Champions League’s Have-Nots Tap Payday Loans to CompeteAlex Duff
Some Champions League teams are turning to soccer’s equivalent of payday loans to compete with richer opposition.
Juventus, Atletico Madrid and Porto, all in yesterday’s draw for the round of 16, got cash advances from lenders in fiscal 2014 on future income such as player-transfer fees and sponsorship deals, according to financial statements.
The three teams, along with AS Roma and Lisbon-based Sporting -- both eliminated from the Champions League last week -- arranged such deals totaling 182.4 million euros ($225 million) in fiscal 2014, 19 percent more than a year earlier, their accounts show.
“There used to be a bit of a stigma to these arrangements, a suggestion clubs were having financial problems,” Ian Clayden, a partner in consumer markets at accountancy firm BDO LLP in London who has advised the English Football League, said. “But as long as the rates are competitive it’s not a bad strategy.”
Under the transactions, known as discounting, factoring or forfaiting, lenders such as Internationales Bankhaus Bodensee AG typically advance 90 percent of the value of a contract and receive the total sum in a year’s time from a club’s debtor. Close Brothers Group Plc, Cantor Fitzgerald LLP and Unicredit SpA are among other lenders to clubs.
Porto paid 8 percent interest to U.K.-based financier Good for Sport Ltd. to be advanced 1.5 million euros of the fee Chelsea agreed to pay for winger Christian Atsu, team accounts show. Separate loans to the Portuguese club from Internationales Bankhaus were charged 6.75 percent interest.
Premier League teams including Chelsea and Manchester City, owned by Russian billionaire Roman Abramovich and Abu Dhabi’s Sheikh Mansour bin Zayed Al Nahyan, have wealthier backers and bigger domestic television contracts than those in southern Europe and don’t need short-term finance to acquire players, according to Richard Price, managing director of East Grinstead, England-based New Century Finance Ltd., which has arranged more than $700 million of loans for clubs.
Many southern European clubs can no longer rely on a “house bank” for an overdraft facility, as they did before the 2008 financial crisis, Price said. Valencia soccer team had its credit line with savings bank Bancaja -- now part of Bankia SA - - halted in late 2008. Bancaja cited Bank of Spain rules for the decision.
Teams will often arrange the advances in “pinch times” during the off-season when they aren’t receiving income and need to finance signings, Clayden said.
Porto will play Switzerland’s Basel in the round of 16 of the Champions League, the region’s top club competition. Atletico Madrid meets Bayer Leverkusen and Juventus will take on Germany’s Borussia Dortmund.
Roma secured 72 million euros of discounting in fiscal 2014 from lenders including Unicredit Factoring SpA. Juventus raised
44.2 million euros, Porto secured 16.4 million euros and Atletico Madrid got 8.5 million euros.
“They’re trying their best to fill the big economic divide in football,” Raffaele Poli, a researcher at CIES Football Observatory in Neuchatel, Switzerland, which tracks trends in the $4 billion transfer market, said. “All the indications are it’s getting bigger and bigger.”
Several others teams not currently playing in European competition including West Ham, Southampton and Fulham have been tapping the same type of loans, in an effort to boost their performance in the Premier League. In Spain’s La Liga, Getafe and Deportivo La Coruna are among those to have turned to the financing method.
Since the financial crisis took hold in 2008 and Spanish banks reined in credit, clubs have had to look at different financing models, Atletico Chief Executive Officer Miguel Angel Gil said in a recent interview. Factoring is one way AS Roma secures funds to sign players, team spokesman Catia Augelli said in an e-mail.
Armed with lenders’ cash and a 100 million-euro capital increase, Roma hired Argentine winger Juan Iturbe from Hellas Verona for 22 million euros, Greek defender Konstantinos Manolas from Olympiacos for 13 million euros and Belgian midfielder Radja Nainggolan from Cagliari for 6 million euros in the last off-season.
The new recruits couldn’t prevent Champions League elimination last week, when the team lost 2-0 to Manchester City. Coach Rudi Garcia told UEFA’s website the club will try to bounce back next season.
“We’re building a team to be as close as possible to the biggest clubs,” Garcia said.