Barca - Where to from here?

Life hasn't been easy on you if you have been an FC Barcelona fan for the past 8 odd years. There was that 8-2 courtesy Bayern. Valverde's almost undefeated season run, laced with memories of Roma and Liverpool. Messi's burofax and subsequent departure. Coutinho scoring not one but two against Barca while on loan. Xavi-ball during Barca's peak Europa despair. The Athletic's steady drone on Barca's finances.The famous palanca's and the subsequent ridicule. Sandro Rossell's going to jail. Josep Maria Bartomeu's 'almost going to jail'. Koeman's season of surreal. The epiphany of Luuk De Jong. The abject shame of Negreira. El Presidente's goal against Madrid which gave Barca the league last season and most recently Xavi's resignation.

Plus the obligatory, Varcelona, Brokelona, Uefalona banter on social media. Tedious doesn't quite start to describe it.

There's more, but this is a good collection to keep our memory jogging and minds occupied. Cule's are a resolute bunch though. Through thick and thin, and dollops of Twitter snarks, they have persevered. Whatever Barca lack in running an efficient sporting organisation, they have more than made up for in sheer telenovela-esque drama, leaving a once proud, now humbled fanbase jaded. Tired of mediocrity and thirsting for some Kingfisher beer to bring back the good times.

Big club, someone said? Truly, Mes Que Un Club.

And no, this isn't sarcasm. Maybe a bit tongue-in-cheek, because the level of dysfunction is mind boggling at times.But even through all this, for some vague unexplainable reason, I still love this crazy institution. It makes no logical sense. Easier would be to go and support Man City. But come this weekend, I will be up at dawn, ready for the suffering. Another 90 minutes of watching us run around the pitch in useless circles.

Every summer for the past five seasons the club has gone through a revolution. But with all the revolution, evolution hasn't been achieved yet and a bit more revolution seems to be required. Meanwhile, Barca have churned through 120 odd players and 8 coaches in twelve years. Come summer, they face a new transfer window with a need to overhaul the squad (once again) with no possible finances, no palancas left and no coach on the bench.

So where to, from here?

This can become a novel in itself without much effort, so let me try and keep it to a few themes which span the future of the board, possible choices regarding a new coach, hopeful player transfers if any and obviously a little bit about "Show me the Money" as Jerry Maguire once said.

This isn't some great tactical analysis or even a serious read. Just a tongue-in-cheek ramble powered by Google search and copy paste, that we as fans sometimes revert to.

So let's get started.

THE BOARD

Well with Xavi leaving (smartly) mid-season, the Barca board does face some inconveniences. Xavi was the shield against the media. What he did not have in coaching pedigree, he did have in oodles as a bonafide club legend. Kept the fanbase and media at bay. Now the media and fans will turn their loving gaze on to the President and the Sporting Director. If the team loses a few more league games and gets knocked out by Napoli in the Champions League (highly possible), the murmurs of elections being called early won't be surprising.

But to be practical, there is too much chaos and media scrutiny (even by Barca standards) to deal with, for a new incumbent. Since Barca are a Mes Que Un Club, the media scrutiny and circus around them is also Mes Que Un, which makes total sense. So, I guess the challengers won't mind waiting in the wings for a bit until the baseline stadium renovation work is completed and the Ghost of Negreira is exorcised before making a move.

That would probably give the current board a couple of years of run-time. Their most important focus will probably be around completing the stadium renovation, fast tracking Espai Barca while getting a manager on the bench who can provide stability and keep the sporting engine running. It is also probable conjecture that Laporta himself might be tempted to call time once the stadium work is completed. Choreographed with the celebrations planned for Barca's quasquicentennial.

It would be the perfect exit. The bigger the problem you solve, the richer your legacy is. "Saving the club from ruin" would be a great narrative to cement that legacy. In all likelihood, Barca will probably have a new board by 2026.

Now - who will lead that board is a million dollar question. But one way or the other more changes are coming.

THE FINANCES

By now everyone and their mother, family, neighbours and The Athletic have a point of view on Barca's finances. That's great, because it reflects the amount of interest the club can generate on an everyday basis. This babbel of chorus simmering in the cauldrons of social media and reams of newsprint shed light on crucial matters for fans to debate and opponents to disparage. Quite an important facet of being a member owned entity over a state owned corporation.

