No club is too big to fail, as lessons from Italy and Spain are starting to reveal



By Tony Attwood

To say that the ancient Italian club Juventus is in trouble is something of an understatement. The board has stood down en masse, the prosecutors and regulators are circling. La Liga has demanded fulsome sanctions complaining that Juventus has broken the financial regulations governing European football.  The shares have collapsed by over 40 percent in the last year.

Questions have been raised about transfer dealings, the loss for 2021/2 was getting on for a quarter of a billion pounds, and their main escape route, the Super League, was given another knock on the head by part one of the final round of legal rulings recently.

The main thing the club is accused of is the selling of players for a declared large sum in which little or no money actually changes hands.  The buying club in such deals then puts the newly acquired player on their books at the alleged transfer value, and so suggests that their financial situation is enhanced and all is hunky-dory.

The practice is known as “false exchanges”, in which a club says, “We paid £1 million for player X but we have sold him for £50m, therefore we have made a capital gain of £49m.”

That money is shown in the books as owing, and so reduces the losses the club is seen to be making, and so the club stays within the regulations laid down by Uefa and their own league, at least for the moment.  And of course, the problem is there is no way of clarifying what the actual real value is of a player – it might be quoted as £50m in a newspaper, but if no one wants to buy the player, that is just an invented value.

Meanwhile, there is a second trick that it appears that some clubs have been using, and that is of deferring player salaries – and Juventus appear to have been doing this across the early parts of this decade – convincing players to accept the approach as a way of reducing their own tax loss.

However those salary payments are not removed forever – they are deferred and still owed to the players, who will be expecting to be transferred and then get their owed salaries out of the money the club receives when it sells the player.  So they should be in the accounts, but somehow (and of course I am sure it is always an honest mistake) someone makes a slip and the money outstanding to the players for unpaid salary doesn’t get registered.

By way of example, according to “the media” as reported in the Financial Times Juventus still owe Cristiano Ronaldo 20 million euros.

Beyond the possible legal sanctions, Federcalcio, the Italian Football Federation, is said to have opened a new investigation, on 1 December into the Italian agency Ansa.  Juventus meanwhile has agreed a “recovery plan” to get its accounts back in order over the next three years.  Failure to comply is said to be likely to mean a fine (which Juventus is unlikely to be able to pay) or exclusion from Europe.  Thus for Juventus everything is turning rather sour at once – for it now looks like the European Courts will vote in favour of Uefa in terms of Super League, and that was going to be Juventus’ final way out of the financial mess.

And of course this has been going on for some time.   Swiss Ramble in a tweet in September 2020 said of Juventus, “Total liabilities include bank debt, transfer debt, tax liabilities, trade creditors, staff debt, provisions, accrued expenses and even deferred income,” was “€911m in 2018/19 was one of the highest balances in Europe,” which would leave it at the time the fourth most indebted club in Europe.  The only ones with more debt (according to Swiss Ramble at the time) are Tottenham Hotspur, Manchester United and Barcelona.  

Now those three clubs have mega-debts for different reasons.  Tottenham owes £1bn on its stadium and appears to have banked on constant engagement in the Champions League as part of the way of paying off the debt.  Unfortunately, this calculation ignored the possibility of Newcastle being bought by Saudi Arabia, and Arsenal coming good under Arteta.   

Meanwhile Manchester United has accumulated debts of £515m,  Barcelona’s debts are £1.13bn which is why it has been selling the rights to its future TV income.  Arsenal’s debt is around £350m.

Now of course some of the debt is covered by money owed to the club by other clubs.  Most transfers for example are paid for over a period of three or four years so while a good headline can be made out of “Arsenal still owe money on the purchase of Pepe”, that is part of the normal way business is done.  The issue is always, can the club pay its debts when they are due – and this is where the problem comes in.  If any club can’t pay the next round of transfer stage payments, it is the other clubs that demand action. .

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