Barcelona have released a ‘financial due diligence’ report commissioned by the current board when they took office in March 2021, highlighting the truly shocking situation.
The new regime, led by President Joan Laporta, wanted an in-depth analysis of Barça’s state from the start of the 2018/19 season until March 2021, when they took over the management of the former’s club. board of directors headed by Josep Maria Bartomeu.
Barca general manager Ferran Reverter has now publicly presented the findings, which concluded that there had been “serious administrative deficiencies” in the management of the club during the two years and nine months in question.
Most damning is the use of the term “technical bankruptcy” to describe the financial situation.
Technical bankruptcy is defined by Investopedia as occurring “when a borrower is unable to make payment on a debt but has not yet officially declared bankruptcy before a legal authority”.
This is listed as a consequence of the club having negative net worth.
The current board also described what they inherited: “debt and future liabilities amounting to € 1.35 billion, in urgent need of refinancing; zero operating cash flow, with difficulties in coping with the payroll; widespread non-compliance with financial ratios, limiting the registration of new players and decision-making; deteriorated facilities and a precarious Camp Nou; an undervalued Espai Barça project with serious shortcomings; and a lack of governance and internal control, which made it difficult to control and manage the institution. “
The report dispels any lingering myths that Barcelona finds itself in this financial mess because of the COVID-19 pandemic. A crippling economic deterioration had already set in.
Payroll increased by 61% from 2016 to 2021 due to new signings and contract renewals – it is pointed out that without a staff change this season, payroll expenses alone would have reached 835 million euros and exceeded the recurring revenues expected from the club above all. other costs.
A “lack of governance and management” is responsible for a 56% increase in administrative expenditure between 2016 and 2020, while in those years the financial cost “has multiplied by six” due to debt. net increase and a “lack of financial planning”.
The board has now outlined what has been done to tackle each of the major issues.
This includes a new five-year strategic plan to address negative net worth, reduce player spending by 155 million euros to correct zero operating cash flow, change financial structure, continue commitment to La Masia, review the organizational structure and improve internal controls.