Now I am not a financial expert, but it seems like Barca's net debt is down to EUR 550 million, from €672M two season ago. A critical aspect of this net debt is about €227M in unpaid player transfer fees.

Google says that net debt is very different from gross debt and net debt is what defines the wage cap or salary mass for La Liga. (The long term debt for Espai Barca is not considered as net debt by La Liga or for that matter by any other financial institution)

But before we go any further, a very quick primer on Barca's finances and debt. Express version without excel sheets.

The story starts in August, 2021 after Laporta had sauntered into office for his second term. On August 30, 2021 Barca's debt statement read something like this.

• Gross debt of €1.35B with €731M for repayment within 12 months
• € 673M owed to banks
• € 390M owed in unpaid player salaries
• € 90M in litigation
• € 80M in advance TV rights
• € 55M in infra projects

A short term debt of €673M to be repaid to banks within 12 months was a very complex situation. Laporta likened this to the club being in the ICU. On top of it there was a negative equity of over €353M. This was the most serious of all the fancy numbers. Why? Because this is the key metric that is considered to assuage the financial health of any organisation (which in turn is also what La Liga uses to impose Financial Fair Play margins on spending).

Shocking, you say? I totally agree. Who in their right mind was running Barca and letting it get here? A €700M annual wage bill on an annual income of around €800M on average? You don't even need to be an auditor to know that this won't end well.

But the business world loves debt. Hold your beer and look no further than the great nation of America. The US federal debt is only $33 Trillion with a T. So - as I said - businesses love debt. Nations love debt, banks love debt, and hedge funds too. Especially when you have core real estate assets as collateral.

There is tons of money to be made.

Curtain raiser on a period of loan craziness, courtesy your friendly neighbourhood banker Goldman Sachs.

• June 2021 Barca financed a €80M bridge loan (for treasury guarantee on their debt)
• They took a further loan of €561M with a maximum term of 15 years on an interest rate of 3%. This was a critical restructure of short-term debt (see above the value of €643 M) which gave the club, room to breathe by increasing their repayment time. This also saw the repayment of the bridge loan of €80M advanced by Goldman Sachs to cover the treasury obligations for a period of 90 days and renegotiated the senior notes signed for an amount of €200M.
• In December 2021, Barca went to take on another loan because why just take €500M when you can take €1.5B notably to remodel Camp Nou, build Espai Barca and the new Palau. Net-new real estate assets.

Now, of course, for most normal people and experts on X, €1.5B in debt feels like an incoming car wreck. So to lighten the mood here are some beloved car brands and their present day debts

• Toyota: $221B
• Volkswagon: $198B
• Ford: $144B
• General Motors: $118B

So back to Barca.

After this period of giddy loan happy craziness, there was a need for some prudence in raising some quick capital to balance the situation to more meaningful terms.

Enter Palanca time! (You get a palanca, you get a palanca and you too get a palanca)

• To keep it stupidly simple, Barca sold retail and future earnings media assets (La Liga TV rights) which were booked under two consecutive fiscal budgets in (2021/22) and (2022/23) for €344M and €443M. In total €787M.
• Part of it was used to repay defaulted transfer fees, buy some players and part to repay some short-term debt.
• No, Barca did not go lever pulling just to "buy players." It was mostly to adhere to restructured short-term debt.

Barca's operating revenue across the past two crazy years (summarised below)

2020/21 was the covid year where Barca's earnings were €631M.

