Real Madrid's Galacticos 2.0 plan: Just how can they sign Kylian Mbappe and Jude Bellingham?
Real Madrid's pursuit of Kylian Mbappe, as well as Jude Bellingham, this summer has prompted comparisons with their spending on the Galacticos era of the early 2000s, in the days before financial fair play and nation state-owned clubs. Yet the finances of Real are very different now and the biggest question will be: can they afford to buy these players?
The bidding for Bellingham will inevitably rise past £100 million if indeed he is to leave Borussia Dortmund this summer at all. As far as Mbappe goes, it is unclear whether the final year on his much-vaunted new Paris St-Germain deal to 2025 is an option or guaranteed, but either way, one expects his club would want a sum in the region of £200 million at least. The two presidents, Florentino Perez and Nasser Al-Khelaifi, are currently at loggerheads on the future of Uefa.
On top of those demands will be salaries befitting the players expected to be the best in the world for the next decade. It has not stopped Real in the past but this time there are some serious obstacles.
The sale of future revenue streams is an enormously contentious area that depends for its usefulness on how Uefa classifies the earnings it generates. Last summer Real sold 30 per cent of the next 20 years of their earnings from the rebuilt Bernabeu to the United States investor Sixth Street for €360 million (£312 million), paid in two tranches. The first, of €316 million, was banked by the club last summer and, according to their most recent financial results, saved them from losses of around €166 million.
Does the income generated from the deal with Sixth Street represent debt or revenue? The club and Sixth Street are adamant it is the latter and therefore eligible to be spent on whatever they choose under the auspices of FFP regulations. But what if another club, such as Newcastle United, were to sell €300 million of future revenue to, for instance, a Saudi Arabian investor and then enter the transfer market this summer with that sum as FFP-ready cash?
In that scenario perhaps Bellingham and Mbappe would be going to St James’ Park instead and Perez would undoubtedly have something to say about it. He has already complained about PSG to Uefa over Mbappe’s new contract and his pursuit of the European Super League is now as much a political position as it is a viable plan for football.
Spain’s big two are already wedded to the sale of future income – with Barcelona having sold €700 million alone last summer and likely more deals of that kind in the pipeline. If Uefa was to treat the infamous “palancas” – financial levers – as debt then both clubs would fail FFP immediately. La Liga has done a similar kind of deal with the private equity investors CVC for its top two divisions, bar a small group of refuseniks including Real and Barcelona.
There is a second tranche of €44 million from the Sixth Street investment payable to Real in the summer. Since those figures for the previous financial year ending June 30, Real published updates detailing results up to Dec 31. The cash in the business was €174 million from which an income tax payment of €96 million had to be paid, leaving €78 million of which some will have to be used for extra stadium costs.
This was all that was left from the €316 million from Sixth Street in the summer. That was primarily used to cover earlier additional stadium costs on top of the original €800 million and also covered €150 million shortfall for their biannual salary bill coming due in July, which totalled €216 million plus €35 million in associated taxes. It does not tell us how Perez might structure a deal for these two young talents but it does indicate that the great Champions League club of the past decade are burning through cash as they try to renew an ageing team and rebuild an ageing stadium.
The lure of Real is strong and the shock and awe of a big Real summer transfer window is long overdue at the club. In the past they have always found a way and it may be no different this time – but the world, and Uefa’s compliance department, will be waiting with interest to see how they do it.
