United in insolvency: the story of Real Madrid & Manchester U

By Ronny Lamb and Tony Attwood

Aided by the growing number of correspondents around Europe who are now contributing to Untold Arsenal I’ve been pulling together the financial doings of Real Madrid. And here’s the irony. They are just like Manchester IOU. Each is as bust as the other – and there are serious doubts as to whether Manchester will ever get all the money from the Ronaldo transfer.

The story takes us to a savings bank called la Caixa, the largest in Spain.with nearly 5000 branches. They rely heavily on mortgages for their core business. Which is not good news because with a collapsed housing market, Saving Banks are not regarded as safe as traditional banks.

What’s really interesting is that they are currently offering depositors a fixed 5% interest for one year, which is more than double the going savings rate in Europe, which usually means they need to recoup money quickly. (You’ll recall of course that Icelandic banks were offering 6% just before the iceberg melted).

Worse, on June 16 Moody’s downgraded the financial strength ratings of 30 banks and building societies in Spain, eight of them by a full four notches. A third of the total are now at the D- level or even lower. The agency said its decision was triggered by “the speed and depth of the deterioration of the Spanish economy and the impact on banks’ balance sheets.” Think La Caixa, think Northern Rock.

Worse again, a study published by Barcelona University professor Jose Maria Gay showed the combined debt of Spain’s 20 top football league clubs was some 3.5 billion Euros in 2008 alone. Would you give a loan to a drowning man? Especially if he wanted to spend it on perishable goods.

And yet the story is that La Caixa have financed 70% of the Kaka, Ronaldo deals.

What else can we get from this? Spain has nearly 4 million unemployed, the largest in Europe pro rata to population, yet Real Mad appear to keep on spending – just like Manchester IOU and Liverpool Insolvency. With the English clubs we’ve gradually teased out an explanation (Manchester are not paying interest on their loans, and Liverpool are using up the money on transfers that was earmarked for the new stadium, in the vague hope that by winning the league they will get more money – although they never quite say how).

So, pressing on with the enquiries in Iberia, here’s another interesting snippet of Spanish information. La Caxia, is not a Spanish word it’s Catalan. What’s more it is one of the principal businesses of Catalonia so bearing in mind that 90% of people in Catalonia support Barcelona then it becomes quite bizarre when you think that it is principally Barcelona supporters who are funding Real Madrid’s spending spree. Would you be happy if the Arsenal Building Society was financing Liverpool?

The picture gets dirtier when we bring in the Spanish savings bank Caja Madrid – who have admitted that it has agreed to give Real Madrid a €76m (£64m) loan to be secured on two unnamed sources of collateral. Madrid are also understood to have a similar deal in place with Banco Santander, which they will need if the sporting director of Real Mad, Jorge Valdano, has it right when he said that the intention is to sign “four or five players more”.

Caja Madrid’s board of directors approved the loan on Monday. A source at the bank, which is the fourth-biggest in Spain, added that a similar deal had been approved by Santander, the bank that extended a credit line to the previous ­president, Ramón Calderón, as he tried to sign Ronaldo last summer. Santander itself has not commented.

Calderón insisted that he had left the club with €91m in its coffers. Added to the two loans, that would give Madrid a total of €243m plus the money from La Caixa, (which provided the ­formal €57m deposit-guarantee he needed to stand for the presidency).

According to somewhat more independent reports, however, Madrid’s debt is an ­estimated €500m.

Pérez has said he has a planned budget for signings ­reaching almost €300m of which €100m will come from nine players who have been put up for sale including Arjen Robben and Ruud van Nistelrooy. Other names include Gabriel Heinze, Klaas-Jan Huntelaar, Wesley Sneijder, Rafael van der Vaart, Royston Drenthe, Mahamadou Diarra and Javier Saviola. How much are they worth? We don’t know until the sales go through.

Let’s try another line. Pérez has said that players such as Ronaldo and Kaka are not expensive because of the income that they generate. This is either a sensational insight that no one else has seen, or else a load or turnips.

