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
- Beyond any doubt Infantino is getting his way. Next: Fifa will leave Zurich
- World Cup chaos: the bits you may have missed
- Fifa establish their unchallengable right to change football rules as they go
- Extraordinary report claims Arsenals’ FA Cup win was not a major trophy!
- 2022/23 Women’s Champions League Juventus v Arsenal – match preview