The pandemic caused a shock among many sectors of the economy, also in football. The competitions stopped and, when they resumed, they did so without an audience. The recovery of the capacity was gradual and it has not been until recently when fields have been full. To this was added that audiovisual revenues were lower than expected. All together it caused a perfect storm that has resulted in an increase in the debts of football clubs with the financial sector, both banks and investment funds. In total, the first and second division teams, which make up the LaLiga employers' association, owe 2,328 million to these entities, 56% more than before the pandemic, according to the financial report of the professional football association with closing data from the last season.
In total, the clubs' debt reached 3,353 million euros at the end of the 2020/2021 campaign. Although it gave a slight respite in this exercise, it is a figure that exceeds by 30% the liabilities of the clubs in the 2018/2019 season, the last without economic effects caused by the pandemic. This figure includes, in addition to the debt with financial entities, what they owe to other teams for transfers whose transfer has not been fully paid. This amount has fallen from 1,300 million to just over 900 million, which serves to offset the increase in what the teams owe to the entities that have lent them money.
The main increase in the debt of the clubs with the financial entities occurred fundamentally in the 2019/2020 season, when the quarantines forced the paralysis of all competitions, both national and European, in the absence of a significant part of the championships. However, it has continued to rise, another 15%, over the past year. The level, in fact, doubles that of the 2016/2017 season when these club liabilities reached their lowest levels in the last five years.
However, the 2020/2021 season brought with it a change in the balance of debts with the financial entities of the football clubs. The LaLiga report differentiates between "debts with credit institutions" and "other financial debts". The former are with banking and have traditionally been broader than the latter. This last section includes debts with investment funds and other non-bank financial agents, as explained by the employers. This shadow bank, as these entities are known in the sector, has gone from being the third source of debt for football clubs —behind banks and transfers not paid to other clubs— to being the first and It already represents 1,240 million euros. That is, one out of every three euros that football teams owe. The association points out that there is a transfer of bank debts towards this type of financing.
LaLiga acknowledges that, despite the fact that the joint debt has been reduced in the last year, the leverage ratios - coefficients that are calculated to know the weight of the debt compared to the operating results of the business - "have substantially deteriorated". This occurs, explains the report, not so much due to the increase in liabilities but due to the collapse of results. "There will be a tendency towards normalization in the coming seasons," says the document, which defends that the debt is "strongly backed by the assets of the teams. The soccer employers' association highlights in its analysis the decrease in what the clubs owe to the Social Security and the Tax Agency If less than a decade ago this figure reached 650 million, now it is around 17 million.
The combined first and second division clubs ended last season with losses of 892 million euros. However, LaLiga points out that 60% of these losses are contributed by a single team. Although he does not mention it, it is known that it is about FC Barcelona, which in recent years has gone through a delicate economic situation. The truth is that only twelve of the 42 teams that make up these two competitions have managed to make a profit last season. The clubs had a turnover of just under 2,000 million euros during the past campaign, with a drop of 15% compared to the previous one, when the impacts of the pandemic were already appreciated. The decrease is mainly due to the collapse of billing on the days of the meeting —the box office—, which has fallen by almost 52%.
The accounting of LaLiga's debt ends at the end of the 2020/2021 season, just before a part of the business was sold to CVC in exchange for a portion, around 8.2%, of the audiovisual income of the Spanish league competition. The fund will invest just under 2,000 million euros, which will be converted into loans for the clubs. LaLiga points out in its report that they will be considered as subordinated debt, which will increase the clubs' liabilities. "It is true that there is an inorganic upward trend in the long term due to the renovation of important infrastructures planned or underway, as well as the exceptional transformational investments that the funds provided by CVC (Impulse Plan) will entail and that will be articulated as 50-year participating loans in the balance sheets of the clubs", the report points out.
It will be from the end of this season, since the first payments have already been made, when the consolidated accounts of the football clubs will begin to incorporate the CVC participative loans. The only three teams that have remained in the first division since its creation almost 100 years ago were left out of this agreement: Real Madrid, FC Barcelona and Athletic Club de Bilbao. The three opposed this operation and even tried to stop it in a precautionary manner in court. Finally, they were left out of the distribution of CVC funds, thus reducing the portion of LaLiga's income that will remain in the hands of the venture capital fund.
This week, the credit agency Moody's has issued a report on Loarre Investments Sarl, the Luxembourg vehicle through which it directs the CVC operation. The document indicates that the investment made by the fund in LaLiga entails a risk in the event that The Super League project will prosper, today parked but not discarded. "It would pose a risk due to the lower interest of the audience in LaLiga with the consequent discount on audiovisual income," the analysis points out. "Because the value of the rights is disproportionately driven by some of the biggest and most successful clubs, any scenario in which one of them leaves the competitions would affect the value of those rights," he adds. In addition, he concludes that with technological changes there may be a fragmentation in the media that can "decrease the value of audiovisual rights."
Moody's also points out that the pandemic has "weakened" the finances of Spanish clubs, especially for having lost income with the stadiums closed. "If a similar situation occurs in the future, it would affect LaLiga's income and, therefore, the distribution allocated to CVC," the note points out. In addition, he recognizes that there are risks for the fund if some of the legal initiatives presented by the three rogue teams finally end up progressing. This could cause the operation to be cancelled, says Moody's. "A growing division between member clubs, in the context of this complex transaction, may make the governance of LaLiga more complex to manage in the future," the credit agency concludes.