THE HALF DECENT FOOTBALL MAGAZINE

8 February ~ Valencia are sitting comfortably near the top of La Liga, playing exciting football and blessed with some of Europe's best attacking players. So it is easy to forget that, just this time last year, they were facing financial ruin. In 2006, the club's president Juan Soler announced plans to build a new stadium, the Nou Mestalla, on local wasteland. The club was to go on using their existing venue until construction was complete, when the old ground would be sold. Additional funding would be provided by bank loans (paid back by the sale of broadcasting rights and sponsorship), annual qualification for the Champions League and, eventually, through money generated by the Nou Mestalla.

Within two years, practically everything that could go wrong did. Firstly, the collapse of the Spanish property market made it very difficult for Valencia to sell either their existing stadium or training ground. Secondly, the team started to lose. Having banked heavily on the fact that Valencia would qualify for the Champions League every year – with little margin for error – they failed. This meant a heavy loss of annual revenue and, therefore, a hefty dent in the club's operational budget.

Soler seemed to think that selling assets to raise and save money would be defeatist. The team had to win, so he spent huge amounts of money on the squad. During his five years in charge, Soler spent over €180 million (£158m) on players such as Ever Banega, Nikola Zigic, Manuel Fernandes, Renan, Timo Hildebrand and Hedwiges Maduro, the majority of whom were unsuccessful.

Then, when that didn't work, Soler turned to the management. He fired the coach, Claudio Ranieri, and hired a new one in Quique Sánchez Flores who was quickly replaced by Ronald Koeman. But after public feuding that resulted in the sale of stalwarts Santiago Cañizares, Miguel Angulo and team captain David Albelda, Koeman himself was sacked and replaced by Unai Emery, who is still in charge. Severance pay alone for these three coaches cost the club a reported €30m.

By February 2009, the debt had risen to over €500m. The club conceded that they were unable to pay their players and work on the new stadium had to be suspended. Soler was forced to stand down as president although he effectively remained in power as majority shareholder and owner.

A chaotic leadership re-shuffle followed, with a succession of leading club figureheads taking turns to be in temporary charge. Finally, with the threat of bankruptcy upon them, Valencia were offered a lifeline in a €74m emergency loan from Bancaja, a local bank, ultimately funded by the regional government, to which Valencia were already in significant debt.

With this, the club appointed a new president in Manuel Llorente whose modest plan to save the club involved a rights issue of new shares offered to existing shareholders. The sale of shares started slowly until a group of fans – known as Fundacio Valencia – made an offer to buy the club. The organisation purchased all of the remaining newly-issued shares – approximately €26m worth – eventually taking over the club with an ownership of 72 per cent. Valencia were officially saved.

Since then, things have dramatically improved. Last month, they reached an agreement with the group commissioned to build the Nou Mestalla to resume work on the stadium. Should things go to plan, this would mean completion by 2011.

In relation to the team, the calculated risks taken by Valencia to keep star players such as David Silva and David Villa have also so far paid off. That said, with both players expected to command transfer fees in advance of €45m, it is surely only a matter of time before at least one of them is sold.

As of this moment, Valencia are in a very strong position. Qualification for next season's Champions League is likely, they have some very good young players and a highly rated coach in Unai Emery. Sensible transfer activity over the next year should ensure Valencia are moving to a new stadium as one of Europe's most progressive clubs. If they do, in a way it will all have been down to Juan Soler. Isidore Lewis

Comments (7)
Comment by pwa 2010-02-08 12:50:59

Interesting to see that it's not only the English clubs who get themselves into financial ruin...

Comment by RayDeChaussee 2010-02-08 13:41:23

Part of the reason Valencia have got through so many coaches in recent years is the fickleness of their delightful fans, who seem to believe they should be up there with Barcelona and Real Madrid season in, season out.
Hector Cuper won them the league a few years back only to be serenaded with chants of "Cuper vete ya" (Cuper get lost). That's gratitude for you.
Shame they haven't gone down the pan - it couldn't happen to a nicer bunch.

Comment by jamie.smith 2010-02-08 15:41:20

Fascinating insight into the behind the scenes going on at Valencia - would like to see more profiles like this of european clubs... particularly the french, they make bad decisions all the time.

Comment by Antonio Gramsci 2010-02-08 15:50:36

I don't understand how the team was saved through a share issue. That didn't make the 500M debt go away, surely? How was that dealt with?

Comment by isi_777 2010-02-08 16:23:15

@Antonio Gramsci... As far as I understand it, there is still a lot of debt, but the payments owed which jeopordised the club's immediate future have been eased/paid-off by (1) the Bancaja loan and (2) the rights issue. This has also allowed the club to take care of its operational costs for the meanwhile and, crucially, for the recommencement of construction on the new stadium. The plan is that this will, in time, hopefully bring in more money to cover the ultimate debt. Fundamentally, there is still debt - and, presumably, interest on this debt - however, the circumstances of this are such that the clubs' primary creditors are currently happy/satisfied. I hope this helps... (P.S. Thanks for all the comments).

Comment by danielmak 2010-02-09 07:27:40

This is a good piece. Thanks for taking the time to write it, isi. I would add a couple more points. First, it's hard to tell how well some of the signings have panned out because the squad is so bloated that there really is no way to get most of them any playing time (even when Valencia is involved in 3 competitions, which has been the case the past 2 years). But I can say that their inability to sell some players has paid off: Banega has been amazing this year; Zigic did very well in the Copa del Rey; and most importantly, Villa was close to going to Real but Valencia pulled the plug at the last minute. What's amazing to me is that they still added to the squad by purchasing Dominguez during the January transfer window. He was pure class last weekend when he came on in the 70th minute or so. But, again, where is he going to play given the strength and size of the squad in the offensive end? Finally, I think they will be able to hold onto Villa because he does not seem to be interested in leaving Spain and Real and Barca don't seem to need another striker. Silva will likely go, though, which might just answer my question about Dominguez.

Comment by stuart77 2010-02-09 16:48:29

another great insight into the game - good to hear what is going on outside the English Premier League - I still think it is just wrong for a football club or any company that employs so few people to be able to go half a million into debt. There should be a limit, the interest on that cash could have built a new stadium. Do the Spanish banks back up their manufacturing industry in the same way?

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