Certainly the big players like to keep the rights to their own image – so what Real Mad have left is the sale of shirts. Let’s say they want to get in £100 million in this way. Based on the fact that shirts have to be made, and sold, the max profit a club can get from a shirt sold at top price is £10 – so they have to sell 10,000,000 shirts.

That can’t include Asia and Africa because the prices there are much lower. How can you sell 10 million shirts in Europe and N America? Look at the Ems – even during Henry’s reign – and you will see that people don’t only buy the big superstar’s shirt. My shirt says “Chairman” on the back, and was given to me for a birthday present by colleagues at work. So no extra sale from me then. And with five top international superstars in the Real Mad team it becomes harder to sell Kaka and Ronaldodo shirts in such volume.

It means that one person in every 75 in Europe will have a Ronaldo or a Kaka shirt, maybe one in every 100 if you get good US sales. I can’t even see one person in every 100 in Spain have any sort of Real Mad shirt. It just looks nuts.

And in fact I think it is, just like Manchester IOU and Liverpool. Manchester are trading on the fact that no one is going to try and call in their debt by pushing the club into liquidation. Those who have debts secured against the ground and players are safe, and those who have unsecured debts are certainly not going to get their money if the club is liquidated.

Liverpool are now using up the final part of their £350m loan that was supposed to build the new stadium. They had about £40m of that left by the end of last season, so they are just spending until it is gone. No new stadium, no extra revenue, whether they win the league or not.

Real Mad have another sort of madness of pretending money can come in from shirt sales (it is one of the craziest stories since Northern Rock started telling people it was ok to take out 120% mortgages on a self-certified personal income that couldn’t afford the payments).

In effect, however you look at it Real Mad can’t pay the interest on these debts, any more than Manchester U can on theirs.

But who cares? Not UEFA (although they make little noises). Not FIFA. Not the authorities of Spain or England. Even when one of them does a Leeds, no one will worry, as long as the show goes on.

(c) Tony Attwood 2009

37 Replies to “United in insolvency: the story of Real Madrid & Manchester U”

  1. I hate this. why do these clubs get away with this? i dont really like going on about unfairness but this is ridiculous, it seems there is one rule for Leeds, Luton etc. and one rule for Manchester, madrid and liverpool.

  2. Uefa should install a licencse where clubs only with solid financial books are allowed in the CL en Eufa League.
    So far the dreaming. 🙁

  3. its not a great time to be selling luxuries, which is what footie shirts are to most people.

    real mad are gambling a lot of money on a very uncertain future. man u have been at this for a good while now, its time they dropped a peg or two.

    on a side note, i was looking to cheer myself uplast night by watching the fa cup 6th round match against hull. great match, but the copy i got had no post match stuff, so i looked on the net for it. you know, the one where phil orange lost the plot and accused arsenal of crimes against humanity and fashion etc. everywhere where the video was hosted, it has been removed from, even setantas own site. its a bit strange, because all of the rest of his post match comments this season are still available.

  4. Hi Tony – Excellent piece – been looking forward to it. The key observation is that Real Madrid like ManU (there seems to be a typo in in that sentence) “are trading on the fact that no one is going to try and call in their debt by pushing the club into liquidation. Those who have debts secured against the ground and players are safe, and those who have unsecured debts are certainly not going to get their money if the club is liquidated.” But as the current credit crisis has proven it only takes one insolvent party in this interlocking circle of creditors for the house of cards to come tumbling down. Think the two hedge funds run by Bear Sterns that in 2008 which went belly-up triggering the freezing of the credit markets and the eventual demise of Bear, Lehman et al.

    Unless they are run by a complete group of twats, UEFA and company, should be well aware of the risks but they like the Banks are hoping that no one will call the debts of Real Madrid, after all they are the club of Franco, of the rich and the powerful. IMO they have no interest in demanding that football clubs like ManU and Liverpool be self-sustaining, as in the Bundesliga, because they have a vested financial interest in the big clubs continuing these excesses.

