The Truth About Debt At Barcelona And Real Madrid

Despite their failure to reach next month’s Champions League final, Barcelona and Real Madrid are by common consent the best two club sides in world football. Featuring superstars such as Lionel Messi and Cristiano Ronaldo, their talented players entertain and delight us in equal measure, as they dominate La Liga season after season.

However, admiration of their exploits is tempered by the financial advantages that they enjoy compared to other less fortunate clubs. Not only do they generate far more revenue than anybody else (around €100 million higher than the nearest challenger, Manchester United), but one of the main reasons for this substantial competitive advantage is an unbalanced domestic TV deal that awards the two Spanish giants almost half of the money available.

Their reputation off the pitch also suffered a hit recently in the media when it was “revealed” that these great teams were built on a mountain of debt (€590 million at Real Madrid and €578 million at Barcelona), raising questions as to whether this was, to coin a phrase, “financial fair play.”

Quite why this came as a surprise to some analysts is a little perplexing, given that the clubs’ accounts have been available to the public for many months. Whatever.

"Pep Guardiola - Goodbye cruel world"

The fundamental issue is whether this debt is too high, as many commentators suggest, with the implication that these grand old clubs might even be in some financial difficulty.

That might seem like an easy question to answer, but, as is so often the case in the murky world of accounting, it’s not quite so simple. To give a comprehensive response, we have to do three things:

1. Importantly, understand what this debt figure actually represents, as there are numerous definitions, all of which can be equally valid in different circumstances.

2. Look at the overall strength (or weakness) of each club’s balance sheet, i.e. also at assets, not just liabilities.

3. Explore how well the debts are covered by items such as income and cash flow.

To avoid looking at Madrid and Barcelona in isolation, we should also compare their debt position with that at other leading clubs. For the purpose of this exercise, I have opted to look at two English teams, Manchester United and Arsenal, as they are useful comparatives, who are viewed as being at different ends of the spectrum. The former are known for the large amount of debt they have been carrying since the Glazers bought the club via a leveraged buy-out, while the latter are often portrayed as the poster boy of sustainable football clubs.

"Jose Mourinho - I couldn't bear to be special"

1. What is debt?

For people without a financial background, the different definitions of debt can be a bit confusing, as acknowledged by UEFA’s snappily titled Club Licensing Benchmark report, which stated, “In practice, the term ‘football club debts’ has been used in many different ways with a great deal of flexibility, references ranging from the very broad, totalling all liabilities that a club has, to the narrow definition of debt financing either including or excluding interest-free owner loans.”

At the narrowest extreme, we have just bank debt: at the broadest extreme, we can use total liabilities, which covers all financial obligations, including tax liabilities, trade creditors, provisions for future losses, accrued expenses and even deferred income. Often, when the media refer to debt, they actually mean total liabilities.

This includes what might be described as operational debt, such as: (a) trade creditors (payables) for amounts outstanding on bills for products or services received, e.g. rent, electricity; (b) money owed to staff, e.g. wages earned by staff paid at the end of the month, bonus payments; (c) other accrued expenses (accruals), which are the same as payables except no invoice has yet been received; (d) provisions, which are an estimate of probable future losses, e.g. legal claims; (e) and, most bizarrely, deferred income for payments received for services not yet provided, e.g. season ticket revenue for matches to be played in the future.

That last one highlights one danger of using liabilities as a definition for debt, as season ticket money received in advance is clearly not a bad thing, as UEFA explain: “It is recorded as a liability, as accountants consider the cash received as not yet being fully earned until the matches take place. This is a liability, but not a debt that will have to be paid back.”

So, much of Madrid’s €590 million and Barcelona’s €578 million debt includes liability for what might be termed normal operations. If we apply the same definition to Manchester United, they have debt (total liabilities) of just under €1 billion (£824 million converted at a rate of 1.20). Even Arsenal’s debt on the same basis is €524 million, which the journalists would no doubt describe as “eye-watering” if they were talking about others and not their template for a well-run club. To use an old adage, you have to make sure that you are comparing apples with apples.

Of course, if you wanted to make a club’s debt look as bad as possible, then you would absolutely use the total liabilities definition. However, it is very conservative to say the least. Indeed, in response to their critics, Madrid and Barcelona might feel like misquoting Mark Twain: “The reports of my debt have been greatly exaggerated.”

The net debt reported in an English club’s financial statement will be in line with IFRS (International Financial Reporting Standards) and essentially covers purely financial obligations, such as overdrafts, bank loans, bonds, shareholder loans and finance leases less cash. On this basis, the gross debt of Madrid and Barcelona at €146 million and €150 million respectively is not only considerably smaller than the figure highlighted in the press, but is also much lower than Arsenal €310 million and Manchester United €551 million.

The difference is not quite so large for net debt, as both United and Arsenal have substantial cash balances, but the Spanish clubs are still lower: Madrid €48 million and Barcelona €89 million. Arsenal are much of a muchness with €117 million, while United are the outlier with a hefty €370 million.

In their Financial Fair Play (FFP) guidelines, UEFA introduce a third definition of debt which lies somewhere between the narrow calculation employed in annual accounts and the widest possible measure of total liabilities: “A club’s net player transfers balance (i.e. net of accounts receivable from players’ transfers and accounts payable from players’ transfers) and net borrowings (i.e. bank overdrafts and loans, owner and/or related party loans and finance leases less cash and cash equivalents).”

They go on to explicitly state, “Net debt does not include trade or other payables.” However, it does include the net balance owed on player transfers, which is a reasonable approach to take, as this can be an important element in the business model adopted by some football clubs, e.g. this amounts to €76 million at Madrid (actually down from €111 million the previous year and an astonishing €211 million in 2009), though it is only €12 million at Arsenal, which probably comes as no surprise to those fans that have been exhorting the club to spend some money.

This has clearly been an important factor in allowing Madrid to finance big money acquisitions. Although all clubs make stage payments for transfers, very few do so to the same extent as Madrid (and indeed Barcelona).

Of course, this does not make the practice inherently wrong. Indeed, UEFA commented, “It is worth noting that the size of transfer payables reported in financial statements can be influenced by the timing of the financial year-ends relative to the timing of transfers, and that transfer payables are, in most cases, not overdue but in line with the payment schedule agreed between the respective clubs.”

Under this UEFA definition, it is remarkable how similar the net debt is between Madrid, Barcelona and Arsenal, with all three clubs reporting a balance in a narrow range of €124-131 million. The exception to the rule is United with, deep breath, €442 million.

