Sitting comfortably near the top of La Liga, playing brilliant, exciting football and blessed with some of Europe’s best attacking players, it is easy to forget that, just this time last year, Valencia were facing financial ruin.
For now, those days are gone. The club still have to be prudent, but the day-to-day running of the business is finally under control.
But how exactly is it that Valencia got themselves in this position in the first place? The story goes as follows:
In 2006, the President at the time – Juan Soler – announced plans to build a brand new, state-of-the-art stadium, the Nou Mestalla. Built on local wasteland, the plan was for the club to go on using the existing stadium until construction was complete, at which point the old stadium would be sold on, thus, helping to fund the operation. The bulk of additional funding would be provided by bank loans, which would be paid back over time through various other revenue streams made up through the sale of broadcasting rights and sponsorship, year-on-year qualification for the Champions League and, eventually, through money generated via deployment of the Nou Mestalla.
Although ambitious, the plans were achievable. Soler believed strongly in the importance of having a good stadium: not only would it provide increased revenue in the long term, but it would also improve the club’s overall global position and allow for Valencia to maintain a sustainable threat to the other big clubs in Spain, such as Real Madrid and Barcelona. Many other clubs in Europe had been successful with this strategy – notably in England at clubs like Arsenal and Manchester City – and Soler’s vast experience in real estate put him in a seemingly good position in which to carry out the operation.
However, Soler’s ambitions hit a series of stumbling blocks along the way, mostly resulting from the fact that he tried to do too much all at once.
What he did with the stadium, he also did with the club’s Paterna training ground. Nice idea it may have been, but this effectively doubled the initial outlay and, in other words, greatly increased the immediate risk of what was already a very expensive project.
Within two years, practically everything that could go wrong did go wrong.
Firstly, the Spanish property market collapsed. This ultimately made it very difficult for Valencia to sell either their existing stadium or training ground, both of which were listed as key factors in the budget for the new stadium.
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.
This put Soler in a difficult position. He understood the club’s precarious position, but he also felt it important to be positive instead of, for example, selling assets to raise and save money. A conservative approach, Soler believed, would be viewed as negative and would send out a message of defeat. The team had to win and a radical shake-up was necessary.
Fearful of this, Soler panicked. He spent huge amounts of money on improving the team in the hope that something good would happen.
Firstly, he spent money on players. During his five years in charge, Soler spent over €180m 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 Sanchez Flores. However, when that didn’t work out, he fired him too and replaced him with Dutchman Ronald Koeman which, in turn, did not work out. In fact, it was a bit of a disaster; hence, after a very public feud involving the extradition of stalwarts Santiago Canizares, Miguel Angulo and team captain David Albelda, Koeman himself was sacked and replaced by Unai Emery (who, as it happens, is still in charge today).
Severance pay alone for all these managers cost the club a reported €30m.
As the money ran out, things went from bad to worse. The situation was hardly helped when, in May 2008, four construction workers were killed in a scaffolding accident while working on the new stadium, a tragedy which compounded the Nou Mestalla as a PR disaster.
By February 2009, Valencia had reached rock bottom. The club conceded that they were unable to pay their players and that work on the new stadium was to be suspended. The club’s debt had risen to over €500m and Valencia were in crisis.
Soler was forced to stand down as President. Although, complexities surrounding his stake in the club meant he effectively remained in power as majority shareholder and owner.
A confusing and somewhat chaotic leadership re-shuffle followed, whereby a succession of leading club figureheads took turns to be in temporary charge – all at a cost and all with limited success. The worst example of this came in the form of Vicente Soriano, a secondary shareholder appointed by Soler.
Soriano’s job was essentially to find a buyer for the old ground and to refinance the club’s debt with its primary creditors. However, he was unsuccessful and, instead, managed only to conjure up a series of time-wasters. Dutch firm ING nearly bought the ground, as did a group of unspecified Middle Eastern businessmen. Valencia even came close to selling the club to the very much unknown Uruguayan investment group Inversiones Dalport, who turned out to be, if not crooks then, certainly very shady.
Finally, with the threat of bankruptcy upon them, Valencia were offered a lifeline. This came in the form of 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 surrounded a rights issue of new shares offered to existing shareholders.
This was hardly revolutionary. Indeed, the sale of shares started slowly until, unexpectedly, a group of Valencia fans – otherwise known as Fundacio Valencia – made an offer to buy the club. Capitalising on the fact that Soriano and Soler were refusing to take up their option to buy new shares, the organisation purchased all of the remaining newly-issued shares – approximately €26m worth – eventually taking over the club with an ownership of 72%. Valencia were officially saved.
Since then – roughly nine months later – things have dramatically improved for Valencia. Last month, the club revealed that they had reached an agreement with the group commissioned to build the Nou Mestalla – UTE, a construction group made up of firms FCC and Bertolin – in order for work to resume 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. Having last year rejected a generous bid from Real Madrid for Villa – rumoured to be in the region of €75m – the club have been stubborn in their belief that the team must remain competitive and continue to win matches.
That said, the club are living cautiously at present, and with each of the two aforementioned players good enough to command in advance of €45m in transfer fees, one would expect it is only a matter of time before at least one of them is sold. My personal opinion is that, of the two, Silva is by far the most replaceable. Not least because Valencia have a number of other equally good – but less ‘fashionable’ – options who can play in his position: notably that of Juan Mata and Pablo Hernandez, either of whom would themselves fetch good money in the transfer market.
As of this moment, Valencia are in a very strong position indeed. Qualification for next season’s Champions League is likely, they have some very good young players and a very exciting young manager in Unai Emery. But prudence is key: sensible transfer activity and a gradual approach between now and next year will ensure Valencia are moving to a new stadium as one of Europe’s most progressive clubs, in which case the money will come rolling in. And if they do, just think… it will all have been down to Juan Soler.