    One way or another, all bubbles end in a splat. I am afraid when this comes to football, like Bear-Lehman-Northern Rock, one or more of these big clubs will be history.

  5. Im glad you run this blog, when all other sites get caught up in nonsensical transfer business, you look past it and conduct your own research, great stuff. I recently came across a United site debating whether they should adopt a transfer policy like Wengers because they are so much in debt, and the writer got slated!

    The reason it is not fair is because teams that ARE financially stable, and do not rely on trophies EVERY year to keep up repayments, will lose out in the short term. But everything has a tipping point, i think maybe united are losing faith in the Glazers, lots of people are concerned whether the 80 Million from that dickhead will be used for players, or to pay off debt. Soon they’ll be begging for a murdoch buyout! If real collapse, so be it, they havent won anything for years, how do they all of a sudden have an Abramovich sized chequebook!

    At least we fans know where we stand, through thick and thin, im happy if the welfare of the club is good, Wenger was one of the only managers (let alone chairman, cheif exc etc) to point out the credit crunch will affect football, mainly the teams who rely on credit, and borrowed money, and here we are with two generations of talent ready to fight through it!

    Would you rather break the bank for one or two players and risk going bust if we don’t win anything again?

  6. That trashy paper “The Sun” has Van Persie linked to United, which is surely a piece of ridiculous rumour mongering, but more seriously we still keep hearing comments attributed to him about seeing if we have “ambition”- ie whom we will sign.The longer this impasse goes on, the worse it will be and another Flamini -type scenario, where the player says he “loves the club”, but AFC finally fail to match the player’s expectations, who then leaves. We first heard around April that all contract negotiations had been put on hold until the end of our hectic season. Now both Wenger and Gazidis seem to be away and players no doubt will soon be on the beach somewhere, if not already. Do we want him to stay or not? Surely we do, despite the surprising statistic that revealed he’s only started 79 League games in five years- at sn average of around 16 per season that’s only marginally better than Michael Owen’s average of 14 in the past four for Newcastle! Did someone say buy Owen…. how many crocks do we want? Additionally, our system of play does not accommodate players who do nothing but wait in the box for chances, however good they are at it!

  7. @ Faron: I heartily agree, this kind of thing shouldn’t be tolerated. It’s just not sustainable.

    And, as an engineer myself, today’s success should stem from sustainability. 😛

    This sounds quite similar to the cause of the global final crisis/recession (whatever you wish to call it), where financial institutions kept giving out loans even though clients may not have always been able to pay it back. I am very VERY interested to see what happens when it all hits the fan. I mean, even though it is on a smaller scale than the global issue, surely it would mean some mass amounts of clubs going into administration?

    Furthermore, how can a club like Real Madrid, who have been quite sub-par (let’s be honest) compared to their earlier era of success still attract such players? Is it purely the history behind the club or the money? Fair enough, the pressure and income may provide a certain thrill to the players, but still, knowing that even though you may sign a severel-year contract, you probably will not see it through (instead; being sold)…. unless you have instant success, must be a massive negative? I mean, I know that if I ever got the privilege to play for Arsenal, I’d never consider leaving. For any club, ever. Oh well, onward we go… and I’d love to have a glimpse at the football climate in 10+ years.

  8. I wonder if there is any truth in the ‘age cap’ at Man U (can’t trust a word from the press)if so it sounds like the first step in following the Arsene model. Interesting if it catches on as we will be well ahead of the game.
    One wonders, given the evidence in this article, if the likes of manu, real or ‘pool can survive in the current climate. The house of cards analogy is apt.
    BTW anyone heard Ferguson being grilled in the media about the ‘wouldn’t sell them a virus’ comment?

  9. The thing about RM that we can never quite account for, or fully understand (because Spain is corrupt to a level beyond British comprehension),is the extent to which the government is in bed with the football industry and with RM in particular.