Some quick takeaways:

• With the sale of future TV rights (where Barca stole from Peter to give to Paul - to quote a popular social media euphemism) media revenue in 2022/23 dropped from €251M to €217M. Given Barca crashed out in the group stages of the Champions League and also did not win any flowers in the Europa League, it would seem that they can probably keep earning ballpark similar amounts from media and TV rights if they continue to keep their league form while giving up any hope for the Champions League / Europa League (beyond group stage) for the next few years.
• Once Camp Nou is operational, Barca can probably earn around €200M - €250M annually from Stadium related income, while commercial retail and sponsorships would possibly hover around the €350M mark (since most are long term deals)
• To keep it even simpler, if Barca did nothing else, gave up on the Champions League for a few years and focused on League top 4, (and covid did not return), they would still probably earn around the bare minimum of EUR 700M - 800M per year. Not too shabby for a broke club and probably what it means to be a so-called "Big Club".
• Now to contextualise all this within the debt that could make the club disappear
• The repayment terms of the €1.5B loan (for Espai Barca etc) over 37 years with an interest rate of 5.5 % would probably be around ballpark €95M per year.
• So from an expense perspective this would be a large chunk or recurring expense along with the salary or wage bill.
• Probably manageable (even with the lesser TV right earnings, given the baseline projected revenue numbers of €700/800M ) until the stadium and Espai Barca are fully operational in a few yearsSee below a beautiful screenshot, for those love numbers in colours.

But since the situation is dire, per experts, let's look at the club's total assets and liabilities as of today.

In short €2.7B in assets (most of which are liquid like real estate, stadium, investments and Espai Barca) and €2.7B in liabilities. Seems like a ton of liabilities, no? But since assets and liabilities always have to be the same on a balance sheet, it does make one wonder that if Barca's liabilities were less then Barca's assets would also be lesser, which would signal an overall lower valuation.

Confusing ? Right? Make my head giddy.

So maybe the point to note is that current assets are greater in value than short-term debt, while long-term debt is hedged against real estate, intangible assets (like players) and financial investments. Safe-ish hedge, it would seem. But what do I know.

Another meaningful insight is probably around net equity and Espai Barca.

Net equity has improved significantly compared to the negative €353M on June 30th, 2022, to negative €1 million on June 30, 2023. In two seasons, Barca has been able to reverse almost all of the negative equity it had in the financial year ending June 30th, 2021. In a few years Espai Barca would also start earning rent on its real estate which would probably make that net equity a bit more cherubic.

Fancy accounting and palanca pulling, you say? I agree.

This is why businesses and banks love debt. Ask any CEO or company founder, they all love certain kinds of debt. Everyone makes money and problems get solved even when you don't have any money in your bank!

It's like magic.

Suffice to say, Barca will survive this tide just about. I don't need to understand much about finances, but if I had to buy a home with my salary which ends by the 10th of each month, I would probably take a 30 year mortgage and allocate 30-40% of my earnings to repay that debt annually while using the excuse of a bonus I get at times to fasten the exit. Barca will probably look to allocate close to 10-15% per-cent of their annual earnings in repaying this debt over 37 years and boy Barca's annual baseline pay-check is surely much rosier than mine. (TV rights, media rights, retail sales and real asset rentals will only increase)

They also have much better accountants and audit firms!

They will survive this one, but this game cannot be played again and again. This is a one trick pony. And expenses will only go up. These new retail assets will increase their financial wellbeing for a few years (after the storm dies down), but with inflation adjusting over time Barca (and many other clubs) will constantly have to look for newer sources of revenue to keep their earnings increasing. This is simply not possible through continuous asset sales, ticket sales, media rights and jersey sales. Not for Barca. Not for any club.

Except those that are funded by nations or billionaire owners.

Maybe that's why two or three pesky disgusting clubs like Barca are "going rogue" about formats like the Super League and adulterating the sanctity of the game.

Where the promise is of greed and more money in return of the death of football.

But here's the thing about money and the death of football. The European football market grew from €19B in 2012 to €29B in 2022. A 50% growth in 10 years. But the clubs that power the game, which drives the demand that fuels this growth, did not grow in revenue by 50% in the same time. The media, player salaries and governing associations enjoyed the majority of the windfall from this growth.

The fans who fight for the living of football did not get one cent from this €10B. The extra €10B also did not kill football. If anything, more football got played.

So maybe it's not about a cloak and dagger conspiracy. Maybe it's just reality. The reality of doing business.A reality many clubs know but are scared to admit because they need to pay their bills for today.

