NEWS
Tuesday October 8 2013
‘Madrid’s debt is €541m’

A Real Madrid delegate banned from speaking at the members’ assembly says that the club’s accounts are not as assured as Florentino Perez claims.

Carlos Mendoza was reportedly barred from publicly commenting at the recent assembly of the club’s delegate members, but has today spoken to AS to list his view on the club’s accounts.

Madrid have published figures for the last year listing record revenue and profit levels and reporting that debt was down by 27.4 per cent to €90.6m, but apparently this is inaccurate information.

“The main thing is that the club’s debt is €541m, which is the sum of non current liabilities, which is what is owed long term, and current liabilities, which are due short term,” began Mendoza, who heads the members group ‘Asociacion Valores del Madridismo’, to AS today.

“Florentino only recognises the net debt, which is what is due exclusively to the banks, at about €90m. But then, Madrid has more debts than with the banks - they have them to players, to clubs, to sporting organisations, with governments, suppliers.

“All this adds up to €541m, which is more than double the debt Florentino inherited from Lorenzo Sanz. And on top of this debt, he wants to face the reconstruction of the Santiago Bernabeu that he has valued at €400m in cost. And then he has said that if he can find no way to fund it that he will resort to ingenious ways…

“How much of the debt is manageable? Revenues are high. We are the highest grossing club in the world, but we are also the number one in spending.

“And look, the revenues have increased annually at 12 per cent in the last decade, but in the last year have risen by only one per cent. And spending has soared.

“I guess that [the reduced revenues] are due to the economic situation [in Spain]. If there is that uncertainty, engaging in this Bernabeu project for €400m does not seem wise.

“And there is other data, the club has opened two lines of credit where they have had to pledge revenue from sports sponsorship and membership fees and subscriptions for three or four years to offer as collateral to the banks. This is not me, the club’s economic report says this.

“To pledge those amounts is like when you go to a pawn shop, you leave something as a guarantee. If you do not fulfil your commitment to return the money borrowed, you lose that thing.”

In explaining that the signings of Gareth Bale, Asier Illarramendi and Isco will be amortised across the next few years to break up the impact of their transfer fees, Mendoza reflected on why the likes of Gonzalo Higuain, Mesut Ozil and Ricky Kaka were sold.

“We have had to sell to offset the spending, like with Higuain. Thus we have obtained a cushion with the results, to make up the book for the coming year.

“Please note that the sale of Kaka has had a very negative impact on the accounts. There were two years left to still pay on his fee.

“The club will be spending about €20m more a year for Bale, Illarra, Isco and the higher salaries. Ozil cost little and has been sold for a large fee. That impacts positively on the accounts, but the enormous expense has seen the accounts continue to accumulate.

“Kaka? Last year Milan would pay €15m for him and we could have saved on his wage. This year, Milan will pay according to what they achieve athletically. It is a curious concept. It is harmful business. With the transfer fee and salary, Kaka cost €120m and played 120 games. More than with Adidas [as Florentino Perez remarked], I wish that Kaka would have helped us to win titles.

“What we need to do is look at the efficiency of the model. Since he began with Vicente del Bosque, Florentino has spent €800m on players to win a League and a Cup. The model is clearly inefficient.

“There is a risk that the club could be converted into SAD status. If the debt becomes unaffordable, it would require capital injections.

“Another way would be enter into voluntary administration. And, there is the research from the European Union on possible funding in the form of hidden government subsidies…”

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