For now, those days are gone. The club still have to be prudent, but the day-to-day running of the business is finally under control.
But how exactly is it that Valencia got themselves in this position in the first place? The story goes as follows:
In 2006, the President at the time – Juan Soler – announced plans to build a brand new, state-of-the-art stadium, the Nou Mestalla. Built on local wasteland, the plan was for the club to go on using the existing stadium until construction was complete, at which point the old stadium would be sold on, thus, helping to fund the operation. The bulk of additional funding would be provided by bank loans, which would be paid back over time through various other revenue streams made up through the sale of broadcasting rights and sponsorship, year-on-year qualification for the Champions League and, eventually, through money generated via deployment of the Nou Mestalla.
Although ambitious, the plans were achievable. Soler believed strongly in the importance of having a good stadium: not only would it provide increased revenue in the long term, but it would also improve the club’s overall global position and allow for Valencia to maintain a sustainable threat to the other big clubs in Spain, such as Real Madrid and Barcelona. Many other clubs in Europe had been successful with this strategy – notably in England at clubs like Arsenal and Manchester City – and Soler’s vast experience in real estate put him in a seemingly good position in which to carry out the operation.
However, Soler’s ambitions hit a series of stumbling blocks along the way, mostly resulting from the fact that he tried to do too much all at once.
What he did with the stadium, he also did with the club’s Paterna training ground. Nice idea it may have been, but this effectively doubled the initial outlay and, in other words, greatly increased the immediate risk of what was already a very expensive project.
Within two years, practically everything that could go wrong did go wrong.
Firstly, the Spanish property market collapsed. This ultimately made it very difficult for Valencia to sell either their existing stadium or training ground, both of which were listed as key factors in the budget for the new stadium.
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.
This put Soler in a difficult position. He understood the club’s precarious position, but he also felt it important to be positive instead of, for example, selling assets to raise and save money. A conservative approach, Soler believed, would be viewed as negative and would send out a message of defeat. The team had to win and a radical shake-up was necessary.
Fearful of this, Soler panicked. He spent huge amounts of money on improving the team in the hope that something good would happen.
Firstly, he spent money on players. During his five years in charge, Soler spent over €180m 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 Sanchez Flores. However, when that didn’t work out, he fired him too and replaced him with Dutchman Ronald Koeman which, in turn, did not work out. In fact, it was a bit of a disaster; hence, after a very public feud involving the extradition of stalwarts Santiago Canizares, Miguel Angulo and team captain David Albelda, Koeman himself was sacked and replaced by Unai Emery (who, as it happens, is still in charge today).
Severance pay alone for all these managers cost the club a reported €30m.
As the money ran out, things went from bad to worse. The situation was hardly helped when, in May 2008, four construction workers were killed in a scaffolding accident while working on the new stadium, a tragedy which compounded the Nou Mestalla as a PR disaster.
By February 2009, Valencia had reached rock bottom. The club conceded that they were unable to pay their players and that work on the new stadium was to be suspended. The club’s debt had risen to over €500m and Valencia were in crisis.
Soler was forced to stand down as President. Although, complexities surrounding his stake in the club meant he effectively remained in power as majority shareholder and owner.
A confusing and somewhat chaotic leadership re-shuffle followed, whereby a succession of leading club figureheads took turns to be in temporary charge – all at a cost and all with limited success. The worst example of this came in the form of Vicente Soriano, a secondary shareholder appointed by Soler.
Soriano’s job was essentially to find a buyer for the old ground and to refinance the club’s debt with its primary creditors. However, he was unsuccessful and, instead, managed only to conjure up a series of time-wasters. Dutch firm ING nearly bought the ground, as did a group of unspecified Middle Eastern businessmen. Valencia even came close to selling the club to the very much unknown Uruguayan investment group Inversiones Dalport, who turned out to be, if not crooks then, certainly very shady.
Finally, with the threat of bankruptcy upon them, Valencia were offered a lifeline. This came in the form of 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 surrounded a rights issue of new shares offered to existing shareholders.
This was hardly revolutionary. Indeed, the sale of shares started slowly until, unexpectedly, a group of Valencia fans – otherwise known as Fundacio Valencia – made an offer to buy the club. Capitalising on the fact that Soriano and Soler were refusing to take up their option to buy new shares, the organisation purchased all of the remaining newly-issued shares – approximately €26m worth – eventually taking over the club with an ownership of 72%. Valencia were officially saved.
Since then – roughly nine months later – things have dramatically improved for Valencia. Last month, the club revealed that they had reached an agreement with the group commissioned to build the Nou Mestalla – UTE, a construction group made up of firms FCC and Bertolin – in order for work to resume 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. Having last year rejected a generous bid from Real Madrid for Villa – rumoured to be in the region of €75m – the club have been stubborn in their belief that the team must remain competitive and continue to win matches.
That said, the club are living cautiously at present, and with each of the two aforementioned players good enough to command in advance of €45m in transfer fees, one would expect it is only a matter of time before at least one of them is sold. My personal opinion is that, of the two, Silva is by far the most replaceable. Not least because Valencia have a number of other equally good – but less ‘fashionable’ – options who can play in his position: notably that of Juan Mata and Pablo Hernandez, either of whom would themselves fetch good money in the transfer market.
As of this moment, Valencia are in a very strong position indeed. Qualification for next season’s Champions League is likely, they have some very good young players and a very exciting young manager in Unai Emery. But prudence is key: sensible transfer activity and a gradual approach between now and next year will ensure Valencia are moving to a new stadium as one of Europe’s most progressive clubs, in which case the money will come rolling in. And if they do, just think… it will all have been down to Juan Soler.