    RM have been on the verge of bankruptcy before but they escaped by selling off their training grounds to the government, who (allegedly), paid RM massively over the odds for the land. This not only covered their debts but helped finance the first wave of Galacticos.

    RM have a ridiculous amount of connection within big business and government. It exists in a way that just would not be possible here. I can imagine Liverpool going to the wall and just maybe Man Utd but I suspect too many people have to much riding on RM to ever let it happen. These connections and the club’s status in Spain means they can pressure banks to allow Madrid certain unwritten privileges, such as low interest repayments on loans.

    All in all the system is completely unfair but we knew that already and this does not mean their could not be a reckoning in global football and soon.

  10. The greatest rumour of the day has to be Mascherano to Barca. That would be hilarious, as he is one of their 3 irreplaceable players.

    Also (sorry slightly off topic) but anyone any thoughts on 17-18M for Johnson?! Was Arbeloa really that bad?


  11. Correct me if I am wrong, but, if I understand rules well, the first and the only one who have to react and prevent clubs from this sort of things is National Football Association, UEFA and FIFA only give Laws and Regulations, which are manly fair in those cases. But the ones who are supposed to stop clubs in “insolvency” are FA’s, as far as I know UEFA cant even ask to check someones finances (talking about clubs), but FA’s can.
    But in Spain it can be understood if you keep in mind whom belong Real (I don’t say its ok, but I see why they are afraid react). But I wandering why English FA doesn’t react or there are some “Reals” in EPL as well.

  12. Jeff you’re right to highlight your fears regarding Van Persie. Would he join the Mancs, hopefull not. Will he stay at Arsenal? There has to be a question mark there as he has been saying for two years now he wants to see class players brought in and trophies in the bare trophy cabinet. Wenger’s responds by saying it’s nothing to do with current players what he does in the market. Then he goes into hiding until the window closes. I suspect we will lose at least 2 of Van Persie, Adebayor, Fabregas, Gallas, Toure or Clichy. Will we be stronger at the start of next year? I doubt it. What will the excuses be this time next year and will Fabregas and Van Persie tolerate another trophyess season? No chance!

  13. the machine that is fifa/uefa/fa is broken. no amount of sticking plaster remedies will fix it.
    it was inconceivable 30 years ago that 80 million would be paid for a player, or that 200,000 quid a week after tax would be a wage demand.
    the german league, as already mentioned, is a good model. at the moment success seems to be linked to indebtedness, and even though its obvious what is wrong with that strategy, it is still the strategy of most big footie clubs.
    the demands for instant and constant success from the supporters seem more important to most owners and managers.
    i think that owners of clubs, especially clubs with history etc., should realise that the club is bigger than any person or board. they are merely priveliged caretakers for a few years.
    we can be thankful that our current board and manager are taking care of our club and that the demands for constant success, though listened to are not prioritised above the continued health of the club.

  14. Guys, don’t know about you but I am starting to become dissilusioned with top flight football and getting seriously cheesed off with the amount of money which is being handed around, especially in the climate we are in. The amount of greed coming from some of these players and their totally unrealistic demands is ruining our league. Normal people like you and I who are finding things tough at the moment have to read things like Aguero wants £200k per week and Eto wants £190k per week after tax. These greedy creatures are ruining football. How can any body be worth an £800k pay cheque at the end of the month? This makes me sick. I also feel very strongly about some of the transfer fees being paid, again this is down to greed. The sooner these ‘sugar daddies in the Premier League leave our league alone the better and we can then get back to realistic values. I am about to cancel my Sky Sports package because I need the extra money, something which greedy players will never experience in life, ever.

  15. My apologies for veering slightly of topic again, but I am warming greatly towards this Vermaelen character. First he does not come across remotely as the usual boring football personality. Secondly he has stated he is going to give EVERYTHING for the cause. That attitude (coupled with ability) is EXACTLY what The Arsenal need.