Football is all about La Pausa you said? Making it a business makes it all tainted and dirty? I agree. It does. But those La Pausa players don't come for free. They are going at about €100M a pop these days (La Pausa Legends go around €250M - €500M) Selling popcorn and stadium tickets to watch games won't get you to buy their jerseys.

Forget them.

So grudging credit where it's due. While those at the board may have no idea how to run a sports club like the threadaratti on X (which includes me as well!), they sure do know how to do palanca pulling, fancy accounting and debt management at speed. Reversing the situation to neutral equity in 2 years wasn't easy, even when you have acres of prime real estate and a 100 year old brand. But they did what was necessary. Yes, we can criticise them for sure (and we do), but try refinancing a failed home mortgage and you will see many idealistic notions fade away.

Fast.

One silver-ish lining in all this is that Barca's prime real estate assets are increasing. McDonald's and Zara are not really valued on the burgers or clothes they sell. They are valued in the number of retail stores they own on the high street. Probably why Barca is also opening retail stores here and there in Spain (and planned for in other countries)

Interestingly, Laporta's plan to get here was pretty much the same as the much maligned Josep Maria Bartomeu. Same blueprint. Because it is the only quick trick in the debt trade. Sell liquid assets to raise manageable and serviceable debt at a fixed interest rate that depreciates over a period of 30 odd years in return for more assets.

It also probably makes sense to understand why Lionel Messi actually left in the summer of 2021 after earning €550M in the previous five seasons (much highlighted by the media) in which Barca never won a Champions League.

A shame. Among many other shames. The end of an iconic legend.

Maybe everything is not a conspiracy. Sometimes shit just happens.

THE FUTURE COACH

German Gegenpressing on the Camp Nou greens? Bring it on! Hansi Flick is apparently already learning Spanish. Tuchel is openly professing his love for Spain, Klopp is jobless from the summer but has a farm in Mallorca, and Nagelsman is still smarting from his Bayern sacking. It is not wishful to think that by the time summer comes, Barca media will probably link every single coach on the planet to the vacant spot at Camp Nou which seems to be a poisoned chalice.

But which elite coach would realistically come? The spectre of Negreira, no money to buy players, The Athletic's daily articles and overall dysfunction?

No one. Probably.

But it seems like Barca will be able to keep a semi-competitive wage bill around €500/€600M , the moment they can show earnings from the investment being realised from one of their levers (the Barca media offering with Orpheus media) which had been captured in the 2022/23 budget, but which hasn't been paid for!

Typical Barca you said? I agree.

So let's assume the worst, that they cannot show it. Because, it's broke Barca. This will probably slap them with a €100M bill for an extra year. Barca spent a grand total of €3.5M in player transfer fees this season. Maybe one more season of that. Probably the next coach will get the same or a little more.

Add to that some smart player sales, some smart acquisitions of effective players at lower salary, some smart promotions from La Masia and the members of the existing core after they return from the infirmary. Barca can certainly aspire to have a squad that can challenge for the league. Because let's be honest, if you are truly any good at your job as a sporting institution, you can craft a good team with an annual wage bill of €500/600M . With an experienced coach (who may not be famous) but has the skill to work within austere financial limits, is ready to accept the reality (not the noise) and has the ability to mould some really talented young players into becoming better than what they are.

It may not be as terrible as it seems at times.

It has to be smart though. That's something that Barca can't take credit for, at times. But then I think of all the smart-run, non-nation-state organisations (Liverpool and Arsenal) that come to mind. They have computers and professionals for everything and they too have won only one (or none) league title in the past 5-6 years.

Of course they play much better football.

So who can this smart coach be?

Hopefully someone who is not a diva or used to nation states bankrolling their player transfers. I don't really mind the entire nation level lever pulling (money is money and if you can get it through fancy legality why not). It's not going to stop anyway, but that luxury won't be available at Barca. That's just the sad reality. So they will have to make do with the paltry €500/€600M per year as a wage bill for a few years.

If that frustrates them then there is a problem.

Cule's love a Barca legend but maybe the time for that was 2 years ago. When the dire need was to balance the books and keep the sporting section just chugging along. Xavi was the perfect face and perfect name at the right time. He deflected the fan base and quite miraculously even won a League title! He would still have been the right person for a couple of more years but alas he is gone.

