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Home News World Europe

UEFA plans $7 billion Pandemic Relief Fund for clubs

Jatin Batra by Jatin Batra
August 18, 2021
in Europe
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UEFA plans $7 billion Pandemic Relief Fund for clubs
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As European football clubs continue to calculate the costs of a global pandemic that has left teams big and small in financial trouble, European football’s governing body is preparing to create a staggering $7 billion emergency fund to help struggling teams support their growing growth. manage debts.

According to several officials briefed on the negotiations, the plan would be for the governing body, UEFA, to provide financial aid to teams struggling for money playing in major European club competitions. The refunds would be linked to the teams’ future payouts from their participation in those tournaments organized by UEFA; for the teams involved in the final stages of the Champions League, Europe’s most important club competition, those payouts can reach up to 100 million euros per year (nearly 120 million dollars).

UEFA has been in talks with banks and private equity firms for months about setting up the fund. According to the officials, the first compensation would be made available to clubs that qualify for the three annual European club competitions: the Champions League, the Europa League and the new Europa Conference League.

For many European teams, the financial aid is desperately needed. Billions of dollars in revenue have been wiped from team balance sheets since the coronavirus first began to affect the football industry in early 2020. Clubs in dozens of countries were forced to play matches without spectators for months, and some had to pay discounts to broadcast partners and sponsors. All but a handful of teams have suffered a lot of pain.

Barcelona, ​​for example, was unable to maintain the services of its most famous player, Lionel Messi, amid mounting debts of more than $1.5 billion, and the president said last week that the club expected the losses this year would approach $570 million, a record figure for a football club. While many of Barcelona’s financial problems are self-inflicted, the result of years of poor management, red ink has been spilling over balance sheets across Europe. The Premier League, football’s richest domestic league, suffered revenue declines for the first time since its founding in 1992.

UEFA was in talks with Centricus, a London-based investment firm that was also involved in talks with FIFA over funding the expanded Club World Cup, but has recently focused on closing a deal with a group of lenders, including Citigroup. and UniCredit, according to those with knowledge of the conversations. They declined to be identified as talks with the clubs continue and no deal has been reached.

UEFA declined to comment on the talks or the emergency fund. But it has discussed the proposal with the European Club Association, the umbrella body that represents around 200 top European teams.

UEFA has asked the ECA to survey its members to understand their financial needs. The most pressing concern relates to tens of millions of dollars in players’ trade debts. Those obligations, which have accumulated over several years as teams buy and sell players to each other, are an essential source of income for small and medium-sized clubs. However, any default from them risks creating a contagion effect given the interconnected club debts.

The player trading market – which was worth $7 billion before the pandemic – has now slowed down significantly, with more sellers than buyers and clubs struggling to sell players they can no longer afford. The chief executive of one of Italy’s biggest clubs said the market for mid-market players – worth between $5 and $30 million, deals that lubricate the market in good times – is now scarce. Instead, teams have become increasingly dependent on loans and free transfers to pay off contracts and salaries they can no longer afford.

According to one of those familiar with the talks, UEFA’s participation in the emergency fund is critical as it will allow the banks to secure their investment against the future earnings of its competitions, rather than against the balance sheets of individual teams. That arrangement would reduce the risk for the lenders while ensuring lower interest rates than usual for clubs. To determine how many clubs are eligible to host, UEFA will create a rating profile for teams based on their likely earnings from the Champions League, Europa League and Conference League, a new third-tier competition to be launched this season .

UEFA’s initiative comes months after a failed attempt by a group of 12 leading teams to form a breakaway superleague.

UEFA is only the latest football organization to seek outside investment to mitigate the lingering effects of the pandemic. The Spanish professional league announced earlier this month that it had struck a deal to sell nearly 11 percent of its broadcasting and commercial revenues to a private equity fund over 50 years in exchange for a $3 billion investment. The Italian league has negotiated a similar arrangement.

UEFA hopes the financing will enable teams to restructure their debt at lower interest rates. At the same time, it plans to review the financial regulations for the teams in its competitions.

According to UEFA president Aleksander Ceferin, the current decade-old arrangement known as financial fair play has ended, and clubs are now bracing for a new set of cost containment rules. A likely option is a combination of a cap on spending linked to income and a luxury tax, similar to a tax imposed by Major League Baseball on teams that choose to spend much more than their rivals.

The move is an attempt to bring clarity to a process that often leaves UEFA unable to enforce its rules on the continent’s biggest spending teams. Under the new system, UEFA leaders will know exactly how much they will have to pay if they spend too much. However, the system is unlikely to have any meaningful impact on the growing imbalance in competition between clubs that can spend freely on talent and those that cannot keep up.

Tags: BillionclubsfundNewsMaduraPandemicplansreliefUEFA
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