    “Arsène Wenger stands for nice, attacking football and dares to work with young talents. That appeals to me enormously. Not that that tipped the scales, though. When a club like Arsenal stands at your door, then you just go.

    “When I get to the Emirates Stadium on Friday I will be hugely impressed. A lot will change in my life. Next season I will come up against the best strikers in the world. I am not scared by that, I will give all my body can give.

    “This is one of the most beautiful days of my life.”

  16. And the fact that Real Madrid’s recent nose dive into cronic debt and aggressive spending has not produced the same condemnation as Michel Platini likes to dish out against the Premier League on a daily basis highlights his anti-Premier league motives and support. The guy’s a clown with no consistancy, an obvious agenda and a chip on his shoulder!!

  17. Parsi, well said and I totally agree. Unfortunately the power of excess hard currency being introduced into the game via TV and wealthy foreign investment has turned the players love of the game into a money making exercise. The weird thing is I really don’t blame them, it is unfortunately part of the world we live in, every one of us tries to earn as much money as we can in our respective jobs and I do not buy the excuse that if you’re earning 50k a week what’s the difference if you earn 70k, trust me, there’s a big difference. People say that in the 50/60/70 etc a player only earnt on average 2 or 3 times the national average salary and i’ve no doubt thats true but there wasn’t much money in football those days. Do people honestly believe those same players who apparently loved the game more than the current batch of superstars as they earnt far less would not be transformed into the same kind of animal we see now if the money was available. This trend will continue as long as fans like you and me continue to spend our hard earned on TV subscriptions, merchandising, match tickets etc.

  18. It is farcical that whilst the rest of us are going through a recession and struggling to make ends meet, football transfer fees and wages are going through the roof. I read an article the other day which said football clubs’ takings have gone up 26% over the past year and wages up by an average of 23% (or may have been vice-versa, can’t remember). This is a ridiculous state of affairs. However, it is up to us as the fans to do something about it. The number of times I read people on here having snidey little digs at each other for not going to the game is ridiculous. The point is, the premiership “Sugar Daddies” (Man City included) are not in it for the good of the club. Whilst they will shell out an initial outlay to improve the team, eventually they are businessmen and are going to want to see a profit. The whole thing creates a vicious circle. The top players keep demanding more and more money, which results in the clubs paying it to keep themselves at the top or to catch up. This leads to demands getting higher year on year. The clubs have to make the money back from somewhere, so there goes another couple of quid on ticket prices, 50p on your half-time pint. Whilst the fans keep paying it, the clubs will keep increasing prices and whilst the clubs keep paying more, players will keep demanding more. That’s the market economy for you. The only way we can do anything about it is to refuse to pay these prices until they get the message. A lot of people say “what’s a couple of quid more, it’s one less pint before the game”. Some people are at the stage where they can’t afford to buy a pint before the game. Soon it will be they can’t afford to go full stop. But clubs and players will keep on and on pushing that barrier. It’s simple elasticity of demand. Players will keep demanding bigger sums until the clubs simply are not…. willing to pay those sums anymore. Hence clubs will keep increasing their prices until it gets to the stage that the fans aren’t willing to go anymore. Using subtle tricks like Glazer’s mandatory cup ticket scheme along the way. At that point, we’ll have reached the stage where the working man is priced out and most of the tickets go to corporate idiots with more money than sense anyway. Unfortunately, the football fan as a captive audience is sowing the seeds of his own downfall. If we don’t like how this thing is going, it’s up to us to stop it by saying enough is enough. I have been offered a season ticket at O.T. but am not prepared to commit such a large sum of money with probably more to follow. I go to about 8-9 games a season usually, always ensuring it is within my means and never buy anything from the ground/megastore except the very occasional half time beer. I will cheer the team to the rafters when I am there, however, am not willing to have the p*** taken out of me. Unfortunately, it’s one of those strange contradictions that the real fans, the ones who have the most right to moan about the players and clubs taking it over wages and salaries, are the ones who are basically helping to perpetuate it. /RANT as I’m starting to do a Rafa now.