2. Strength of the balance sheet

To state the blindingly obvious, liabilities are only one side of the story (or balance sheet). To get a full picture of a football club’s health, we also have to look at its assets. This is where the English clubs start to look better, as they tend to have higher assets, especially as they usually own their own stadiums.

United’s net assets (assets less liabilities) are a mighty €973 million, though €618 million of this is due to inter-company receivables from the parent undertaking, while Arsenal have a highly respectable €322 million. Madrid are far from shabby with net assets of €251 million, but Barcelona fall down on this measure with net liabilities (also described as negative equity) of €69 million. In other words, their reported liabilities are larger than their reported assets. Barcelona are far from alone in this, as UEFA’s benchmarking report noted that 36% of clubs reported negative equity in 2010, but it is still nothing to be proud of.

If this ratio is refined to only cover current assets and liabilities (payable within 12 months), then it is even worse for the Spanish clubs, as they both have net current liabilities: Madrid €141 million and Barcelona €226 million.

Once again, the accounting values are a little misleading when looking at the balance sheet, because of the way that certain assets are treated in the accounts. As UEFA say, “Some of the principal assets of a club, such as a loyal supporter base, reputation/brand, membership/access rights to lucrative competitions, and home-grown players, are not included within balance sheet assets since they are extremely difficult to value, despite them unquestionably having a value. These unvalued assets tend to be greater for larger clubs.”

"The Glazers - Money (that's what I want)"

This is highlighted when a football club is sold. Invariably, the purchaser pays a higher price than the fair value in the accounts and the difference is booked as an asset called goodwill. In this way, Manchester United’s balance sheet includes £421 million of goodwill.

This can also be seen very clearly with player valuations. In the accounting world, when a player is bought, football clubs do not expense the cost immediately, but instead book it onto the balance sheet as an intangible asset and write it off evenly over the length of the contract. Following the Bosman ruling, the assumption is that the player will have no value after his contract expires, since he could then leave on a “free”.

However, the value in the real world is almost always higher. As Javier Faus, Barcelona’s Vice President of Finance once explained, his club has over €250 million of assets that are not reflected in the balance sheet. This is particularly the case for the Catalans, as their team is full of players developed in-house by the legendary La Masia, and these effectively have zero value in the accounts. I don’t know exactly how much the likes of Messi, Xavi and Iniesta would be worth if sold, but I do know that it’s more than zero.

The respected Transfermarkt website does actually list values for each major team’s squad, so we can get an idea of how much stronger each club’s balance sheet would look if you applied real values instead of accounting values. As expected, this is most striking in the case of Barcelona, where the real value is estimated as €591 million, so €470 million higher than the books, leading to adjusted net assets of €401 million.

Of course, it would kind of defeat the object if a club were to realise that value by selling all its players, but a few judicious sales can make a big difference to the reported strength of a club’s balance sheet.

3. Debt coverage

As we said earlier, Real Madrid (€480 million) and Barcelona (€451 million) have the highest revenues in world football, covering around 80% of their debt, which is significantly higher than their English counterparts, Arsenal 57% and Manchester United 40%. In Arsenal’s case, this is obviously a function of much lower revenue (€307 million), even though I have included property income, as liabilities are not split by business segment.

However, as the old saying goes, “revenue is for vanity, profit is for sanity”, so a more useful ratio might be cash flow to debt, which provides an indication of a club’s ability to cover total debt with its annual cash flow from operations. There are many ways of defining cash flow, but I have used EBITDA (Earnings Before Interest, Taxation, Depreciation and Amortisation) for simplicity’s sake. Others might adjust for (irregular) profit on player sales, while you could also use free cash flow, (operating cash flow minus capital expenditure).

Contrary to popular belief, Real Madrid and Barcelona are relatively profitable: Madrid have made total profits of around €200 million in the last five years, including €47 million last season; while Barcelona’s loss was only €12 million. Adjusting for non-cash flow expenses like depreciation and amortisation plus interest produces very impressive EBITDA of €151 million for Madrid and pretty good €66 million for Barcelona. In the same way, Manchester United’s notable ability to generate cash results in excellent EBITDA of €138 million.

So, Madrid’s cash flow over debt ratio comes in at 26%, much better than the others: Manchester United 14%, Arsenal 13% and Barcelona 11%. Simply put, the higher the percentage, the better the club’s ability to pay its debt.

While it is clearly important to be able to ultimately pay off debt, a club’s ability to service its interest expenses is absolutely crucial. This can be explored with the interest coverage ratio (cash flow/interest payable), which tells a similar story to debt coverage, i.e. Madrid’s ratio of 11.7 is by far the best, though the others are not too bad: Barcelona 4.5, Arsenal 3.9 and Manchester United 2.5 (anything below 1.5 is a bit questionable).

What is striking here is just how much higher the interest payable is at United €56 million (£46 million) compared to the other clubs: Arsenal €18 million, Barcelona €15 million and Madrid €13 million. In fact, both “heavily indebted” Spanish clubs actually pay less interest than the two English clubs.

Let’s look at the debt in a bit more detail for the clubs we are reviewing, as this might throw up some other anomalies.

Real Madrid’s accounts use yet another definition for debt, which is essentially the same as UEFA’s definition (bank debt plus net transfer fees payable) plus selected creditors (essentially stadium debt). This gives a net debt of €170 million, a reduction of €75 million from the €245 million in 2010. That’s pretty impressive, especially when we consider that the net debt peaked at €327 million the year before.

That said, for many years before 2009 they had no bank debt at all. The loans are split evenly between Caja Madrid and Banco Santander and were mainly used to finance the major signings that summer. The interest rate is relatively low, but the loans do have to be repaid by 2015, though even here Madrid were given some leeway with lower payments in the first three years.

Stop me, if you’ve heard this before, but Barcelona also use a different definition for debt, providing their Annual General Meeting with a figure of €364 million, which is not fully explained, but the main distinguishing factor is that some debtors are deducted to arrive at the net balance.

This represents a 15% reduction from the €430 million reported the previous season, but is still higher than the preceding years. Indeed, Javier Faus, Barcelona’s Vice President of Finance, admitted, “We’ve reduced the debt, but we’re still in a delicate situation. The debt is still too high for us to be able to dictate our future. We can’t afford to owe so much money to the bank, and we need to generate more income.”

