* Borrowing legitimate way of financing expansion, LFP says
* Recent study shows debts at least 3.5 billion euros
* Author urges soccer authorities, government to act
By Iain Rogers
MADRID, April 29 - The Spanish professional soccer
league (LFP) has defended clubs with high and rising levels of
debt, saying borrowing is a legitimate form of financing
expansion widely used in other corporate sectors.
A study by a professor at the University of Barcelona
published last week showed the combined debt of the 20 clubs in
Spain's top league rose by more than 650 million euros to at
least 3.5 billion ($4.6 billion) in the year through June 2008.
Jose Maria Gay, the study's author, has warned that Spanish
soccer faces financial collapse and urged authorities to force
clubs to stop spending and borrowing in excess of what they can
afford.
An LFP source, who asked not to be identified by name, told
Reuters the organisation was unaware of Gay's report but noted
that an increase in debt to finance expansion was not
necessarily a cause for concern.
"Debt is an instrument of financial and economic management
that all companies in all corporate sectors make use of," the
source said.
"It's rather shocking that the concept of debt, when applied
to soccer clubs, has such extremely negative connotations,
something that is not the case in any other sector."
Many Spanish clubs have been forced deeper into the red as
they struggle to cope with surging wage and transfer costs for
the top players they need to compete.
The sharp global downturn and the deep recession in Spain
will cause more pain as income from TV rights, sponsorship,
merchandising and ticket sales dwindles, analysts say.
CONSTRUCTION HALTED
Gay based his latest study on official 2007/08 accounts.
They showed Real Madrid had the largest debt with 563 million
euros, followed by city rivals Atletico with 511 million and
Valencia with 502 million. Barcelona was 438 million in the red.
Valencia, league champions in 2002 and 2004, recently said
they might have to sell players to ease their financial
difficulties and the club has been forced to delay wage payments
and halt construction on a new stadium.
The LFP source said it would be "prudent and advisable" in
the current economic climate for clubs to rein in borrowing,
particularly as the credit crunch had pushed up financing costs.
"The clubs in the league are aware of the situation and are
taking the appropriate steps," the source said.
The biggest problem for clubs was relegation and this was
the main reason some had gone into insolvency, the source said,
adding that the LFP was looking at ways to ease the burden of
the drop.
"Relegation is the key to the issue. Relegation means a very
significant loss of earning capacity, while still having the
same obligations in terms of paying players.
"Easing the burden of relegation is one of the ways of
solving this problem and the league is working on measures that
go in this direction."
TREMENDOUS HANDICAP
Gay at the University of Barcelona said it was a "tremendous
handicap" for clubs to be so deeply in debt with the nation
experiencing its worst recession in at least half a century.
He called on the LFP to act but said it was "sitting on its
hands". The Spanish soccer federation (RFEF) appeared to be
"missing in action" so it was up to the national government or
UEFA to step in, he said.
"We have to force the clubs, via a supervisory body, to live
within their means, only buy players they can afford based on
their financial situation and assets and to limit their debt.
"The bubble is being inflated with ever larger amounts of
air and at some point it's going to explode."
(Editing by Pritha Sarkar; To query or comment on this story
email sportsfeedback@thomsonreuters.com)