  19. Interesting piece Tony, you seem to be the only person out there looking at the financial situation beyond the “lets buy everyone now” viewpoint. I do however disagree with your assessment of ManU, people will lend to RM because they know that the Spanish government will not let them go to the wall. In this country if the government began to effectively subsidise ManU there would be riots, for every 1 Man U fan there are 3 that hate Man U with a passion. You state that no one will call in there debts because unsecured creditors would get nothing and creditors with guarantees have nothing to fear but Man U are not paying the interest on these loans. Therefore the interest is being added to the capital amount and “rolled over” into the following year. This has happened even in recent record years for Man U. Therefore at some point the debts will be larger than the assets and then secured creditors will be in the same position as the unsecured. If they were earning huge interest payments it might be worth the risk but eventually the secured creditors will decide that the exposure has reached a point that they are not willing to stomach and demand repayment.

    You have already highlighted that you can buy Man U “debt” below cost as people are trying to make the best of a bad situation. I believe that Man U are close to reaching a point where they cannot continue. As shotta points out in an earlier comment as soon as one brick goes the whole thing tumbles.

  20. Very good piece Tony.

    In my view, it just puts what Arsene is doing for Arsenal and its long term value in better perspective because, in 5years or less, ManU, Real Madrid, Liverpool and, maybe, Tottenham may be in worse position economically to continue competing at the topmost level whereas, in the same period, Arsenal’s position is likely to get steadily stronger and better. Indeed, the only type of FCs that may be able to compete with Arsenal for great footballers maybe those owned by tycoons with very deep and free-from-economic-threat pockets.

    Unfortunately, even if someone gets to break it down to the current football stars in Arsenal it will still make no difference to them: they either want maximum value for their talents NOW or they want to win trophies NOW both of which the Arsenal model cannot provide or guarantee.

    This may be understandable. What is not understandable is why any Arsenal fan, having been fed on these realities would still be clamouring that the club be run with funny money (i.e. money it cannot generate or which sources it cannot sustain)….

  21. Couldn’t agree more Parsi – I just don’t what can be done about it.

    The bubble will surely burst in time – there has to be a ceiling to this madness.

    In the meantime we can only marvel with disgust at the non-existent limits of man’s spiraling greed.

    Greed, it seems, is the defining trait of our era.

  22. Jonny Neale – I think that you need to add an inability to take responsibility for your own actions to your list of defining traits for our era.

    When ManU or Liverpool go bust it won’t be the fault of fans who demanded more signings and supported irresponsible managers or owners, it will be the fault of the owners, the press, Arsenal or anyone else they can think to blame.

  23. Crumbs Marc, which actions of mine in particular is it which you think I am unable to take responsibility for? Was it that incident with the nun and the penguin? I thought I explained that?

    Seriously though, is it REALLY the fans fault above the people who run their club for them? Plenty of Arsenal fans clamour for high-profile signings but we just happen to be lucky enough to have a different kind of ownership & management. I don’t know that we fans are much more than pawns, prawns or plankton when it come to the decisions made on our behalf.

    I have several Liverpool supporting friends, who are now devastated – they had NO control over who was installed nor did they know that once installed, Statler & Waldorf would turn out to be liars intent systematically raping the club to within an inch of it’s life.

    You can say “careful what you wish for” at them but I don’t think the fans can actually be held responsible for what has happened. The reality is the fans had no little to no control over anything.


  24. Jenny Neale – Without the fans clubs would be nothing. I remember plenty of Liverpool fans being all high & mighty when tweedle dum and tweedle dee took over and gloating at Man U fans that their owners weren’t going to do what the Glazers have done at Man U. At least some ManU fans had the balls to make a stand and demonstrate against the takeover, some even forming a breakaway club.