He emphasised the board’s concern when he added, “It’s not the debt that we want, and we have to reduce it further, to sustainable levels, with regard to the cash flow generated by the club. We’ll continue to work on it.” Ideally for Faus, the net debt would be “just over €200 million.”

Indeed, Barcelona were forced to take out syndicated loans of €155 million in 2010 from a group of banks led by La Caixa and Banco Santander, though club president Sandro Rosell has defended Barca’s debt level, arguing that it is eminently serviceable via its huge revenues, “The club is not bankrupt, because it generates income. The banks know that we have a business plan that will allow them to recover the money.”

Indeed, the willingness of Spanish banks to help Barcelona is a factor, as it is difficult to imagine a scenario where a local financial institution would be responsible for damaging the emblem of Catalonia, given that its customer base is largely made up of the club’s supporters – even with the struggles in the Spanish economy. This is evidenced by the banks ignoring Barcelona’s breach of commitments in terms of total liabilities made when securing the 2010 loan.

Manchester United have also succeeded in reducing their net debt, which was cut from £377 million to £308 million (£459 million gross debt less £151 million cash), after the club bought back £64 million of its bonds. This is down from a peak of £474 million in 2008.

Last year the club raised around £500 million of funds via a bond issue, so that they could repay the previous bank loans, in order to fix the club’s annual interest payments for a longer period (up to 2017), thus ensuring more financial stability. However, there was a price to be paid, which can be seen with a comparison to Arsenal’s bonds, as the debt has to be repaid quicker (7 years vs. 21 years) and the interest rate is higher (8.5% vs. 5.75%).

The really annoying thing for United fans is that this is still unproductive debt. While clubs like Chelsea and Manchester City have used their debt to fund the purchase of better players and Arsenal used theirs to build a new stadium, United’s debt was only used to enable the Glazers to buy the company.

At least the owners managed to find £249 million last November to pay off the prohibitively expensive Payment In Kind notes (PIKs), which carried a stratospheric interest rate of 14.25% (rising to 16.25%), though it is unclear how they funded this repayment. Including the PIKs, United’s gross debt was at one point as high as £773 million with annual interest payments of around £70 million. To paraphrase Winston Churchill, “never has so much been owed by so many to so few.”

"Emirates Stadium - good debt"

Included within the net debt as at 30 June 2011 are astounding cash balances of £151 million, though this was boosted by cashing the £80 million Ronaldo cheque and the £36 million upfront payment from the shirt sponsor. United’s board has argued that it likes to retain so much cash to provide “flexibility”, but this seems a strange decision when they have to pay 8.5% interest on the bonds, while cash balances are unlikely to attract more than 2% interest.

The latest financial engineering from the Glazers is the decision to float a minority stake of the club via an IPO (Initial Public Offering) on the Singapore Stock Exchange with whispers suggesting that the board is seeking to raise £600 million for a 30% stake. The IPO was postponed last year due to volatile market conditions, but is now reportedly back on the agenda.

If some of the proceeds were used to repay part of United’s debt, as the club has apparently briefed journalists, then they would benefit from lower interest payments, though this would not improve cash flow if they were then replaced by dividends to the new shareholders.

Arsenal have now eliminated the debt they built up as part of the property development in Highbury Square, reducing gross debt to £258 million as at end-May 2011. That comprises the long-term bonds that represent the “mortgage” on the Emirates Stadium (£231 million) and the debentures held by supporters (£27 million). Once cash balances of £160 million are deducted, net debt was down to only £98 million, which is a significant reduction from the £136 million last year and the £318 million peak in 2008.

Many fans ask whether it would be possible for Arsenal to pay off the outstanding debt early in order to reduce the interest charges, but chief executive Ivan Gazidis has implied that this is unlikely, arguing that not all debt is bad, “The debt that we’re left with is what I would call ‘healthy debt’ – it’s long term, low rates and very affordable for the club.” In any case, the 2010 accounts clearly stated, “Further significant falls in debt are unlikely in the foreseeable future. The stadium finance bonds have a fixed repayment profile over the next 21 years and we currently expect to make repayments of debt in accordance with that profile.”

So, Real Madrid and Barcelona might not exactly be sitting pretty in terms of debt, but their situation is not quite as bad has been made out. However, it is true to say that debt is a major issue for many other Spanish clubs.

A recent study by Professor José Maria Gay de Liébana of the University of Barcelona revealed that total debt of La Liga clubs was €3.5 billion with half of them having negative equity (though it should be noted that the accounts from seven clubs were only from the 2009/10 season and two from as far back as 2008/09).

As Professor Gay said, “Everyone is concentrated on Madrid and Barca, who are the kings of the banquet, while the rest live a real uncertain future. Many clubs are living dangerously.”

While Madrid and Barcelona unsurprisingly top the list with debt (total liabilities) of €590 million and €578 million, seven other clubs have debt over €100 million, most notably Atletico Madrid €514 million, Valencia €382 million (even after selling stars like David Villa, David Silva and Juan Mata) and Villarreal €267 million. In contrast to the big two’s debt cover (by revenue) of around 80%, theirs is much lower, e.g. Atletico Madrid just 19%.

Spanish football’s struggles are highlighted by the fact that no fewer than six clubs in the top division are currently in bankruptcy protection: Racing Santander, Real Mallorca, Real Zaragoza and all three promoted clubs (Real Betis, Rayo Vallecano and Granada). Furthermore, the beginning of this season was delayed by a players’ strike over unpaid wages. The figures are frightening with 200 players owed a total of €50 million, up from €12 million owed to 100 players the previous year.

"Athletic Bilbao: good football, low debt - what's not to like?"

This is due to two factors: (a) Spanish football’s inability to govern itself properly; (b) the awful state of the economy.

Up until recently, the Spanish Football League (LFP was unable to impose any meaningful sanctions on financial miscreants, but a new law came into force in January 2012 that now authorises the authorities to relegate a club in administration – though whether they have the stomach for a confrontation with a club’s supporters is debatable.

In fairness to the LFP, they have also been impacted by the troubled economy, as Spain is entering recession with a record unemployment rate of 24% (a horrific 40% for young people) and Standard & Poor’s cutting the country’s credit rating. As LFP president José Luis Astiazaran noted, “We are not immune to the wider economy.” Professor Gay agreed, “Football is largely a reflection of what has been happening in our economy, with people spending way beyond their income, relying on fanciful growth forecasts and ending up with unsustainable debt and an asset pricing bubble.”

