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SBD Global/August 14, 2013/FinancePrint All
A "person familiar with the matter" said that Brazil's football federation may lose half its '12 profit following the collapse of a bank that had been at the center of a government graft scandal, according to Panja & Marcelino of BLOOMBERG. The person, who asked not to be identified because the information is private, said that Confederacao Brasileira de Futebol (CBF) deposited about 30M reais ($13.14M) with Belo Horizonte-based Banco Rural "over the last decade." Brazil's central bank liquidated Rural this month citing "serious" legal violations. Rural, which specialized in lending to small and medium-size companies, was closed after "successive losses generated abnormal risk to creditors," the central bank said Aug. 2. CBF, which had '12 sales of 382M reais ($165M) and net income of 55.6M reais ($24M), "risks losing the majority of its money held at Banco Rural because of the terms of the bank's liquidation." Brazil's deposit insurance fund "guarantees Rural's certificate of deposit, local agricultural letters of credit and deposits" of as much as 250,000 reais ($108,389M). According to a Rural statement on its web page, amounts above 250,000 reais "will be evaluated by the liquidator." The deposit insurance fund "also guarantees investments in the so-called DPGE, a local bank note," of as much as 20M reais ($8.6M) (BLOOMBERG, 8/12).
For the "second consecutive year, La Liga clubs are earning more than they are spending on player transactions," according to Carmelo Ruiz of AS. As of Monday, the 20 La Liga clubs had received €396.5M ($525M) on transactions, while spending on player signings totaled €254.5M ($337M), "leaving a positive balance" of €142M ($188M). This "tendency started last year" when the league made €72.4M after combined revenue from player signings totaled €217M, compared to just €144.6M spent on players (AS, 8/13).
Scottish football is "continuing to operate on the edge of a 'financial precipice' despite a growing realisation and acceptance that clubs must cut their wage bills," according to Stephen Halliday of the SCOTSMAN. A survey by accounting firm BDO has revealed that 80% of Scottish top-flight clubs "either believe their financial situation could be better or are in need of attention." BDO warns of "'deep-rooted difficulties' which will take several years to solve, but on a more optimistic note conclude that the continuing commitment of supporters provides a platform for a more sustainable future." In "a sign that Scottish clubs are learning the lessons of recent turbulent times, with the demise of Rangers and the subsequent financial crises at Hearts and Dunfermline," 80% of those surveyed said that they "now use a wages-to-turnover ratio as a key indicator of the club’s financial health." So far, however, only 20% of them come "under the recommended ratio of 55 percent," while the remainder come in under the maximum accepted level of 65%. BDO professional sports group partner Charles Barnett said, "No Scottish teams reported they would increase the size of their first-team squad in the coming season with 40% stating it would be the same and 60% stating it would be smaller. In actual wages 20% said they would spend the same with 80% stating they would spend less. The fans never like this but it must be the way forward if Scottish football is to remain viable in the future." Forty per cent of SPL clubs said that "they were dependent on principal shareholders to finance annual revenue shortfalls or operating losses," down from 67% in last year’s BDO survey. A fifth of club owners are "considering an exit within a year to 18 months and two-fifths reported formal or informal approaches from external parties interested in taking a stake in the club." Barnett: "Football clubs appear to be as attractive as ever to external investors. This is both a strength and a weakness for the future financial security of football in general" (SCOTSMAN, 8/13).
The European Commission "is looking into the issue of illegal state aid for Spanish clubs," according to Mark Baber of INSIDE WORLD FOOTBALL. But there is no truth in the reports that Real Madrid and Barcelona "would be forced by the EC to give up their privileged status as member-owned clubs and become plcs." In fact, the obligation under Spanish law for clubs to become Sociedades Anonimas Deportivas or Sports Limited Companies "is due to be abolished." EC investigation "was prompted by complaints from English and German clubs." The complainants, frustrated by the length of the investigation of EC's competition office (now lasting four years), "asked the European Ombudsman to step in and speed the process up." This has led to some reports that Barcelona and Real Madrid "could lose their member-owned status." If the European Commissioner had any real interest in putting an end to the member-only status of Barcelona and Real Madrid, "he would find a major obstacle in his path in the form of the European Union's Directive on Services in the Internal Market." This gives enterprises the freedom to adopt the legal structure for their entity that they see fit and only allows for restrictions to that freedom in domestic law if they comply with all of the following conditions: non-discrimination, necessity, and proportionality. Another obstacle to any such scheme "would be that there are member-owned clubs in many other European countries" -- for example, there are more in Germany and Sweden than in Spain (INSIDE WORLD FOOTBALL, 8/13).