach in 2008 the success he brought

catapulted barcelona forwards

creating a virtuous cycle the more the

club won the more money they got

the richer and more successful they got

the more attractive they became

making it easier to secure new players

or tie down incumbent ones

to long contracts since guardiola

left in 2012 however the club have had

five managers including incumbent ronald

kerman

while luis enrique won nine trophies in

his three years and ernesto valverde

secured two la liga trophies

the club has stagnated in europe they

haven't won a champions league since

2014-15 lewis enrique's first season

in charge kerman could technically win a

domestic double

but the club's real proving ground is on

the continent where a lack of recent

success

has seen a decrease in competition

revenue and broadcasting revenue

two major sources of income barcelona's

revenue fell by 39 million euros between

2019

and 2020. crucially though the virtuous

cycle

has been replaced by a vicious one this

is because barcelona are still paying

for prior success

in terms of huge contracts to a core of

players associated with that previous

era

the club has always maintained an

unusually high wages to turnover ratio

the standard is about 60 while they

sometimes have been closer to 70.

but while that was justifiable at the

team's peak and when those players were

in their respective primes

now it's a tremendous burden and efforts

to rejuvenate the side have been

complicit

and the accumulation of debt barcelona

have thrown away money in the transfer

market and still owe much more

the club have occasionally bought well

and for value in the last decade

most notably pederi marc andres stegen

and evan rakitic

but vast sums have been spent on players

who have yet to deliver consistently

like usman dembele all those that never

did like andre gomes or yerry mina

the result is that barcelona have the

highest wage bill in world football

yet nowhere near the best squad

so how do they get out of this well it's

simple in practice but

hard in actuality a priority for the

newly re-elected la porta

is to renegotiate the terms of the bank

loans these include facilities with

goldman sachs

alliance and prudential and were largely

taken out to cover wages in the short

term

now this will be tricky because banks

will see barcelona as a risk

but should be possible to some degree

secondly barcelona need to improve

on and off the pitch winning will help

as will managerial stability

and a much improved hit rate in the

transfer market

they also need to reduce the wage bill

clear out older or fringe players and go

back to using a core of homegrown

players who will be in the short term at

least

less costly in terms with talents like

ansufatti

moriba and oscar mingeza this feels like

a balance that can be struck

and with laporta re-emphasizing the

importance of lamazia during his

campaign

one also likely to be pursued there are

other options

but they are less certain barcelona

could change its ownership model than go

public

which would see a huge cash injection

but caused mutiny among the socios the

club's members

barcelona were also pushing for a

european super league under bartomeu

which would have seen increased revenues

but is unlikely to happen in the short

term at least

and completing the camp noah project

would also help a great deal

the estadio johan cruyff is already open

providing facilities for the women's

team

and barcelona b while improvements to

the camp now will increase

seating capacity and the appeal and

accessibility of the stadium

le porter has been vague in describing

how he'll address the economic situation

much of his campaign was focused on leo

messi's contract and future signings

but regarding the club's debt he said we

will have to roll up our sleeves

take our suitcases and sell ourselves to

find new forms of income

we have a detailed shock plan that we

will announce in due course

what that plan involves remains to be

seen but it will have to be dramatic

enough to inspire the financial

revolution

that barcelona clearly

but we need need another striker listen

he's going to sign my nephew's

girlfriend's

brother's barber his best friend to the

kidman assistant

every source has a source the athletic

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