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The danger of selling to Real Madrid

JerusalemMan

Johnny Morrison
This was a good and insightful read.
It is from a Gooner site but they seem to have done their homework.

http://blog.emiratesstadium.info/archives/30010?

In July, after months of prevarication Government in Spain finally revealed that it is owed €663,876,441 in overdue tax by football clubs in the top two divisions.

This is of course just another issue in a country whose economy is in a state somewhat worse that Bongo-Bongo (a country revived by the UK political party UKIP as a symbol of a land whose economy is out of control).

But Spain is not just Bongo-Bongo in Europe, it is also something else. Because Spain gets European Union bailout grants which are heading towards €100bn.

Now of course this will all be gibberish to the good men of BT Sports who, as reported at the weekend, cannot add 3 plus 3, but for the rest of the population, it is a matter of interest, not least because of this little fact…

That total sum does NOT (may I repeat that, NOT) include four clubs which are exempt from reporting such matters under a 1990 law within which they do not have to operate as public limited companies (the “plc” and “Ltd” companies in the UK) but are “socios” – effectively not controlled by or answerable to the tax authorities!

Now, you may ask, who are these lucky devils (and if you are in business, you might add “and how can I turn my company into one of these?”)

Here’s the answer: Real Madrid, Barcelona, Athletic Bilbao and Osasuna. Tellingly the Government of Spain would not disclose the debt that these four owed the government. To say the EU is not amused is to put it lightly – not least now the EU is investigating what we might once again call “Spanish Practices”

If you have been a regular reader of Untold you’ll know we’ve been pushing away at the Real Madrid and Barcelona issues since we started, both because most of us associated with the site believe that companies should pay tax, and because it is patently clear that these two clubs have an utterly unfair advantage over other Spanish clubs (not really our concern) and non-Spanish clubs (very much our concern as Arsenal fans).

The issue of Real Madrid and Barcelona is simple. Spain is broke, the economy is bust, the only job opportunities that are booming are in prostitution, and recorded unemployment is over 26%. And…

Barcelona is teetering on the financial brink (as when it failed to pay its players three summers back, and “solved” the crisis by stating that they were banning the use of the colour photocopier). Real Madrid continues to claim that it can buy players at world record prices, and then pay for this with shirt sales. (It is a ludicrous assertion of course but dutifully Untold actually did the sums in an article we published when C Ronaldo went to the club, to show how fake the assertion was).

Things are looking bad for Real Mad, as after years of procrastination the issue of state aid for the club is being investigated by the EU, as is the land deal in which effectively a piece of waste land on the edge of the city owned by the club and worth €421,000 in 1998 was effectively exchanged with the Council in 2011 for land worth €22.7m.

Michel Platini managed to get EC competitions commissioner, Joaquin Almunia, himself a Real Madrid fan, to sign the statement making the use of illegal state aid to football clubs as making a club fail FFP arrangements.

In a recent article the Independent newspaper suggested the total debt of clubs in the top league in Spain is €4.1bn – a debt that is utterly unsustainable in terms of interest payments, and totally unrepayable – which by and large loans are supposed to be. As a result clubs are finding that for the first time in a long time, players want to get out of Spain as everyone waits for more developments of the type we saw when Málaga failed to meet its commitments. Salamanca has also gone. Others are on the edge.

TV subscriptions are falling fast, and there is talk of changing the times of TV games to fit in with the Asian market. Digital+ has lost 15 per cent of subscribers in the last year and Mediapro, which has closed down one of its channels, is 25 per cent down in the last two years.

Of course the clubs are doing everything possible to put a spin on their situation – and the fact that some people actually believe that players like Bale can be paid for in shirt sales shows how gullible some supporters – and indeed journalists – are.

Likewise the fact that Atletico Madrid can put up a silly bid for Santi Cazorla, and have it reported all over the press shows how successful Spanish clubs are at pulling the wool over the bleary eyes of pub-based journalists. No one mentioned that as the club allegedly put in the bid, they did so from a base of a debt of €180m. Even the sale of Radamel Falcao to Monaco for €60m didn’t help much since they had already sold the rights to the player in an attempt to stave off closure.

“Investment group participation” as this part selling is known (which is banned in most countries) is now openly used as the only way to meet the Secretary of State for Sport’s requirement that €1,000m to be removed from the top two division’s debt over the next three years.

Valencia (5th last year) owe over €300m. Malaga are banned from European football and players are starting to take action over unpaid wages. 24 clubs in the top two divisions have entered administration in the past four years. Sevilla play in the Europa League this year because Rayo Vallecano, who finished above them last season, are banned by Uefa because of their finances. Deportivo owe €156m, have been relegated and are on the financial cliff edge. Likewise Racing Santander.

Meanwhile the “Beckham Law” that put foreign players in a low tax bracket has gone, banks (now firmly supervised by the EU as part of the EU loan deal) no longer lend clubs money. It is all coming to an end.

