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Saturday January 26 2013
Valencia close to the brink

Ally Macleod uncovers the story behind Valencia’s mismanaged finances and considers where the future may lie amid further struggles.

In what has been a rollercoaster decade for Valencia fans, the club has enjoyed domestic and European success followed by a prolonged period of downsizing that has been characterised by a series of boardroom power struggles. Playing the lead roles in the saga are the protagonists Manuel Llorente, Francisco Camps and Juan Soler whose contributions have seen the club meander in and out of financial stability.

It was Llorente who presided over Valencia between 1999 and 2004 when the club enjoyed a series of titles. However, success came at a price and a €200m debt was racked up, forcing the sale of lynchpin Gaizka Mendieta to Lazio. Unfortunately for Los Che the financial problems at the Italian club meant Valencia saw little of the €48m fee for the midfielder.

Meanwhile, entering the stage was Francisco Camps, President of the Generalitat Valenciana [Valencian government], who invited Juan Soler to replace Llorente as President of Valencia. Assuming the reigns in 2004/05, Soler paid little heed to the rising debt and instead embarked on an ambitious programme to build Nou Mestalla.

The construction was spurred on by a promised injection of up to €500m by former Vice-President Vicente Soriano’s Palport Investments. Unfortunately, the investment never materialised and construction was halted after a succession of non-payments amid the collapse of the Spanish property industry. The club were unable to sell old Mestalla for the anticipated €320m and, on the park, Soler racked up a €133m net transfer debt in a mere four seasons.

Camps’ intervention did not end there. In office he used the Valencia Finance Institute to guarantee the loans of Valencia, Hercules and Elche for a combined €118m. With all clubs defaulting on the loans, the regional government through Fundacio VCF – a non-profit organisation whose mission is to develop sporting projects with social and cultural benefits for the common good - now owns 72.5% of Valencia’s shares. In a country drowning in debt, it remains a controversial use of public money.

It was little wonder therefore that, when returning to the presidency in 2009, Llorente faced a debt that had reached €550m with an unsustainable 16 per cent interest rate. Moreover, the club was making an annual €20m loss as a result of over-extending on salaries under Soler. As a result, Llorente implemented a policy of selling the club’s most valuable player every summer as shown by the departures of David Villa, David Silva, Raul Albiol and Juan Mata. Combined with a share issue that raised €18m, debt has now been reduced to €380m. At the same time, salaries have been renegotiated to lower the annual wage bill from €89m in 2008 to less than €70m in 2011.

In light of the relative financial stability brought to the club, Bankia agreed to restart building on the stadium in 2011. However, within one year the bank’s own near insolvency forced the deal to collapse. Nou Mestalla now stands as one of many white elephants in Valencia, such as the Virgin Castellon Airport that is still to see a commercial flight, Virgin or otherwise, in a city that much like the club epitomises the financial woes faced by the whole of Spain.

This season has seen Valencia slip out of the top four amid further boardroom consternation. The club is on its second Coach and the annual asset-stripping approach is not proving particularly sustainable for performances on the park. In September the Plataforma Nou Valencia called for the dissolution of Fundacio VCF and the resignation of Llorente. Despite raising concerns that the current shareholders were focused on protecting the interests of Bankia rather than those of the club, Plataforma Nou Valencia were unable to gain public support to further their plans.

While European TV money has so far proven crucial in meeting interest payments, the danger of missing out on Champions League football in 2013/14 will challenge the survival of Valencia. Earlier this week the club defaulted on an €81m loan and was taken into the ownership of the Generalitat Valenciana. The remainder of January could see a turnover of players to meet further interest payments. As the club is pushed ever closer to the brink of collapse, continued downsizing will be the only way to stand a chance of surviving in the months ahead.

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