Barcelona's Billion-Dollar Plan To Get Out Of Debt

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Hey Friends,

The situation at FC Barcelona is one of the most interesting things I have ever seen in sports. They are an incredibly accomplished organization with a massive fanbase and a rich history, of course. And Forbes values the club at $4.76 billion, making them the most valuable soccer club globally and placing them slightly ahead of Real Madrid.

Most Valuable Soccer Clubs Globally

1. Barcelona: $4.76 billion (+18% two-year change)

2. Real Madrid: $4.75 billion (+12% two-year change)

3. Bayern Munich: $4.21 billion (+39% two-year change)

4. Manchester United: $4.2 billion (+10% two-year change)

5. Liverpool: $4.1 billion (+88% two-year change)

6. Manchester City: $4 billion (+49% two-year change)

7. Chelsea: $3.2 billion (+24% two-year change)

8. Arsenal: $2.8 billion (+23% two-year change)

9. Paris Saint-Germain: $2.5 billion (+129% two-year change)

10. Tottenham Hotspur: $2.3 billion (+42% two-year change)

And they are also one of the world’s most valuable organizations, regardless of sport.

Most Valuable Sports Franchises Globally

1. New York Yankees (MLB): $6.75 billion

2. Dallas Cowboys (NFL): $6.43 billion

3. New York Knicks (NBA): $5.42 billion

4. Golden State Warriors (NBA): $5.21 billion

5. Los Angeles Lakers (NBA): $5.14 billion

6. New England Patriots (NFL): $4.97 billion

7. Boston Red Sox (MLB): $4.8 billion

8. Barcelona (Soccer): $4.76 billion

9. Real Madrid (Soccer): $4.75 billion

10. Los Angeles Dodgers (MLB): $4.62 billion

But here’s the interesting part — FC Barcelona was nearly $1.5 billion in debt at the end of the 2020-21 season and was even technically bankrupt, according to Deloitte.

Barcelona’s Debt Breakdown

• Player salaries: $443 million

• Bank debt: $761 million

• Pandemic impact: $103 million

• Membership losses: $45 million

So how did this happen? Most of the blame has been placed on former team president Josep Bartomeu, who resigned in 2020 after 20,000 Barcelona supporters called for a vote of no confidence over mismanagement claims. The club sustained 9-figures in losses due to COVID-19, went trophyless for the first time in over a decade, and even club legend Lionel Messi publicly criticized management.

But the main problem was their payroll. Barcelona had the highest payroll in all of sports when Josep Bartomeu resigned, which somehow reached higher levels than the club’s total income. For example, the club’s payroll reached $763 million for the 2019-20 season, and with payroll rising 61% over the previous five seasons, it was on pace to reach nearly $950 million if immediate action wasn’t taken.

Remember, Lionel Messi was making more than $150 million annually. And once you add in the fact that Josep Bartomeu was accused of frequently paying higher than average commissions to agents, sometimes reaching 30%, it all starts to make sense.

But Bartomeu left last year, and Joan Laporta decided to return to FC Barcelona for his second stint as club president. He then laid out a five-year restructuring plan to reduce the club’s overall debt and immediately got to work doing just that.

The club’s payroll was reduced from $763 million in 2019 to $450 million for 2020, and then even further to $215 million for 2021-22. But while that was helpful financially, it also meant several top players were either let go or saw their contracts restructured.

Lionel Messi offered to take a 50% pay cut, but even that wasn’t enough, and he eventually left for Paris Saint-Germain in late 2021. Players like Gerard Piqué, Sergio Busquets, and Jordi Alba renegotiated their salaries, and the club cleared space by loaning away Philippe Coutinho, Yusuf Demir, and Antoine Griezmann to other clubs.

Those moves helped the club reduce its debt from $1.5 billion in 2020-21 to $891 million in 2021-22. That represents an impressive 40% drop in just twelve months.

But that was only part of the plan. Barcelona has also put its foot on the gas and aggressively pursued cash-generating opportunities over the last few months.

The club refinanced its debt with a $568 million loan from Goldman Sachs to give themselves “breathing space.” And they signed a massive sponsorship deal with Spotify that will pay $307 million over four years, or nearly $80 million annually.

Still, news broke this week that Barcelona is getting even more aggressive.

Not only have they reportedly secured agreements to sell 49% of their production studio, Barca Studios, and their Licensing and Merchandising business for a combined ~$430 million, but Goldman Sachs might be coming back for more.

According to Spanish publication El Confidencial, Barcelona is about to close a deal with Goldman Sachs and All Sport Finance (ASF) that will pay the Catalan club $1 billion in exchange for 30% of its future broadcast revenues and a percentage of the future income derived from Espai Barça, the club’s new stadium complex.

But here’s an interesting caveat — Barcelona reportedly plans to use the funds to lower the liabilities on its balance sheet but also to go after top players and keep existing stars. For example, reports are already suggesting that they want to keep Frenkie de Jong and might even try for a transfer of Robert Lewandowski or Lautaro Martinez.

That’s the current dilemma: you have to continue building winning rosters that can compete for titles while also reducing $1 billion-plus in debt and fixing your finances.

The bottom line is that I think this is a story worth following closely. We have one of the world’s most valuable sports entities that continues to play financial gymnastics and is now being forced to creatively generate cash flow through its ancillary assets.

Maybe it will work out just fine. Barcelona has millions of fans globally, and they are one of the most monetizable assets in the world. But what if it doesn’t? That’s when things get interesting. As always, I’ll keep you updated as things change over time.

I hope everyone has a great day. I’ll be off tomorrow and Monday, so we’ll talk on Tuesday. Enjoy the weekend!

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