    This is why we need Arsenal fans to vocally let Usmanov know what we think of him and his takeover.

  25. Marc, I agree with you (though please don’t call me Jenny, people will talk!) but their demonstrations amounted to nothing and there was no way those who thought it would be a good thing could ever have known that Stalter & Waldorf would prove to be outright liars.

    Almost no fans wanted the MK Don’s move but it happened anyway.

    Whilst fans can have great influence, I don’t hold them responsible.

  26. I empathize with these posters who are pissed off with the greed and excesses of players but we should never lose sight of the fact that it is the big-banks (in collusion with club-owners/executives) who are feeding this frenzy, making loans backed by dubious cash flows (10,000,000 t-shirts anyone) with the goal of squeezing every ounce of interest through rising ticket prices, overly expensive TV deals (ask the insolvent Setanta), and sponsorship. How else do you explain the Caja Madrid savings bank, in a depressed market, lending Madrid a €76m (£64m) hoping in return an above market interest rate of 5%? (BTW – this reminds of now disgraced Allen Stanford’s now bankrupt financial entities here in the America’s which was paying above market deposit rates based on fictitious investments until the house of cards came tumbling down). This unregulated system of club financing allow big clubs to distort the market for transfers and players wages. Trust me, if it wasn’t for Madrid’d madness we would not be hearing these outrageous salary demands by players.
    We gooners are among the luckiest supporters in the world as Arsene constantly reminded us, when in the past fans and players demanded big signings, that that this was an unsustainable way to run a football club.

  27. Correction: How else do you explain the Caja Madrid savings bank, in a depressed market, lending Madrid a €76m (£64m), apparently hoping in return to use the interest to fund an above market savings rate of 5%?

  28. This site is fast becoming the temple of financial sanity in football. Why are we not reading analyses like these in the papers?

    Instead we hear of a certain sports marketing “expert” called Chadwick who says RM can make €100M in just one year from Kaka alone. My only wonder is how he came to get a place in the Ivory Tower, this Mr. Chadwick.

    Then there’s the oft-quoted $400M in profit that Real Madrid reportedly made from David Beckham. These must be have been had in Monopoly money or something; because Real Madrid’s turnover only increased by €100M in the 4 years Beckham was there, which was still a fantastic rate of increase (not all due to Beckam for sure). That figure is one of those clever pieces of fiction that catch on and get accepted as reality.

    We’ll wait to see what the final Galacticos II will look like. But it’s a safe bet that it won’t be a team full of more superstars and genuine all-time football greats than the last one.

    They didn’t sell the number of shirts Perez is talking about when they had Ronaldo (the authentic), Zidane, Figo, Raul, Roberto Carlos and even crotch-stuffer Beckham. We don’t know the number they sold but we do know that Barcelona FC’s commercial Director who’d know about this kind of thing reckons RM have to sell 30 million shirts to recoup the Kaka+Ronaldo money alone.

    I am left wondering what, in a depressed global climate, would make them sell several multiples of Real Madrid because of Kaka and Ronaldo (the lesser). Kaka is a fantastic player, but he’s no Zidane. And the lesser Ronaldo is so-addressed because he’s not the player Ronaldo was. As a commercial icon, none of those two match Beckham and are unlikely to do so.

    Tony is right, me lads! They’re pulling a Manchester United. Load up on debt and hope the future can pay for the present. To be fair to RM, that’s probably the worst case scenario in their calculations, (the probable scenario in most evidence-based calculations) whereas that’s the current reality of Man poo. And they can’t even go out and spend another £250M like RM!

  29. A Liverpool supporter has just posted this piece to the discussion about why Arsenal supporters should seek to stop RBS giving Liverpool another penny.

    “Manchester United and Chelsea were by far the most indebted, owing £699m and £701m respectively, Arsenal were third, with £416m debts and Liverpool, the other top four club, were understood to owe around £280m

    “How arsenal can have ago at Liverpool when there 136 million more in debt is beggers beleieve… Cheek ye own debt before commenting on other peoples!!!!”