It could be argued that the dominant position of the two Spanish powerhouses is slowly killing Spanish football. This financial pre-eminence is boosted by the “every man for himself” approach taken with the individually negotiated TV deals. Madrid and Barcelona both trouser €140 million a season with the nearest club to them, Valencia, receiving about a third at €48 million. Thirteen of La Liga’s clubs receive between €13-18 million, including Athletic Bilbao with just €17 million. What price them holding on to all of the scintillating young talents that have enthralled us during their Europa League campaign?

Spain is unique among the leading European leagues in not having a collective TV deal, which explains why accusations of selfishness have been aimed at Madrid and Barcelona. The Sevilla president, José Maria del Nido, complained, “We cannot allow a situation where, because two clubs are very powerful, they bring about the demise of the Spanish league.”

That said, football is an amazingly resilient industry and it has not yet collapsed under the weight of debt in Spain, even though the issue is not a new one. In fact, La Liga debt has been about the same level of €3.5 billion for the last four years. Although it rose €50 million last season, the 2001 debt of €3.53 billion is actually lower than the €3.561 billion peak in 2008.

Nevertheless, there is no room for complacency, when a comparison is made with the other major European leagues. At €3.5 billion, Spanish liabilities are by far the highest, almost a billion Euros more than Serie A €2.7 billion (up €327 million in 2010/11) and the Premier League €2.6 billion (2009/10 figure). The debt levels in the financially disciplined leagues are unexpectedly much smaller: the Bundesliga €0.9 billion and Ligue 1 €0.7 billion.

In addition, the Spanish league also has the worst debt coverage (in terms of revenue) at 47% compared to the others: Serie A 63%, Premier League 95%, Ligue 1 140% and the Bundesliga 193%.

This sad state of affairs was underlined when it emerged that Spanish clubs owed the taxman €752 million, including €426 million from clubs in the top division. In fact, that came from just 14 of the 20 clubs, as the remaining six had no outstanding tax debt. According to the AS newspaper, that included Real Madrid, which seems a little strange, as both the club’s accounts and the study by Professor Gay do list tax liabilities.

Once again, Atletico Madrid have the dubious honour of leading the pack with the largest tax debt of €155 million, even after paying the €50 million from the sale of Sergio Aguero to Manchester City directly to the tax authorities. The next highest was Barcelona with €48 million.

This high level of tax debt is galling to many, particularly given the fragile Spanish economy, not to mention the fact that Spain has five clubs in the semi-finals of the Champions League and the Europa League – including the aforementioned Atletico Madrid.

As always, Uli Hoeness, the forthright president of Bayern Munich, got straight to the point, “This is unthinkable. We pay them hundreds of millions to get them out the shit and then the clubs don’t pay their debts.” In fairness, some clubs have negotiated payment plans with the authorities, such as Atletico Madrid (€15 million a year), Levante (5 years) and Mallorca (10 years).

On top of that, the Spanish government and the football league recently announced new rules that would pave the way for the clubs to repay the outstanding tax debts, as the threat of intervention from European Union anti-trust officials loomed large. The LFP said, “Economic control will be strict, as well as the sanctions regime.” These measures will include clubs being obliged to set aside 35% of TV rights revenue for tax payments from the 2014/15 season; clubs possibly being forced to sell players to raise cash; and clubs maybe even booted out of the league.

"Holidays in the sun"

Of course, Spain is hardly unique in having clubs facing severe tax issues, as fans of Rangers and Portsmouth would no doubt attest, but it is the magnitude of the debt in Spain that is concerning, especially given the relatively low revenue of some of the clubs involved.

Given the understandable focus on tax liabilities recently, it might also be a good idea for UEFA to include these in their definition of debt in order that clubs take this issue more seriously than they appear to have done in the past. It is actually a little strange that UEFA do not, as Article 50 of the FFP regulations specifically states that there should be no overdue payables to social/tax authorities (as well as employees) in the same way that Article 49 prohibits overdue payables towards football clubs. While the latter is included in their definition of net debt, the former is not.

In conclusion, while there are some very real debt problems in Spanish football, the situation is not quite so dramatic at Barcelona and Real Madrid as some would have people believe. It would obviously be better for their balance sheets if the debt was lower, but their ability to generate revenue is unsurpassed, admittedly partly due to the current unfair TV deal, but also their high gate receipts and awesome commercial strength. These operations continue to grow, as seen by Barcelona’s record-breaking shirt sponsorship deal with the Qatar Foundation and Real Madrid’s plans to build a $1 billion holiday resort in the United Arab Emirates.

"Put your shirt on it"

Of course, the two Spanish giants may still come under pressure from their creditors at some stage, especially if they embark on a summer spending spree following the disappointing Champions League semi-final exits. Nor should the impact of Spain’s faltering economy be trivialised, but the fact is that right here, right now, the important debt (bank loans, transfers and tax liabilities) is relatively low, at least for clubs of this size.

When reading reports on how much Barcelona and Real Madrid owe, it’s not quite a case of “don’t believe what you read”, but you do need to understand what any analysis is actually referring to, because, as we have seen, debt has many different definitions.

Caveat emptor – or something like that.

Valencia - On The Road To Recovery?

Despite losing to Sevilla last weekend, Valencia have made a very promising start to this season, most evidently when they led reigning champions Barcelona twice before securing an unexpected draw. On the one hand, this should not be too much of a surprise, as Valencia have finished third in La Liga in each of the past two seasons, though admittedly they were a hefty 25 points behind Pep Guardiola’s superlative team last year. On the other hand, this represents a hugely impressive achievement for Los Che after all the upheaval they have faced both on and off the pitch.

In order to reduce their large debts, they have been forced to sell many of their best players, losing four members of Spain’s victorious 2010 World Cup squad in the last two summers. Last year the heart of the team was ripped out when the departures of David Villa to Barcelona, David Silva to Manchester City and Carlos Marchena raised over €70 million, while this year it was the turn of skilful midfielder Juan Mata, who moved to Chelsea for €27 million.

Nevertheless, club president Manuel Llorente has defiantly proclaimed, “You can always sell star players and remain competitive”, which has proved to be the case at Valencia. The team has been rejuvenated with the addition of young talents like Sergio Canales, on loan from Real Madrid, and Pablo Piatti from Almeria, while they have managed to retain the promising Pablo Hernández and Éver Banega. They have also astutely strengthened the defence by acquiring Adil Rami from French champions Lille and Spanish U-21 international Víctor Ruiz from Napoli.

