Debt Financing And Football

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The combined debts of the European Super League Clubs is an eye watering £7.4 Billion yet they carry on business as normal.

The most puzzling part about football is how the big clubs are always able to spend huge amounts in the transfer market yet already owe hundreds of millions and in some cases billions. How is it possible that these clubs can actually afford to buy any players yet stay within the Fair Play Rules.

How is this Fair play?

UEFA aimed debt | In General, 12 clubs have £5.6 billion of debt. As per UEFA’s definition of financial debt, clubs own £3.5 billion in debt. Cumulative transfer debt is £2.1billion. Moreover, almost all of the financial debt has come from banks (£3.3 bln), compared to only £0.2 bln from owners.

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The new Fair play Rules come into effect this month June 2022 which allows clubs to spend 70% of the clubs revenue. This takes into account the clubs salary bill. Up to last month clubs could spend $5 million more than they earned over a 3 year period.

The problem is not that straight forward as clubs are operating in a grey window using debt to purchase players they cannot afford. What this means is at some point the wheels will come off as this is an unsustainable way of doing business. This actually looks lie a genuine ponzi scheme as someone is going to have to pay for this one day as this cannot continue forever.

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Tottenham's debt figure is slightly skewed as they are paying off their stadium so that is understandable and actually get relief from the Financial fair play due to this. The UEFA turn a blind eye allowing for an extra 30% relief due to building costs. This is maybe why Real are upgrading their stadium as it actually benefits them bypassing the rules.

Looking back there are not many football clubs that actually make a profit and a prime example is in 2019 Chelsea were the top earners only after having won the Champions League giving them an extra 23 Million otherwise they would have not been looking so great.

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The problem is a club needs to spend on new players regularly to help grow their fanbases. They need to remain competitive in their leagues plus grow their support. Manchester United forking out $50 million in debt payments each season is nothing compared to where they will be in 10 years time. It makes no difference if you win the trophies as you are spending more than you are earning and that debt will only increase. This is madness and as a business model not one to copy as unless the club gets sold with new owners paying off the debt then at some point UEFA has to step in. Many clubs are arranging new loans each season that are well into the hundreds of millions adding to the debt already owed and at some point someone has to pay for this and the club will suffer along with the fans.

Imagine buying players in the transfer market and you already haven't paid off the last lot of players you purchased. These players are all funded by debt so if a player costs $100 million that isn't exactly true as salaries and debt payments need to cover this players package.

Barcleona - £283 million transfer debt and £180 million staff debt.
Atletico Madrid - £277 million transfer debt and £86 million staff debt.
Manchester United - £149 million transfer debt.

Here are some examples of how healthy clubs really are as they don't own those players and is a form of leasing. This is the loop holes that FIFA needs to close as this is not really sticking to the Fair Play Rules. If this carries on with the new rules imposed this month unless they drastically change their way of doing business this will not be happening within 5 years.



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19 comments
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I think if the situation continues as it is and the debts continue to accumulate, it is possible to see these major teams owned by people or investment funds belonging to countries to save them from bankruptcy

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Maybe but according to financial fair play they will not be able to operate like they do currently. This business model is a ponzi scheme and everyone loses.

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I have been saying this for years, and it seems unsustainable, but they all have a long arm at Uefa. From which they have succeeded in reforming the Champions League. So again more money is flowing their way. And by that they bought themselves some time, and will probably raise their debts once more.
Inter Milan made an offer of 60 million EUR for two players of Club Brugge today… They keep on spending…

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Yes they do keep on spending as it is tomorrows money and not now. This will be someone else's problem and not theirs come 10 years time. There is only going to be so much money as tv rights with the cable operators will be under pressure. They are losing customers so that base is shrinking and not growing. This looks like a train wreck as who is going to fund this madness? Fans can only pay so much for supporting a team.

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Why then is owning a club so attractive if it is barely profitable? Must be a gamble on the asset value when selling.

Also think a lot of players are overvalued in football. There's simply no justification forking out ridiculous sums for some players irrespective of their supposed quality

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The main train of thought is the washing of dirty money and why players became so expensive as clubs were willing to pay those fees. Not saying all clubs are dirty, but that was what the talk was all about a few years ago when transfers were that costly. The profit has to be made in the sale of the club as values have risen even though as a business it doesn't give the returns like businesses should.

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I wonder the new possibilities of fans token and players NFT might alleviate the situation… or make it worse!

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Football clubs are nothing more than the playthings of foreign billionaires and players nothing more than contracted mercenaries.

Young fans are treated like morons and they happily lap it up.

I mean you need look no further than the relationship between football and crypto.

Fan tokens and NFT collections designed purely for short term cash grabs by clubs that have no impact on their bottom line.

Yuck.

To say I'm disillusioned with the game is certainly an understatement.

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Easy to see now why these clubs are desperate to form a breakaway league where they can try and maximise TV revenue. The only way these business models are sustainable is if that revenue continues to increase as it has done for the past few decades.

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And to think many of the tv subscription services are losing thousands of customers monthly. I don't see a bottomless bucket of gold to support what these clubs are doing.

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Thank you for your witness vote!
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That debt is extremely unsustainable. The bubble must burst at some point

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I expected Manchester United in that because they are spending more than they are earning. The kinds of players we are buying at inflated prices only to have them not live up to it would further drag the team down. I didn't see Tottenham's debt that high and thanks for explaining it. Stadium expansion and that's fair enough on them. The debts keep growing for these clubs and if care is not taken, there would be greater consequences down the years.

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Football has become a money laundering machine in my opinion. Especially the clubs that are owned by big "investors". It is truely a shame to see big clubs with traditions turning to these kind of deals to maintain the relevancy.

I think a good example could be Bayern Munich but then again, they did some shady stuff in their past to get into this postition.

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They have like assets that they collateralise to ensure they can take a decent chunk of debt right? Sponsorship, merchandise and all that stuff enables them get further into debt.

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Crazy stuff and it's not just football clubs, but countries too that have crazy debts. It's mad and the whole thing is a merrygoround

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