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 Posted by Dermot Corrigan
Oct 9, 2013

Madrid have debt ‘problem’ - economist

Renowned Spanish economist Jose Maria Gay de Liebana has backed claims that Florentino Perez is hiding the true size of Real Madrid’s debts, while saying its socios could lose control of the club should the situation not improve.

Florentino Perez broke the world transfer record to bring in Gareth Bale this summer, if you believe what Tottenham said.
Florentino Perez broke the world transfer record to bring in Gareth Bale this summer, if you believe what Tottenham said.

Rigg: Alonso goes under radar

Perez regularly maintains that his commercial expertise has helped cut Madrid’s debts and that they currently stand at around 90 million euros. However, others -- including concerned fan group 'Asociacion por los Valores del Madridismo' -- maintain the real figure is over 500 million euros.

Now Gay de Liebana, regarded by many as Spanish football’s foremost financial expert, has told AS that he shares these worries.

“Madrid’s debt is, effectively, 541 million euros,” the Universidad de Barcelona professor said. “That represents 64 percent of its total liabilities. It is a very high debt and there is a problem. The short-term debt, which is 338 million euros, is higher than its current or liquid assets, which are 239 million. So there is 100 million euro in negative working capital.”

While some figures -- such as Madrid’s record annual revenues of over 500 million euros -- were impressive, Gay de Liebana said closer scrutiny of the accounts showed the club’s financial management was not as good as that at some other top clubs.

“It is true that Madrid has important cash on hand -- 156 million at the end of the season,” he said. “But you cannot abuse negative working capital. If you look at Arsenal or Bayern, two reference points in financial management, their working capital is positive. Madrid has homework to do.”

Perez’s plans for the club currently include a 400 million euro refurbishment of the Estadio Santiago Bernabeu, which could be funded by further borrowing, or by selling the naming rights to a sponsor.

“The plans for the stadium are fantastic, but 400 million during a time when nobody is able to invest -- obviously they would need to finance it with bank debt. That seems a bit risky,” Gay de Liebana said.

Should the debt increase still further, Madrid’s socios could lose control and the club be converted into a limited company, Gay de Liebana warned.

“The fact is that Madrid is so far in debt, and has a big project for the stadium, so it could end up in a monumental situation, and have to convert itself into a limited company [Sociedad Anonima] and capital be injected in,” he said. “Then you would need a socio with the ability to bring that capital, or if not, the support of a benefactor.”

Gay de Liebana said that a levelling off in commercial and matchday revenues in Madrid’s accounts due to the poor general economy in Spain was another concern, as was a potential rearrangement of La Liga’s current television revenue sharing agreement.

“That would be a tremendous problem,” he said. “Madrid and Barcelona receive way more than anyone else, around 160 million euros. That cannot grow much more.”

Given the money spent on players by the club during Perez’s reign, Madrid should have won many more trophies, the Espanyol supporter maintained.

“We are talking about 700 million invested [in players],” he said. “That is an enormous figure, which really obliges you to win everything. You cannot have a club that invests so much and then does not win the Champions League. You must win La Liga, and the Champions League, and then leave the Copa del Rey for Espanyol.”

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