"Ever "Ready" Banega"

The highly rated, young manager Unai Emery has played a pivotal role in the team’s ability to reinvent itself every season. After guiding unheralded Almeria to a first ever promotion and then eighth place in La Liga, he was recruited by Valencia in 2008. Regarded as a master tactician, Emery has worked minor miracles with the resources available and is now in his fourth season, which might not sound much, but only two other Valencia coaches have lasted as long. He has even been spoken of as a possible successor to Vicente del Bosque, when the Spain coach steps down.

Valencia’s fans are infamously among the most demanding in Spain, having become accustomed to a lot of success over the years, both domestically (6 La Liga titles, 7 Copa del Rey trophies) and internationally (1 Cup Winners’ Cup, 1 UEFA Cup and 2 Fairs Cups). It’s not all ancient history either, as Valencia enjoyed four glorious years between 2000 and 2004 when they reached the Champions League final two years in a row under Argentine Héctor Cúper, first losing 3-0 to Real Madrid in 2000, then being defeated on penalties after a 1-1 draw with Bayern Munich in 2001, before Rafa Benítez guided them to two La Liga titles and a UEFA Cup victory against Marseille.

However, that’s when the problems started with Benítez resigning after arguments over control of new signings, when the manager famously complained, “I was hoping for a sofa and they bought me a lamp.” Former manager Claudio Ranieri proved the old adage that you should never go back, as his return lasted less than a season. Although his replacement Quique Sánchez Flores guided Valencia to third and fourth places, his reign was characterised by constant infighting with Sporting Director Armadeo Carboni, which ended with both men leaving the club within few months of each other in 2007.

"Roberto Soldado - the fighting spirit of a soldier"

At the time that Flores was fired, Valencia were just four points off the top of the table, but his replacement, Ronald Koeman from PSV Eindhoven, was a disastrous choice. Not only did he fall out with three of the club’s most popular players (captain David Albelda, goalkeeper Santiago Cañizares and veteran midfielder Miguel Angulo), but the team was perilously close to the relegation zone when he was dismissed, before finally reaching safety in 2008.

Whatever happened on the pitch was nothing to the financial challenges facing Valencia as they encountered a series of incompetent presidents that took the club to the brink of extinction. First up was the rotund figure of Juan Soler, who became president in 2004 with a grand plan, “We’re going to be the envy of Spain.”

However, his delusions of grandeur were built on shaky foundations, almost literally, as the ambitious project to sell the old Mestalla stadium and replace it with the state-of-the-art, revenue generating Nou Mestalla collapsed, as the Spanish property bubble burst at exactly the wrong time.

"Pablo Piatti - one of the young guns"

That might have been outside Soler’s control, but the vast sums splashed out on mediocre players (e.g. Manuel Fernandes, bought for €18 million, sold for €2 million, and Nikola Žigić, bought for €14 million, sold for €7 million) and the constant changes in management (costing over €30 million in severance payments) were certainly down to him. His attempts to “live the dream” resulted in no major trophies, exacerbated by failure to qualify for the Champions League, and massive debts.

Soler briefly brought in Juan Villalonga, the charismatic former chief executive of telecoms giant Telefónica, as a consultant, but he only lasted a couple of weeks before exiting stage left with a large fee for his “expert advice.”

Step forward, Vicente Soriano, the club’s former vice-president, promising €500 million of new investment from a company called Dalport Investments that would clear the club’s debts and enable them to build the new stadium. It sounded too good to be true – and it was. The mysterious backers, whose company logo was revealed to be copied from a children’s colouring book (yes, really), failed to deliver and Valencia faced a serious liquidity problem.

"Silva and Villa - old friends"

Construction work at the new stadium ceased, as bills from the builders were not settled, while the players were not paid for two months. As Emery said, “We have reached rock bottom.” They only managed to get through this with the help of a €50 million loan from a group of local businesses, called Fomento Urbano de Castellon.

The club’s main creditor, the local bank Bancaja, had seen enough and took a seat on the board, imposing a policy of austerity on Valencia and inviting Manuel Llorente to be the new president. He then made a very smart move by launching a share issue that raised €18.5 million from around 26,000 supporters, which demonstrated the strength of feeling for the football club. This “emotional blackmail” helped persuade the regional government to guarantee a €74 million loan from Bancaja that enabled the Valencia Fundació to take a 72.5% stake in the club, which provided much-needed stability.

It was a close run thing, as Llorente admitted, “We have saved a very difficult and worrying situation. Without the intervention of the regional government, we would have defaulted on our payments or been relegated to the Segunda B (third tier of Spanish football).”

However, Valencia are by no means out of the woods yet, as they still carry a vast amount of debt. Soler’s excesses increased this from around €100 million when he took over to a crippling €550 million in 2009. Although this was reduced to €471 million in June 2010, it is still extremely high, only surpassed in Spain by Real Madrid €660 million and Barcelona €549 million, and those two clubs benefit from much higher revenue and greater borrowing capacity. In fact, Valencia’s annual revenue of €102 million means that their debt cover is only 0.22, which is the weakest in La Liga.

The other particularly worrying aspect for Valencia is that a large amount of this debt is from bank loans with €249 million owed to Banaja – and most of that (€229 million) is short-term, so payable within a year. Apart from the standard trade creditors, accruals and provisions, Valencia also owe a large amount (€58 million) to other football clubs for transfer fees, while €31 million of the loan from local businesses remains.

In fairness, since the last accounts were published, Llorente announced last October that the debt had come down to €400 million, while it has been reported, though not confirmed, that it is now down to €370 million. Either way, the club will continue to be burdened with considerable debt until they find a buyer for the old Mestalla.

Following the €92 million capital increase, Valencia’s balance sheet actually appears reasonably strong with €55 million of net assets, despite the huge liabilities. However, this is a bit misleading, as much of the club’s capital is tied up, either in fixed assets (€281 million), mainly due to investment in the new stadium, or in the squad (€71 million). Although the players would be worth much more in the real world, estimated at €165 million by the respected Transfermarkt website, this value could only be realised by selling players. In fact, a study by Deloitte last year concluded that the company shares had “no economic value.”