So, what of Bale and Real Madrid? When Arsenal sold Nic Anelka to Real Madrid there were multiple problems in getting the money out of the club. And that was long before any of this started. Real Mad will want to pay the Bale money (if the deal goes through) over five years, in the hope that over time all the little local difficulties will have gone, and no one will be looking at their accounts any more.

But there is every chance that this won’t happen, and that Real will start renegotiating its debts early next year. Because of this it is likely that we are now at the very peak of player prices. A whole range of factors could reduce prices from next January onwards.
 
Assuming that is all true, it's scary.
You would think la liga will implode sooner rather than later.

24clubs over top2 divs went into administration. Crazy.
 
It could be titled the danger of not selling to Real Madrid now.

My assumption is that we can't keep Bale long-term so we should sell for this world record fee while the opportunity is there. Real would have to pay us the instalments or risk missing out on European football. Football debts (to other clubs) seems the one thing UEFA do enforce. If we delay until the end of the transfer window Real might find out more and think again. If we agreed a gentleman's deal to sell next year like they did with Ronaldo then they might not be able to buy, but we would still probably lose Bale and it might be to United or Chelsea for less. That would be a nasty thing to swallow.

Obviously, I would prefer Bale to stay, but the Real deal offers a lot of money we can use to strengthen the squad and keeps him out of the clutches of Chelsea, United and City. That assumes it is a real deal.
 
Obviously, I would prefer Bale to stay, but the Real deal offers a lot of money we can use to strengthen the squad and keeps him out of the clutches of Chelsea, United and City. That assumes it is a real deal.

Depends how much money.
If they are creating their bid with overly-optimistic predictions and hopes of improvement then we may find ourselves being owed a lot and not having as much tangible resource to replace Bale.
Whether that be through signing one player like Lamela or by upgrading 3 or 4 players in the squad so that our overall performance doesn't dip much even though the shining star has departed
 
This was a good and insightful read.
It is from a Gooner site but they seem to have done their homework.

http://blog.emiratesstadium.info/archives/30010?

In July, after months of prevarication Government in Spain finally revealed that it is owed €663,876,441 in overdue tax by football clubs in the top two divisions.

This is of course just another issue in a country whose economy is in a state somewhat worse that Bongo-Bongo (a country revived by the UK political party UKIP as a symbol of a land whose economy is out of control).

But Spain is not just Bongo-Bongo in Europe, it is also something else. Because Spain gets European Union bailout grants which are heading towards €100bn.

Now of course this will all be gibberish to the good men of BT Sports who, as reported at the weekend, cannot add 3 plus 3, but for the rest of the population, it is a matter of interest, not least because of this little fact…

That total sum does NOT (may I repeat that, NOT) include four clubs which are exempt from reporting such matters under a 1990 law within which they do not have to operate as public limited companies (the “plc” and “Ltd” companies in the UK) but are “socios” – effectively not controlled by or answerable to the tax authorities!

Now, you may ask, who are these lucky devils (and if you are in business, you might add “and how can I turn my company into one of these?”)

Here’s the answer: Real Madrid, Barcelona, Athletic Bilbao and Osasuna. Tellingly the Government of Spain would not disclose the debt that these four owed the government. To say the EU is not amused is to put it lightly – not least now the EU is investigating what we might once again call “Spanish Practices”

If you have been a regular reader of Untold you’ll know we’ve been pushing away at the Real Madrid and Barcelona issues since we started, both because most of us associated with the site believe that companies should pay tax, and because it is patently clear that these two clubs have an utterly unfair advantage over other Spanish clubs (not really our concern) and non-Spanish clubs (very much our concern as Arsenal fans).

The issue of Real Madrid and Barcelona is simple. Spain is broke, the economy is bust, the only job opportunities that are booming are in prostitution, and recorded unemployment is over 26%. And…

Barcelona is teetering on the financial brink (as when it failed to pay its players three summers back, and “solved” the crisis by stating that they were banning the use of the colour photocopier). Real Madrid continues to claim that it can buy players at world record prices, and then pay for this with shirt sales. (It is a ludicrous assertion of course but dutifully Untold actually did the sums in an article we published when C Ronaldo went to the club, to show how fake the assertion was).

Things are looking bad for Real Mad, as after years of procrastination the issue of state aid for the club is being investigated by the EU, as is the land deal in which effectively a piece of waste land on the edge of the city owned by the club and worth €421,000 in 1998 was effectively exchanged with the Council in 2011 for land worth €22.7m.

Michel Platini managed to get EC competitions commissioner, Joaquin Almunia, himself a Real Madrid fan, to sign the statement making the use of illegal state aid to football clubs as making a club fail FFP arrangements.