    That seems to me a most important statement, because it shows why and how the current financial mess can continue. We all know that the Arsenal debt is for the development of the ground, the businesses and the apartments, and that over £150 will be recouped from the apartments and businesses. The rest will make its way through the mortgage and be paid off. We also know that Liverpool are using the money they got for the stadium to buy players and for the owners to buy the club.

    But the writer of that comment, and many others like him, can’t see that and prefer to continue the war that most of us join in with glee at the games, into a serious discussion of finances.

    That is how and why the madness continues – because to writers like that there is no difference between a mortgage being paid off and which generates massive new amounts of money (far in excess of the interest paid) that we didn’t have before, and using money to buy players.

    The fact is that if Real Madrid, Man U, Liverpool or Arsenal win the league, it makes very little difference to the income. As long as you get through the group stages of the Champs League you get your money. (OK there is some difference, but not enough to notice when talking about debts of £350m).

    So Liverpool can spend £30m each year on new players and maybe win the league, but it doesn’t resolve the fact that the £350m is almost gone and when it is gone there is not going to be any more.

    The fact is that because so many supporters don’t get that, the system continues – until the clubs go bust. Liverpool supporters might have been able to stop the madness a while back, but not now. It is too late. Just as Leeds supporters lived the dream with Ridsdale so Liverpool fans like this one live the dream with the Americans.


  30. Really interesting, well thought out article Tony and in regards to your comments in the post above. It really makes me mad that our debt is lumped in with everyone else when it it patently different. Arsenal are in debt in the same way any of us paying a mortgage for our houses are. Like most people in this scenario, Arsenal have a mortgage that they can afford to pay back without using all of their income. When the mortgage is paid off, they will own a state of the art stadium. Sensible borrowing to finance expansion and increase income is a common business practice, but the kind of borrowing without a proper plan that we are seeing elsewhere is irresponsible in the extreme.

  31. It’s not so much borrowing without a plan, it’s borrowing to finance a deficit-making or loss-making activity. You could borrow a 50lb sack of toilet paper to make a 50lb sack of gold, or you could borrow a 50lb sack of gold to make a 50lb sack of toilet paper.

    The risk to each club is different. What would worry me most if I were a Liverpool fan is that the footballing side is now +£80M in debt. That debt doubled in one year. That means you have to borrow ever more money. I’d also worry that the rich sugar-daddies are now raiding the sweet-16s piggy bank…i.e Gillet and Hicks are taking +£40M a year out of Liverpool to finance their own stuff. And now the club might not be able to meet its trade debts so there’s the immediate risk of bankruptcy.

    The risk to Chelsea is that Abramovich would walk away. And he will eventually. Or he would stop putting money in. Then they’d stagnate in the latter case or maybe even die in the first case.

    The risk to Man poo is that they’ve won everything, have the largest attendances, have record commercial takings, and they’re not generating enough cash to pay the Glazer’s debt which would lead one to think that their cash situation can only get worse gong forward, and one day they might approach the Liverpool situation. To be fair though, £20M a year (the Ronaldo money) over 4 years can help a lot. The sums that make a difference to survival and otherwise can be smaller than crazy transfer fees. If Man poo had the Ronaldo 80M in hand they’d not have turned such a big loss this year.

  32. 2nd Correction: I misrepresented the bank paying 5% interst on deposits; it is la Caixa, not Caja Madrid, but my argument remains the same. Paying above-market interest rates logically results in a bank seeking riskier investments with a potentially higher rate of return to fund their liabilities.

  33. not a real fan but an arsenal fan. i have heard from many real supporters that the club gets 50% of the advertisement money that a player gets . they recoup a lot of money that way.

  34. bro, you said that man U are not paying for the interest on their loans.

    but as far as I know the interest is 15% and that is why their debts are growing every year

Comments are closed.