The Mestalla holds 55,000 supporters, but it has seen better days, so in some ways it was understandable that Valencia embarked on their plan to build a new 75,000 capacity stadium, especially as the local authorities gifted them a plot of land less than two miles from the city centre. The problem was that they had not arranged their funding, believing that they would be able to finance the construction by selling their old stadium. Indeed, they were apparently close to a sale for €320 million, before the market tanked, leading the buyer to drop his offer to €240 million, which was rejected, even though it would have wiped out the club’s bank debts.

In hindsight, this was almost certainly a mistake. As Soriano wryly put it, selling land is not easy “in the largest real estate crisis in history.” Work on the new arena, modeled on a Spanish bullring, commenced in August 2007, but was suspended in February 2009. Valencia have already invested €150 million in the development, but still require a similar amount to complete it. So, now the club finds itself in the bizarre situation of owning two stadiums – one they have not managed to sell and one they cannot afford to finish building.

Another major factor behind Valencia’s spiraling debt levels was the cash splurged on new players with net spend of €133 million in the four years up to 2008. Some of the purchases can only be described as a waste of money, such as €25 million for the inconsistent winger Joaquín, recently sold to Malaga for just €4 million, or nearly €40 million on a bunch of Italian misfits (Francesco Tavano, Marco Di Vaio, Stefano Fiore and Bernard Corradi), though in fairness the latter duo from Lazio were to compensate for unpaid transfer fees for Gaizka Mendieta.

However, the days of big spending have long gone and in the last four years Valencia have generated net sales proceeds of €76 million. As vice-president Javier Gomez admitted, “Before, we had a plan that was based purely on selling the land. Now we need to seek alternatives. We need to win back credibility with the financial institutions.”

That was a precursor to the sales of Villa and Silva (and others) in the 2010 summer window, when gross sales of €84 million meant that Valencia topped the European list of selling clubs. The need to sell was reiterated by Llorente, “Our key objective is economic viability and that means we are obliged to take responsible decisions, one of which is to sell our best players.”

Valencia had gambled on living beyond their means in a desperate attempt to keep up with Real Madrid and Barcelona, but it hasn’t quite worked out like that, as can be seen when comparing the activity of Spain’s leading clubs in the last four years. In that period, Madrid’s net spend was an incredible €312 million, while Barcelona’s net outlay was high by any other standards at €165 million, thus increasing the gap between the big two and the chasing pack.

In fairness, other clubs have also not spent a great deal, but nobody has sold like Valencia, who now also face the emerging threat of Qatari funded Malaga, who have spent €85 million (almost all in the last two seasons). Meanwhile, Valencia have had to shop at the cheaper end of the market (relatively speaking) or enter into innovative deals, such as the two-year loan arrangement for Canales, where they pay Real Madrid €1 million a year with an option to buy for €12 million (though Madrid can then buy the player back for €18 million).

The reality is that Valencia have no money to spend on new players, unless they sell first. Even then, a good proportion of any sales proceeds will go towards reducing debts. Little wonder that even former goalkeeping hero Cañizares saw the sale of top talents as inevitable, “Those players should be at big clubs – like Valencia once was.”

Given Valencia’s financial difficulties, you might expect that the profit and loss account would be a disaster zone, but, on the face, of it the bottom line does not look too bad with the club reporting profits before tax in three of the last six years, including a healthy €18 million in 2009/10. However, that does not tell the whole story, as the results have been significantly influenced by profits on player sales and other exceptional items.

If we take last year as an example, Valencia reported EBITDA (Earnings Before Interest, Taxation, Depreciation and Amortisation) of €9 million, though €30 million of non-cash expenses (player amortisation and depreciation) produced an operating loss of €21 million. Net interest payable of €15 million widened the loss to €36 million before €54 million profits on player sales swung this back to a profit before tax of €18 million.

To be fair, this reliance on player sales is far from uncommon in Spain, as shown by a study of La Liga finances by Professor Jose Maria Gay de Liébena from the University of Barcelona, which revealed that only four clubs made operating profits in the 2009/10 season: Real Madrid, Tenerife, Sporting Gijon and Atletico Madrid. The total operating loss for clubs in La Liga of €213 million was reduced to a combined €93 million loss before tax after once-off items of €192 million had been added and net interest of €73 million deducted.

At this point, I should note that not all clubs had published their 2009/10 accounts when the University of Barcelona performed their review, so they included 2008/09 figures for five clubs (Sporting Gijon, Almeria, Athletic Bilbao, Malaga and Mallorca), while nothing was available for Xerez. Even so, the conclusions are unlikely to be much different when more recent results are available.

We can see that Valencia’s 2009/10 profit before tax of €18 million was only surpassed by Real Madrid’s €31 million, but we have to once again note that their profit on player sales of €54 million was more than any other club. This has very much been the order of the day for Valencia in the past few year. In fact, if profit on player sales and other exceptional items were to be excluded, then Valencia would have reported substantial losses in each of the past six years: 2005 €40 million, 2006 €70 million, 2007 €25 million, 2008 €55 million, 2009 €68 million and 2010 €36 million. That would give a combined loss of nearly €300 million in six years.

Apart from player sales, Valencia’s accounts list profits made from land sales, though it is not clear whether these have actually been realised. In particular, 2006 includes €161 million revenue for the “urban exploitation of the Mas de Porxinos development”, while 2008 features €90 million revenue for the sale of “the first plot of the Mestalla stadium.”

Actually, very little detail is provided in the earlier accounts on the split of the exceptional items between player sales and other activities, but that does not really matter for the purpose of this point, which is that Valencia clearly make large losses at an operating level, amounting to €234 million over the last six years. Admittedly, €186 million of that is due to non cash flow expenses like player amortisation, but this reflects the club’s investment in the playing squad, which is a fairly normal activity for a football club. Even excluding these items, total cash losses in this period added up to €48 million.

On the bright side, when Valencia manage to generate more than €100 million revenue in a year, then they are profitable at the cash (EBITDA) level, but the problem is that they still need to find cash to buy new players and to pay hefty interest charges.

That’s the other aspect of Valencia’s debt that places them at a competitive disadvantage in La Liga, namely that the amount of interest that they have to pay is much more than other leading clubs. Over the last four years, they have had to pay a total of €54 million interest, compared to €39 million at Barcelona, €37 million at Atletico Madrid and €22 million at Real Madrid.

