Barcelona “on the verge of bankruptcy” – report

FC Barcelona released its latest financial report on Monday, and the numbers paint a troubling picture for the soccer giant, with newspapers in Spain even speculating it is close to bankruptcy.

On Monday evening, soon after the financial report was published, Spain’s second largest national newspaper, El Mundo, claimed that the club is on the “verge of bankruptcy.”

El Mundo’s claim was based on the club’s financial report for the past 12 months, which was made public Monday morning. In the report, the club acknowledged that its balance sheet currently shows a “negative working capital” of over 604 million euros ($729 million).

It added that this figure “may cast doubt on the application of the going concern principle.”

Businesses operate under the going concern principle when they are stable and expect to continue in business for the foreseeable future. Any doubt over that principle suggests financial issues are present.

In the 2020 financial year, Barcelona said it made a loss of around $117 million, though it said that without the impact of the coronavirus pandemic, it would have made a small profit of around $2 million.

Club financials also showed that Barcelona has a total of $1.4 billion in debt. $322 million of that debt must be paid to banks by the end of June.

A further $562 million worth of debt repayments are also due in the short term, including $237 million owed to other teams for recent transfers.

Barcelona still owes $35 million to Liverpool for the signing of Philippe Coutinho back in 2018, while Ajax is due $19 million for the signing of Frenkie de Jong in 2019.

It also owes Bordeaux, Gremio, and Bayern Munich for the respective signings of Malcom, Arthur, and Arturo Vidal, despite all those players having now moved on to new teams.

Barcelona’s financial situation has also been significantly worsened by the global COVID-19 pandemic, with the club reporting a a 14% fall in annual revenue last season.

Revenues fell to $1.03 billion from $1.2 billion in 2019. This was substantially below the club’s pre-pandemic revenue forecast of $1.26 billion.

Around 74% of that revenue was spent on player’s salaries, the club said, up from 68% in 2019.

However, interim club president Carlos Tusquets told MARCA that the club was unable to pay players for their pre-agreed January salary.

“Players won’t receive their monthly payment for January. It has been postponed in the same way that others have been postponed, such as title-winning bonuses,” Tusquets said.

January’s missed payments are expected to be paid in February, but the club could also incur a significant financial penalty for exceeding La Liga rules which state clubs should spend no more than 70% of income on player salaries, reports El Mundo.

Players late last year collectively agreed to a wage cut to help the club financially during the pandemic. At the time the cut was said to be worth $147 million.

MARCA says Josep Maria Bartomeu, the club’s former president who resigned in October, is partly to blame for the situation and Barcelona needs to take immediate action to reverse his mistakes.

“Bartomeu has a lot to answer for, with an irresponsible financial plan throughout his presidency, delaying so many payments until future dates,” it said.

The newspaper added that Barcelona is in “a very precarious situation.” It also said, however, that it is “a long way from facing any kind of existential crisis.”

It noted that the club has a number of valuable assets in players like Antoine Griezmann and Ousmane Dembele, each of whom could likely be sold for more than $120 million.

El Mundo, as well as warning of threat of bankruptcy for Barcelona, says the club is in “an absolutely terrible situation.”