Atletico Madrid CEO Uses House to Help Back Soccer Team

Champions League finalist Atletico Madrid is struggling to pay its bills on time even as the team chases European club soccer’s top prize.

Atletico was late with 37 percent of payments to suppliers last season, according to its latest financial statement. Chief Executive Officer Miguel Angel Gil said that, with Spanish banks restricting lending to the club during a six-year slump, the team turned to investors from Azerbaijan, the U.S. and Kazakhstan to help finance the signings of six players including striker Diego Costa. Gil said he has also used a home he owns as collateral to secure a loan.

The club’s finances make its progress on the field under coach Diego Simeone all the more remarkable, according to Jose Luis Sanchez, president of Senales de Humo, or Smoke Signals, a fan group which has sought to have Gil removed as owner of the team he took over from his father.

“The squad was bought on the cheap,” Sanchez said. “Simeone’s attitude has been to say: this is what I’ve got, let’s get on with it.”

Atletico plays Real Madrid, the record nine-time European Cup-winner, for the Champions League trophy in Lisbon on May 24. The match will mark the first time that teams from the same city will meet in the competition’s final. It’s Atletico’s first elite European final since it lost to Bayern Munich in 1974. The red-and-whites will win their first Spanish league title since 1996 if they avoid defeat against Barcelona on May 17.

Cash Flow

With cash flow at 5 percent of its 543 million-euro ($745 million) debt last June, Atletico is in the weakest financial shape of the eight clubs that reached the Champions League quarterfinals, according to Jose Maria Gay, an accountancy professor at Barcelona University who researches soccer club finances.

“They have a chronic problem,” Gay said. “They have to service their debts all the time.”

Real Madrid had cash flow at 24 percent of debt, and for Bayern Munich it was 26 percent, according to Gay. Of the quarterfinalists, only Chelsea had a comparably low cash-to-debt ratio to Atletico, Gay added. The London club is bankrolled by Russian billionaire Roman Abramovich.

Even if Atletico wins the final and takes its Champions League prize money to as much as 50 million euros, it will probably have to trade players, according to Gay.

Some of Atletico’s financial woes date back to Gil’s late father, Jesus, a real estate magnate and former mayor of Marbella who oversaw the team’s 1996 league title and a period when it was relegated to the second division in 2000 and given a two-year tax moratorium.

Debt Payments

The club is paying off about 80 million euros of tax debt costing 4.5 percent in annual interest at the rate of about 15 million euros a year, according to Gil, whose desk in a wood-paneled office at the Vicente Calderon stadium is below black-and-white pictures of his parents.

In the winter, some office workers wear coats indoors to ward off the cold at the aging, 48-year-old stadium and rooms are warmed by portable fan heaters.

Atletico was outside the 60-day deadline stipulated by the government with 37 percent of bills in the year through last June, its latest financial statement says. That shows it’s strapped for cash, although such figures are not unusual in southern Europe, Gay said.

In 2012, European soccer’s ruling body UEFA temporarily withheld the team’s prize money from the Europa League for failing to meet payment obligations.

Atletico has struggled for decades to keep up with the financial might of Real Madrid, soccer’s richest club by sales, according to Fernando Castan, author of a history called “100 Reasons to Support Atletico Madrid.”

‘Bit Chaotic’

Real Madrid boasts a more modern stadium with elevators, flashy VIP boxes and overhead heating in the stands that keeps fans warm during mid-winter games. It also has the world’s two most expensive players, Cristiano Ronaldo and Gareth Bale, who each cost more than the entire Atletico roster to sign, according to data on which tracks player trading.

“Atletico has always been a bit chaotic,” Castan said. “When they were building the Calderon stadium, the club was in financial ruins and had trouble paying.”

Real tapped loans totaling 151.5 million euros from Banco Santander SA and Caja Madrid, now part of Bankia, to acquire Ronaldo and Kaka in 2009.

Spanish banks have been less generous in lending to Atletico, and it’s turned to sharing the cost of hiring players with investment funds controlled by Los Angeles-based Creative Artists Agency LLC, Doyen Sports Investments -- a hedge fund supported by investors from Kazakhstan -- and an Azerbaijan group, Gil said.

Transfer Rights

The funds receive a share of the fee if the player is traded to another club, an arrangement that UEFA wants to ban from its competitions because investors may gain control over a player’s destiny.

“We are sharing the risk,” Gil said. “It’s an interesting transaction because if the player doesn’t do well the club doesn’t lose everything.”

A group of investors that Gil declined to identify acquired 33 percent of the transfer rights of Costa, who rejoined Atletico from Real Valladolid in 2010.

In an interview in February, Gil said the club hadn’t decided whether to transfer Costa, although that wouldn’t be an unusual scenario. Atletico traded top scorers Fernando Torres to Liverpool in 2007, Sergio Aguero to Manchester City in 2011 and Radamel Falcao to Monaco last year.

New Stadium

To raise money from lenders, Gil said he also used a home outside Madrid as collateral. According to the latest financial statement, Gil and President Enrique Cerezo, who is the second-biggest shareholder, between them raised 510,000 euros by mortgaging real estate they own.

Atletico’s financial outlook is improving with plans to move into a new stadium in 2016 that will increase match-day sales from parking and corporate hospitality by at least 66 percent, according to Gil, who said the move has “zero” net cost for the team. Fomento de Construcciones y Contratas SA is building the stadium in return for acquiring the site of the team’s current arena, Gil said.

Sanchez, the fan group leader, says Gil and Cerezo unlawfully bolstered their control of the club in a share capital increase in 2003, a claim upheld in a ruling by Spain’s Supreme Court in February. That hasn’t any immediate effect on their club’s ownership.

Amid events on the field no one is concerned about that case right now, Sanchez added.

Most of Atletico’s first team was in the line-up when it was eliminated by third-tier Albacete in the Spanish Cup in December 2011, just before Simeone was hired to replace Gregorio Manzano, Sanchez said. At that time, Atletico was 10th in the 20-team La Liga.

“This season is a kind of miracle,” he said.

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