In terms of revenue, Valencia are in a delicate position. The good news is that their 2009/10 income of €102 million placed them fourth highest in Spain at about the same level as Sevilla and only €23 million behind Atletico Madrid, whose position was influenced by Champions League money. In fact, Valencia are one of only five clubs in La Liga that earn more than €100 million revenue, with the remaining clubs considerably behind them with the next highest being Villarreal €59 million and Athletic Bilbao €56 million. Valencia’s revenue is also good enough to put them in 25th position in Deloitte’s European Money League, ahead of clubs like Benfica, Everton, Werder Bremen and Napoli.

The problem is that the big two in Spain, namely Real Madrid and Barcelona receive around four times as much revenue as Valencia with €439 million and €398 million respectively. In other words, they earn €300 million more a season – every season. Financially, they are not just leading the race in Spain, they’re almost out of sight. As money tends to lead to success in sport, an old quote from the boxing promoter Don King could be paraphrased when assessing the chances of any team other than Madrid or Barcelona winning La Liga, “They have two chances: slim and none. And slim just left town.”

And it’s getting worse, as the revenue gap to the “competition” in Spain is actually growing. In 2007, Valencia’s revenue of €108 million was “only” €182 million less than Barcelona’s €290 million, but the shortfall has now risen to €296 million. In that period, Valencia’s revenue has slightly declined, while Barcelona’s has grown by 37% and Real Madrid’s by 25%.

OK, Atletico Madrid and Sevilla have both made great strides in growing their revenue in percentage terms, but the absolute size of the monetary disparity to the big two has increased even with these clubs. From this perspective, the Spanish league is not a fair fight, but is a foregone conclusion before the season kicks-off, unless one of the big two spectacularly implodes.

Like most other clubs, Valencia’s revenue growth has been largely dependent on television, as can be seen in 2010 when the €19 million increase was almost entirely attributed to this revenue stream with the new domestic deal rising by €11 million and the Europa League distribution €4 million higher. Media is up to 46% of Valencia’s revenue and will account for an even larger proportion when Champions League money is taken into consideration.

Match day income has been essentially flat, staying within a €27-29 million range over the last four years, while commercial income has actually fallen from its peak of €25 million in 2008 to €23 million. It should be noted that other income can have an impact on Valencia’s figures, e.g. €8.5 million in 2008.

Valencia are the third best-supported club in Spain with an average attendance in 2010/11 of 41,300, only behind Barcelona 80,400 and Real Madrid 68,300. In 2009/10 this produced match day revenue of €28 million, which was the 19th highest in Europe, just below Manchester City. That’s not bad at all, but (stop me if you’ve heard this one before) pales into insignificance compared to Real Madrid’s €144 million (5 times as much) and Barcelona’s €98 million (3.5 times as much).

Although Valencia’s efforts to move to a new stadium have been fairly comical, this vast difference does help to explain the rationale for the project. In the meantime, this revenue is dependent on the number of matches played, i.e. progress in the cup competitions, and the pricing strategy. In fact, many season ticket prices were lowered for the 2011/12 season in recognition of the financial hardship being encountered by many supporters, so revenue will fall €1.1 million unless another 2,500 tickets are sold.

Despite the increase in television revenue in 2010, Valencia’s €42 million is a fraction of the €140 million that Real Madrid and Barcelona each receive, though it is the same as Atletico Madrid and a fair bit more than Villarreal and Sevilla (€25 million). Unlike all the other major European leagues which employ a form of collective selling, Spanish clubs uniquely market their broadcast rights on an individual basis, so Real Madrid and Barcelona on their own receive around half of the total TV money in La Liga or 12 times as much as the €12 million given to the last clubs on the list (Malaga, Sporting Gijon, Tenerife and Xerez).

This produces the most uneven playing field in Europe and compares unfavourably to the 1.5 multiple in the Premier League between first and last clubs. Looked at another way, Valencia, who finished third in the Spanish league, received less money than West Ham, the team that finished bottom of the Premier League.

This is why the majority of Spanish clubs have been pushing to move the current revenue distribution model towards a collective structure. Tentative agreement has been reached whereby Madrid and Barcelona’s share would be reduced to 34% (still more than a third), but the plan also assumes that Valencia and Atletico Madrid have their share cut from 6.5% to 5.5% each. As most clubs have contracts in place until 2013 or 2014, the new system will only be introduced in 2015.

"Adil Rami meets El Presidente"

Effectively, Valencia have opted to maintain the status quo by denying other clubs the chance to compete with them, while maintaining the inequality with the two Spanish leviathans. Espanyol director Joan Collet did not disguise his bitterness, “If I was an Atletico or Valencia fan, I would be furious, because by signing this, they have admitted they are fighting for third at best.”

On the face of it, the new deal will reduce Valencia’s TV revenue, but there is optimism that the total deal will grow from the current €600 million to €800-900 million, so they could end up taking a smaller slice of a larger pie. This does not seem completely unfeasible, given that the television revenue in La Liga is currently lower than the Premier League, Serie A and Ligue 1.

The current English deal is worth around €1.3 billion a year, which is more than twice as much as the €0.6 billion received by La Liga, the main reason for the difference being the hefty €575 million that the Premier League receives for foreign rights, around four times as much as their Spanish counterparts. If this area could be addressed, taking the total deal up to €900 million, then Valencia’s share would increase €8 million to €50 million.

Valencia’s television revenue for 2009/10 included €4.7 million for reaching the Europa League quarter-finals, where they were unluckily defeated by Atletico Madrid, which was a sizeable increase on the €0.4 million received for the previous season’s UEFA Cup.

However, the big money in Europe comes from participation in the Champions League, and Valencia earned €24.1 million in 2010/11 for reaching the last 16. Assuming that their other revenue streams remain unchanged, this would increase their total revenue by 20% to around €121 million. When commenting on the club’s debt reduction, president Llorente emphasised “how important it is for us to play in the Champions League”, because the majority of the money used to repay loans “came from earnings in that competition.”

Although there has been a lot of discussion about the huge gap between the big two and the rest of the clubs in Spain in TV revenue, it has seemingly gone unnoticed that it is very much the same story on the commercial front. Valencia’s revenue here of €23 million is perfectly respectable (4th highest in Spain), but is around €100 million less than Real Madrid and Barcelona.

Again, the situation appears to be getting worse, as no fewer than six La Liga clubs started this season without a shirt sponsor, including Atletico Madrid, Sevilla, Villarreal and indeed Valencia, who in the Barcelona match actually sported their Twitter handle on their shirts. For the last two years, Valencia were sponsored by online gambling company Unibet, who reportedly paid them €6 million a season for the privilege, though some of that was used to pay the wages of certain foreign players. Before that, the relationship with Valencia Experience ended in tears, as the club started legal proceedings for non-payment.