So this time around, there is a need for an efficient executioner. A no-nonsense (low profile) guy who can mould a team with what he has. Built on efficacy for the next one or two seasons. Is that Flick? Or Tuchel? Or Klopp? I have no clue. Is it even the right time to get those kind of coaches? Maybe for the brand. For the inauguration of the new Camp Nou and the 125 year celebrations. For the optics. But who knows what Laporta wants and which coach would be willing to come.

For now, let's assume there are a few unknown coaches out there who can craft a team and would consider the role given Barca's name (much maligned as it is). If Laporta can find one like that, it would be in the best long term interest given the practicality of the situation. Maybe someone out there likes working with kids (Barca has a lot of those). Let's hope.

In all probability it will probably end up being Rafa Marquez. So YOLO.

Mapping an environment for a man is incredibly important and I just don't think Barca can give a super coach all his needs to be successful at the moment.

THE PLAYERS

All said and done, Barca have some good players and some great kids. They can't possibly win the Champions League and are not your navy seals type. If you make them run too much they will clutch their hammies and end up in the hospital. La Pausa and running around like triathletes don't really go hand in hand in can Barca.

It probably isn't needed as well all the time.

Even so, this team has players who, if coached properly, can play well and challenge for the league title. What is needed are a couple of effective wingers, an effective midfield controller (one defensive mid capable of playing the pivot if needed), one semi-effective striker and maybe one quasi-effective right back.The rest is really ok for a club which is still not out of the woods. Can Barca get elite players in each position? No. But effective players who fit the need and cost structure?

Yes.

That's where smart scouting comes in. Does Barca have a smart scout though?

So, in all probability, there will be tradeoffs. Even though I don't think its needed, maybe the two Joao's will be signed. However we need only one Joao. Felix is a great player but he won't be the most effective winger we require at this stage. He needs a different set up. Similarly, Romeu and Christensen can be stop-gap DMs, but given Barca's way of playing, that is the one position where they probably need to spend to give the defence and midfield any semblance of efficacy and control. I do believe that even with the likes of Pau Cubarsi, Mikhail Faye and such we won't concede more than the 350 goals we have already conceded this season, so maybe losing one of our "elite" defenders won't be as bad to fund an effective DM.

Goals win matches and Barca are thin in that department. Vitor Roque can be better than sliced bread(but no one knows if he will be). Even if he is, he is barely 18 and we can't expect Lewandowski, Lamine and Raphinha to bang in the goals consistently.

Lamine is 16! Barca desperately need a semi - dependable striker/winger or a 9.

On the wings it's not that Raphinha and Felix are bad, but their outcome is less than their potential in this Barca set up. So maybe both can be moved on to fund some less flashy but more effective replacements (not that there are many).

In short Barca only have a few players who can command a good market price but also be moved along without sacrificing a lot in terms of results.They are Frenkie De Jong, Gundogan, Raphinha and Jules Kounde. Not that I am advocating they need to be sold, but those are our only options to raise funds and restructure the squad if needed. Much will depend on the new coach, so we will have to wait and see.

And that's it. That's where Barca are at the moment. Not out of the woods. But not as bad as painted and probably a wee bit better than in 2021. Definitely not where they need to be to build an elite team yet. But good enough to have decent showings. The name and profile of the new coach will show the club's ambitions beyond lip service and we as fans will have front row seats into the drama that's going to unfold over the summer.

It's truly a Mes Que Un club that can convert all its fans into finance experts, football experts, La Pausa experts, scouting experts, amortisation experts, wage bill experts, debt experts, construction experts, VAR experts and Spanish history experts. My head is hurting after trying to Google all that finance stuff.

It's literally freaking insane. Such in-depth education, completely rent free.

Grab that popcorn and sharpen your keyboards, Twitter warriors. It's just getting started. Again!

PS: I love The Athletic. Great publication.

PPS: I literally Googled all the finance stuff. If you think they are all wrong, you are probably right

PPPS: The sole aim of this article is entertainment. Nothing else. We are a free fan blog with some free time. Definitely not Factos FC.

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