Barcelona's £1bn black hole could signal a catastrophic collapse – and Lionel Messi's exit

Soccer Football - Spanish Super Cup Final - FC Barcelona v Athletic Bilbao - Estadio La Cartuja de Sevilla, Seville, Spai - Reuters /MARCELO DEL POZO 
Soccer Football - Spanish Super Cup Final - FC Barcelona v Athletic Bilbao - Estadio La Cartuja de Sevilla, Seville, Spai - Reuters /MARCELO DEL POZO

The brutal reality of Barcelona’s finances were finally laid bare on Monday with the admission by the club that it has crippling total debts of €1.173 billion (£1.04bn) – suggesting the only way out could be a restructuring of its 122-year-old ownership set-up.

As for Lionel Messi, there is no prospect of a new €100 million-a-year contract (£89m) – the salary that the world’s most celebrated footballer is accustomed to earning at the Nou Camp. Unless the disgruntled Argentine star is prepared to take an enormous pay cut he will inevitably be leaving this summer when his current deal expires. The club’s financial results, long overdue, were a picture of the situation as of June 30 last year and the reality is that the situation has significantly deteriorated since then.

Telegraph Sport has long highlighted the reliance of the two Spanish powers, Barcelona and their rivals Real Madrid, on debt and long-term borrowing and a precarious financial approach to club-building has laid the ground for a catastrophic collapse in the Covid-19 era. Madrid’s debt, which includes the €575 million (£511m) bonds to rebuild the Bernabeu Stadium, is also over €1 billion (£890m) and may be much more. The two clubs’ days as predators circling the Premier League’s best players are over and the haste with which they have pursued European super league proposals, led by Real president Florentino Pérez, demonstrates the desperation to show creditors increased future revenue streams.

Barcelona’s situation is so grave that it looks impossible to resolve without some kind of capital injection from a third party. The club is owned by its 150,000 plus members – or socios – which would make this operation problematic. The assets of the club – the Nou Camp, the training ground, the player contracts – belong to the members and any takeover would require them to be bought out. The prevailing wisdom is that these clubs, cultural behemoths in Spain, are too important to be allowed to fail, but the conditions under Covid-19 are unprecedented.

The re-signing of Messi, already gravely disillusioned, would now be too great a burden for the club to bear even in spite of the 33-year-old’s achievements over the last 15 years. His friend and former team-mate Luis Suarez was released last summer simply to take pressure off the wage bill. The Liga salary cap, calculated according to future revenue shows that Barcelona’s wage paying capability has fallen from €671.4 million (£596.4m) to €382.7 million (£340m).

Currently Barcelona have a negative working capital – debts exceeding short term assets – of €600 million (£533m). They owe around €320 million (£284m) to other clubs in transfer fees; bank borrowing of €280 million (£249m); bonds of €200 million (£178m); unpaid wages of €200 million; suppliers are owed €84 million (£75m); and public administrators €55 million (£49m). Barca have a €146-million (£130m) state-backed credit line which seems to have been used to pay last summer’s wages – the club pay salaries twice yearly in six month tranches.

The club’s problems were severe before the pandemic, with four separate bond issues in 2018 and 2019 to raise funds – all of it borrowed against New York and Hong Kong subsidiary companies and their merchandising company set up to handle their Nike merchandise.

The sacking of manager Ernesto Valverde last season, which precipitated a significant public rift between the players, led by Messi, and the then president Josep Maria Bartomeu, cost the club €10 million (£9m) in compensation to their former coach. Barca have already dismissed his successor Quique Setién and are refusing to pay his compensation, effectively arguing in a tribunal that he was incapable of doing his job.

The club claim to have spent around €100 million (£89m) on the Espai Barca project, the rebuilding of the Nou Camp, although its long-term future looks in considerable doubt given the scope of their debts. There will be presidential elections in March to choose the successor to Bartomeu with former president Joan Laporta the favourite over the other key candidate, Victor Font. The winner will be faced with some testing decisions in order to save the club.

Barcelona and Real have always rejected the notion of a rich owner, and are one of only four clubs in Spain, with Athletic Bilbao and Osasuna, to be owned by their members. However, years of financial mismanagement have made them extremely vulnerable to the tumbling revenues of the Covid-19 crisis and there is no benefactor in a position to bail the clubs out. The boards of the four membership-based clubs have successfully lobbied Government to have the law that makes them personal liable for club losses to be struck out.

With Pérez at Real and a succession of Barcelona presidents, money has been spent and debt accumulated with a carelessness that would not have been the case had it been their own resources at risk. The Uefa Financial Fair Play regulations that were brought in to curb the billionaire owners of clubs in the Premier League and elsewhere have not, it seemed, been comprehensive enough to save the membership-owned clubs whose model was long held up as the best way of ensuring a stable future.

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