There is better news with the kit supplier deal, as Joma have signed a five-year deal running until 2016, which is reputedly worth €4 million a year. They replaced Kappa, who were paying just under €2 million a year, while the previous long-term relationship with Nike brought in €1.5 million a season.

The revenue theme is repeated in the costs, where Valencia’s 2009/10 wage bill of €73 million was only lower than the big two – but it was significantly lower, with Barcelona spending €235 million (inflated by performance-related bonus payments) and Real Madrid €192 million.

Even so, Los Che have been consistently above UEFA’s recommended maximum wages to turnover limit of 70% in the last few years, even though their wage bill has been essentially flat. This is in stark contrast to many other clubs, who have seen their wage bills surge in the same period.

In fact, after a board meeting last September, Llorente said that the 2010/11 financials would show total operating expenses falling by €18 million from €92 million in 2009/10 to €74 million. Most of this was attributed to a substantial fall in wages, which Llorente quantified as 21% compared to the €74.5 million paid out in 2008/09, implying an amazing €15.6 million decrease to €58.9 million. Although this is a dramatic reduction, it does only bring Valencia to a similar level as Atletico Madrid €62 million and Sevilla €61 million.

The club’s austerity policy has seen it reduce salaries, including the president’s, and cut jobs, including the post of sporting director Fernando Gomez. This is the other (financial) benefit of selling top players, as losing the high salaries of the likes of Villa, Silva and Mata helps reduce the overall wage bill. This helps explain why Valencia were willing to let players like Joaquín and Fernandes leave so cheaply. Indeed, Joaquin was only offered an extension to his contract at €2 million, which was €1 million lower than his previous agreement, while Malaga are apparently paying him €4 million.

The other major player cost is amortisation, which fell slightly last year to €29 million, not much more than it was in 2005. For the non-accountants, I should explain that amortisation is the annual cost of writing-down a player’s purchase price, e.g. Rami was signed for €6 million on a four-year contract, but his transfer is only reflected in the profit and loss account via amortisation, which is booked evenly over the life of his contract, i.e. €1.5 million a year (€6 million divided by four years).

Given the limited activity in the transfer market, you might expect player amortisation to fall further, but this is not necessarily the case, as it depends on how much amortisation remained on the players that departed. In any case, if it does rise, it is unlikely to be by very much.

"Sergio Canales - loan star"

Valencia’s financial future is partly down to their own actions, but is also linked to external factors not under their control. Spanish football is struggling under the burden of debt, which has reached €3.4 billion for the 20 clubs in La Liga. Indeed, no fewer than six clubs in Spain’s top division are currently in administration: Racing Santander, Real Mallorca, Real Zaragoza and all three promoted clubs (Real Betis, Rayo Vallecano and Granada).

Consequently, the beginning of this season was delayed by a players’ strike over unpaid wages. The figures are frightening with 200 players owed a total of €50 million, up from €12 million owed to 100 players the previous year. The Spanish Football League (LFP) is now taking action with a proposal to implement rules designed to curb the clubs’ excessive spending. As its president Jose Luis Astiazaran commented, “We are not immune from the wider economy.”

Valencia’s own strategy was clearly outlined by vice-president Javier Gomez a couple of years ago, “The club is in a very delicate situation. It has to control spending, grow income and sell assets.”

"Pablo Hernandez - can do it at the highest level"

As we have seen, they have certainly taken steps to control spending by slashing the wage bill and other operating expenses, but, as any business will tell you, growing income is far more difficult. In the short-term, the only realistic opportunity is regular qualification for the lucrative Champions League, which, in fairness, Valencia have achieved for the last two seasons.

This raises the spectre of UEFA’s Financial Fair Play rules that force clubs to live within their means if they wish to compete in Europe. This is going to be touch and go for Valencia unless they continue to qualify for Europe, so this becomes a bit of a circular argument. The last reported operating loss was €21 million, but this should largely be eradicated this season by savings that the club announced. However, Valencia then have to find €15 million for interest payments, leading to an annual loss of a similar amount.

This could be covered by Champions League money – or continuing the policy of profitably selling players. Llorente endorsed this view a few months ago, “The sale of players is no longer necessary to balance the budget… because of the money we are getting from the Champions League.” Since that statement, Mata has been sold to Chelsea, but this could equally have been a sporting decision as a financial one.

"David Albelda - loves a tackle"

What will help all clubs is that UEFA’s break-even calculation allows certain costs to be excluded, such as youth academy, depreciation and interest on infrastructure like a stadium, so Valencia should theoretically be fine. However, the allowable losses (acceptable deviations) are only an aggregate €5 million for 3 years if the losses are not covered by an owner, as opposed to €45 million if they are covered. As Valencia do not have a wealthy benefactor, that could potentially be an issue.

Of course, the major concern for Valencia remains the stadium. Earlier this year the club extended the Bancaja mortgage for a year beyond its June 2011 expiration date to give them more time to find a buyer for the Mestalla. This is a calculated gamble, costing €15 million of interest, as it was reported that the bank had been willing to clear the €240 million debt in exchange for the land. Llorente still believes that he can get at least €300 million, though this seems fairly optimistic, given the state of the real estate market.

The bank could still offer the same deal next year, but Valencia would then need to take out a new loan to fund the completion of the Nou Mestalla. Last year Llorente estimated that the club would need a further €126 million (and 22 months of work), but the press has reported that some areas of the new stadium are already damaged beyond repair, so this sum could easily rise to €150-200 million.

"More songs about buildings and fools"

Although Valencia have said that they would be open to a ground share with Levante, this does not seem to be a realistic option, as their neighbours do not have enough money to share the construction costs, which is a pre-requisite for any agreement.

Nevertheless, it may still be the right decision to push ahead, because Valencia could potentially end up with lower debt, albeit still too high for a club of their magnitude, but at least they would have a new stadium that should generate more revenue.

Whatever happens, it would be unrealistic to expect Valencia to do any better than they have in the past couple of seasons, especially after Llorente has adopted a far more level-headed approach to the transfer market than his chaotic predecessors. Finishing third behind Barcelona and Real Madrid is nothing to be ashamed of. In fact, given all of the financial pressures that have forced Valencia to continually sell their best players, it’s a great achievement that is deserving of much praise.