Carlos Mendoza: "Madrid’s debt is 541 million euros"
The President of the Association for Madrid’s Values was stopped from speaking by Florentino when he criticised his economic management in the members' meeting. Here he says why he’s worried about the club
You looked worried at the meeting...
My association (for Madrid’s Values, the Asociación por los Valores del Madridismo) have studied the accounts and the budget. We’ve got good people. Our treasurer is an auditor in one of Spain’s biggest companies and we’ve detected things where the President’s explanation isn’t in line with reality. There are things that worry us for the future.
Why did Florentino stop you speaking?
I was saying that the club’s debt is 541 million euros, which is the total of long-term and short-term debts. Florentino only recognises the net financial debt, that is what is owed just to the banks, which is around 90 million. But of course Madrid has debts with other parties other than the banks: with players, with clubs, with sporting institutions, with the government and public bodies, with suppliers... The total is 541 million euros, more than double the amount Florentino inherited from Lorenzo Sanz. And on top of this debt, he wants to rebuild the Bernabéu, which he says will cost of 400 million euros. Then he said he can’t finance it and he’ll have to come up with clever strategies.
How much debt can the club cope with?
The club’s turnover is very high. We’re the club with the highest income levels in the world, but we’re also number one in costs. The thing is, incomes have been increasing by an average of 12% a year for the past decade but in the last year they only went up 1%. And the costs are rising fast.
The income isn’t growing?
I would suppose it is because of the economic backdrop. And if things are uncertain, getting involved in the new Bernabéu project costing 400 million doesn’t seem very sensible. There’s something else too. The club have two new credit lines, but they’ve had to use the advertising income and the season ticket sales for the next three or four years as guarantees to the banks, because they don’t trust the club... That’s not me saying that, it’s from the club’s annual accounts.
Used as a guarantee?
They’ve been pawned basically. Just like when you go to the pawn shop, they give you money and you leave a guarantee, something real. If you don’t pay them back, they keep whatever it is you left. Here, if Madrid don’t pay back the money, the bank has the right to the income from the advertising income and the season ticket sales.
How do you interpret that?
Obviously the banks are asking for an extra guarantee from Madrid because they don’t trust the club’s situation. Under normal circumstances they wouldn’t demand it.
Are the signings of Bale and Illarramendi and Isco included in the numbers?
No, the accounts run to 30 June, so they will be in next year’s accounts. And they are written down every year. If Bale cost 100 million for a five year contract, the annual cost in the accounts is 20 million euros. We think the amount paid for Bale is scandalous.
Does this have something to do with the sale of Özil?
They had to sell him to make up for the signings, just like with Higuaín. With that they got a reserve they could use to dress up the accounts for next year. Remember the sale of Kaká has a very negative effect on the accounts. There were still two years of his contract to amortise. That’s 20 million of cost, plus Bale, Illarra, Isco and the salary increases. Özil was cheap and they sold high, which is good for the accounts, but the overall costs keep increasing and the debt builds up.
You also spoke about Kaká in your interrupted speech.
Last year Milan would have paid 15 million euros for him and we would have saved his fees. This year they’ll pay an amount depending on what Milan achieve on the pitch. It’s a strange idea. The whole thing has been a business disaster. Between his transfer fee and his salary Kaká cost 120 million euros and he played 120 games. I would have preferred Kaká to help us win titles, rather than Adidas to sell boots.
Is this method of signing players sustainable?
What the club needs to look at is the efficiency of the model. Since Del Bosque left Florentino has spent 800 million euros on players who have won a League and a Cup. The model is clearly inefficient.
If the debt keeps climbing could the club be converted in a limited liability company (rather than being owned by the members as is the case at the moment)
That’s a risk. It could happen if the debt is becomes too large and the club needs to bring in more capital. Or the Sports Law could force the change [in Spain this law has obliged nearly all clubs to change to a limited liability company in a bid to force transparency and regulation in the sector. Madrid, Barcelona, Osasuna and Athletic have so far been exempted]. Another way would be as a result of the investigation the European Union has opened into possible financing of the club by hidden subsidies...
What do you know about that?
Not much, mostly the information that I think [the newspaper] the Independent published. What’s certain is that the agreement with Madrid’s city council for the planning change needed to renovate the Bernabéu is still being appealed. The club was going to receive 430,000 euros as a result of the agreement, which was what was in the budget. By the end of the year this income was more than 24 million euros. Interestingly, including this amount, the club didn’t end up making a loss just before the elections.
Is there a danger Madrid will no longer belong to the members?
Up to now the President has been very clear about this, but with the question being asked a number of times in the run up to the members’ meeting about a possible obligation to convert...
Were you there?
Yes, yes... In principle the President said that the information wasn’t true and that if there was a possibility of a conversion it was because the club was being forced to. He said, “if they do force us, it’ll be fine, because every member will have a share” and he said that the members wouldn’t be able to sell the share. What worries me is that he’s talking about the club being obliged to change. It reminds me of when he said “I wanted Mourinho to carry on, but we’ve reached an agreement for his departure from the club because it’s the best for Madrid”. I’m worried that he’s going to end up saying: “I would have liked the club to have continued belonging to the members but...” At the end of the day it seems things keep happening here and nobody says anything.
Do the accounts include a pay-off for Mourinho?
No. And that’s a good enough reason to vote against their approval. Now my Association is looking at the Fly Emirates contract. Just as Forbes says this is the most valuable club in the world, Forbes also says that the value of the contract with Fly Emirates is far below its real price.
How much are they paying?
I think it’s 25 million euros a year... The question is, why did Madrid negotiate so badly? Does it have something to do with the fact Mourinho was the face of these countries? Did it have something to do with getting rid of Mourinho? These are questions we’re not allowed to ask at the meeting.
Madrid’s brand is hugely powerful. But they could avoid some of the costs. It seems excessive that there are 31 top executives who earn an average of 270,000 euros each a year.
What do you think about Florentino’s grand plans?
The Real Madrid resort was announced to a huge fanfare. Now the club have had to return the two or three million euros they got for the use of the brand. We have very little information about this, of course. Then there’s the Madrid Theme Park. There’s no Master Plan! And we’re really worried about the Bernabéu. The need for the work is debatable and the expected income is doubtful. The works will last for two years, which is a hassle. He promised this in 2004. He wants it to be an architectural reference for the whole world. We’d like Madrid to be a reference for the world for its value, its principles and its sporting successes...
I don’t want to interrupt you but, in closing, anything else to say?
We weren’t pro-Florentino before because we supported proposals we thought were good, and we aren’t anti-Florentino for telling the truth now. We just want transparency!!!