Barcelona walking a financial tightrope to rebuild the squad

Barcelona’s rebuild of its squad is well and truly up and running. Favorite son Xavi closed the previous season fairly well as head coach. Now, he brings in several new arrivals to put an end to the supporters’ suffering.

However, despite the glitz and glamor of new signings, questions remain over the plausibility of Barcelona’s transfer spending. As of now, Barcelona remains billions in debt. Plus, rumors of differed wages lead to conspiracy theories about the financial dealings of the club. Many fans feel that something dodgy must be going on behind the scenes.

In fact, stories of the club nearing bankruptcy hit the social media circuit. Recent reports of a decrease of over $500 million in yearly revenue do no favors to the skyrocketing debt crisis.

However, not all is as it seems in Barcelona. These tragic tales of doom and gloom may be pretty far from the mark. Simultaneously, Barcelona readies itself for a resurgence with increased transfer spending.

A much-needed resurgence

Yes, on field success has been pretty scarce in recent years. The downturn in revenue, combined with questionable transfer decisions, left the club on shaky ground. LaLiga rules stipulate that clubs can only spend a certain amount of money on players. This figure comes from a club’s current revenue and outgoings. For Barcelona, the club sits at -$150 million. Therefore, the Catalan cannot register any new players until this figure returns to positive figures.

The only way to do that is to create more revenue.

Granted, this seems like an insurmountable mountain. Remember, Barcelona is one of the juggernauts of world soccer. Despite its financial struggles, this is a wildly easier task than it is for other clubs. In fact, it is comparatively pocket change in the grand scheme of things.

So, here are the basics of how Barcelona rebuilds its squad.

Barcelona working to rebuild its squad

Firstly, Barcelona restructured its debt. Short-term liabilities became long-term. This provides stability for the club to find its footing. The general connotation of debt is negative. However, when managed properly, it can turn into a positive. Changing the length of the loan reduces monthly repayments. Consequently, the banks will not foreclose and call in the full amount of those debts any time soon.

Secondly, Barcelona wants to reduce its current wage bill. Fortunately, many players took significant pay cuts, often reaching the maximum allowed in LaLiga at 50% of the previous salary. Reason being, many players do not want to leave the club. Frenkie de Jong is the standout case. The Dutchman does not want to leave the club, but does not want to take a pay cut, either. Barcelona likely wants his wages out of the club, and the player is merely collateral for that.

Lastly, and most importantly, is the sale of business assets. When people talk about assets in terms of football clubs they usually think of the players themselves. Yet, a club the size of Barcelona has more to offer the business world than the talent of it’s playing staff. For one, the club sold off 10% of all TV revenue for the next 25 years for over $250 million. Straight away, this wipes out the -$150 million La Liga stipulated as their squad buying power.

But, the sales do not end there. Currently, club president Joan Laporta is negotiating other business deals to put the club back at the high end of football transfer market. Another 15% of future Barcelona TV deals is up for sale for a reported $330 million. Meanwhile, 49% of the clubs merchandising is going for another $200 million.

This might not be the reading that many Barcelona haters want to see and selling off future earnings may be something of a risk. However, in the short term, these moves more than allow Barcelona the room they need to sign who ever they feel they need this summer and should see them on a more secure financial footing for the next few years.

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