In a recent article the Independent newspaper suggested the total debt of clubs in the top league in Spain is €4.1bn – a debt that is utterly unsustainable in terms of interest payments, and totally unrepayable – which by and large loans are supposed to be. As a result clubs are finding that for the first time in a long time, players want to get out of Spain as everyone waits for more developments of the type we saw when Málaga failed to meet its commitments. Salamanca has also gone. Others are on the edge.

TV subscriptions are falling fast, and there is talk of changing the times of TV games to fit in with the Asian market. Digital+ has lost 15 per cent of subscribers in the last year and Mediapro, which has closed down one of its channels, is 25 per cent down in the last two years.

Of course the clubs are doing everything possible to put a spin on their situation – and the fact that some people actually believe that players like Bale can be paid for in shirt sales shows how gullible some supporters – and indeed journalists – are.

Likewise the fact that Atletico Madrid can put up a silly bid for Santi Cazorla, and have it reported all over the press shows how successful Spanish clubs are at pulling the wool over the bleary eyes of pub-based journalists. No one mentioned that as the club allegedly put in the bid, they did so from a base of a debt of €180m. Even the sale of Radamel Falcao to Monaco for €60m didn’t help much since they had already sold the rights to the player in an attempt to stave off closure.

“Investment group participation” as this part selling is known (which is banned in most countries) is now openly used as the only way to meet the Secretary of State for Sport’s requirement that €1,000m to be removed from the top two division’s debt over the next three years.

Valencia (5th last year) owe over €300m. Malaga are banned from European football and players are starting to take action over unpaid wages. 24 clubs in the top two divisions have entered administration in the past four years. Sevilla play in the Europa League this year because Rayo Vallecano, who finished above them last season, are banned by Uefa because of their finances. Deportivo owe €156m, have been relegated and are on the financial cliff edge. Likewise Racing Santander.

Meanwhile the “Beckham Law” that put foreign players in a low tax bracket has gone, banks (now firmly supervised by the EU as part of the EU loan deal) no longer lend clubs money. It is all coming to an end.

So, what of Bale and Real Madrid? When Arsenal sold Nic Anelka to Real Madrid there were multiple problems in getting the money out of the club. And that was long before any of this started. Real Mad will want to pay the Bale money (if the deal goes through) over five years, in the hope that over time all the little local difficulties will have gone, and no one will be looking at their accounts any more.

But there is every chance that this won’t happen, and that Real will start renegotiating its debts early next year. Because of this it is likely that we are now at the very peak of player prices. A whole range of factors could reduce prices from next January onwards.

The hilarious thing is this nonsense is coming from an arsenal fan who you'd think might understand debt.

http://swissramble.blogspot.ie/2012/04/truth-about-debt-at-barcelona-and-real.html

5+Debt+IFRS.jpg



6+Debt+UEFA.jpg


10+Debt+Coverage+-+Revenue.jpg


11+Debt+Coverage+-+Cash+Flow.jpg


12+Debt+Interest+Coverage.jpg


Ultimately Real made a profit of 200m over the last 5 years and have no problems paying their interest payments on their debt.
 
Ultimately Real made a profit of 200m over the last 5 years and have no problems paying their interest payments on their debt.

If that is the case and im simplifying things here. Why dont they just take the profit from and pay off their debt to make sure they dont waste money on interest?
 
If that is the case and im simplifying things here. Why dont they just take the profit from and pay off their debt to make sure they dont waste money on interest?

Because the interest rate is so low (2% per year) its not worth worrying about.
 
Its them two and Bilbao and Ossasuna who get a tax releif and dont publish there real debt. With FFP coming in this has to change surely. You cant have teams likes this operating on an unfair level to the rest of the sides in their league. Same goes for Monaco as well.

Well you have teams competing against each other in Europe operating under different tax rates. Is this unfair? FFP has nothing to with domestic football its a UEFA european thing.
 
But if the tax issue is suddenly being addressed, then that will have a knock on effect on budgets and FFP
 
It seems the government will be chasing them for back taxes, their main bank is itself almost bankrupt, Spain itself is going skint...would you take an IOU off of them?
 
Basically explains how it is that Bilbao is able to fund and finance a new stadium when all around them are falling to bits.

pgi0.jpg
 
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Its them two and Bilbao and Ossasuna who get a tax releif and dont publish there real debt. With FFP coming in this has to change surely. You cant have teams likes this operating on an unfair level to the rest of the sides in their league. Same goes for Monaco as well.

Real Madrid, Barcelona, Athletic and Osasuna in the early nineties were debt free, and that is the reason they are now clubs owned by then fans.
Osasuna is one of the poorest clubs in La Liga and lower leagues in Spain are full of teams owned by the fans, so the "this clubs owned by the fans have a lot of money because some strange things that we dont know but we talk about" is just a nonsense talk, really.
 
Basically explains how it is that Bilbao is able to fund and finance a new stadium when all around them are falling to bits.

pgi0.jpg


No, they have been saving money for years and they have been always one of the most importants teams in La liga. The new stadium comes late.
 
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