Sunday, August 21, 2011

The ashes of the Valencian "Fallas"

The exit of Juan Mata close an era in Valencia CF. Not so long ago, this club played 2 Champions League finals, won 2 Ligas and a UEFA Cup, but this golden era had a painful end due to the terrible decisions in the sport and patrimonial departments.

It is necessary to go back in the 1990s to know the origin of the current situation. Valencia CF was one of the Spanish clubs that had to become a corporation in 1992. With the new decade, a member of one of the most powerful families of the high-class of Valencia, Francisco Roig, bought a big percentage of the ownership of the club, which allowed him to control the club. Francisco Roig had big ambitions and his dream was to have a "Valencia campeó". But despite the arrival of big names like Romario or Salenko and the signing of prestigious coaches like Luis Aragonés or Jorge Valdano, the results were poor and he resigned from the presidency in 1997, which ended up in one of the most important shareholders, Pedro Cortés, although Roig remained in power from the shadows, given his majority in the ownership of the club.

Francisco Roig

A turning point was a sentence in the year 1998 that declared illegal the increase of capital made by Roig, which had allowed him to control the club. The club was in the hands of Pedro Cortés, who betrayed his old partner and joined his shares to the ones of Arturo Tuzón, to keep Roig out of control. The change in the presidency put Valencia CF in the right direction and the club won a Copa and its following Supercopa in 1999. During this period, the club set the base of the future victories. Without big expenses in the market, the club signed players like Claudio López, Fabián Ayala, Amadeo Carboni, Kily González, Jocelyn Algoma, Adrián Illie or Gerard, who joined the local talents Gaizka Mendieta, David Albelda or Farinós. In those years, Valencia reached two consecutive UEFA Champions League finals, in 2000 and 2001, which increased the value of their players and coach, Héctor Cúper.

In the summer of the year 2001, many big clubs of Europe started the chase of Valencia players. Héctor Cúper signed for Internazionale FC and Gaizka Mendieta broke the market with his record signing for SS Lazio for 45M euros, which was clearly superior to the 19M paid for Javier Farinós by Inter or the 35M paid by FC Barcelona for Gerard García the previous year. The pressure of the fans on Pedro Cortés for these transfers made him resign for personal reasons, which gave the presidency to Jaime Ortí in the summer of 2001, who had been one of the men of Francisco Roig.

With Jaime Ortí and the arrival of Rafael Benítez to Mestalla came the best years of Valencia CF. The club won 2 Ligas (2001 and 2003) and 1 UEFA Cup (2003). But the victories did not bring peace to the club. Francisco Roig was making his movements to recover the ownership and presidency of the club, but at the same time, the Soler family, well-known in Valencia and successful businessmen of the real estate sector, also had their power ambitions. Jaime Ortí, despite he had been a man of Francisco Roig during the 90s, favored the movements of the Soler family in order to keep the presidency despite his irrelevant percentage in the ownership. Finally, in the year 2003, Francisco Roig surrendered and sold his shares for a 31.6M euros.

This corporate operation is important to understand why Valencia is struggling nowadays. The battle to obtain the power in Valencia CF was not based on the value of the club, but in an important fight of 2 important Valencian families to get the control of the club that is the symbol of the city and a big part of the region. The price paid by the Soler family was 600 euros per share, when the face value of this share was 40 euros when it was issued less than 10 years ago. It is important to highlight that the club had a historical debt of 120M euros, which was not irrelevant for a club of the size of Valencia. In one way or another, the Soler family took the control of the club, getting the fame and the political influence they were aiming since long ago.

Only the Liga and UEFA Cup titles avoided the change in the presidency. Juan Soler stayed in the shadows for a year given the popularity of the winning president Jaime Ortí, but in October 2004, Juan Soler made his dream reality and sacked Ortí to get the so wished position. At that moment, no one could even imagine that Juan Soler would destroy the economy of the club in only 4 years.

The presidency of Juan Soler can be definied by one word: disaster. Disaster in every single aspect. If we refer just to football, Valencia passed from being one of the top clubs of the continent to lose prestige due to poor domestic and continental campaigns. The club splashed 180M of euros in players like Di Vaio, Fiore, Caneira, Corradi, David Villa, Miguel, Regueiro, Joaquín, Morientes, Del Horno, Tavano, Hugo Viana, Arizmendi,  Zigic, Fernandes, Maduro, Banega or Alexis and only very few of them were worth the price paid for them. There were constant changes in the position of coach: Claudio Ranieri, Quique Flores and Ronald Koeman had short periods on the bench. At the same time, given the bad results, the club had 2 general managers in this period: Amadeo Carboni, who had an evident bad relationship with Quique Flores, and Miguel Ángel Ruiz. In this aspect, the club was a total mess and the team was a victim of it.

Juan Soler

If it was not enough, the patrimonial management was as bad as the sport one. The most shocking case was the change of sponsor in 2008 signed by Juan Soler, when the club broke its contract with Toyota, who were paying 3M per year, to sign a deal with a ghost company called Valencia Experience, which was supposed to be a company that promoted events in Valencia. No one knew what this company had ever done and, of course, they never paid a single cent of the promised 6M per season. During all the season, Valencia wore the shirt with the name of this ghost company for absolutely nothing and, given the contract they had with Nike, a change of sponsorship would have even had worse effects.

But, without a doubt, the most harmful patrimonial operation was the construction of the Nou Mestalla, the new stadium of the club. Since the year 2004, Juan Soler started to negotiate a land swap with the government of the region and the city hall. In this agreement, the government change the qualification of the lands in Benicalp in order to allow the club to build the new stadium. In 2006, the Nou Mestalla was announced, a futuristic 5-star stadium with a huge capacity of 75,000 seats. Along with the stadium, Valencia was going to build a commercial zone. The overall cost of the new stadium was going to be 344M euros and the team would start the 2010-2011 season in their new home. In the summer of 2007, the building work started, but in the 2008-2009 season, they had to be stopped, since the club could not meet the payments. Nowadays, the club did not start with the building works again, since they were not able to sell the lands of the old Mestalla at the required price.

At the end of the 2007-2008 season, Juan Soler resigned from the presidency due to the huge social and political pressure. Juan Soler decided to sell the shares to Juan Villalonga, former Telefonica president. Villalonga wanted to increase the capital of the club in order to reduce the huge debt of the club, but Juan Soler blocked the whole operation retaining his shares. Only a few days later, Soler sold his shares to Vicente Soriano, who stayed in the presidency for one season. But Vicente Soriano never paid for the shares and the ownership returned to Juan Soler.

The summer of 2009 was the summer of shame, but also the summer of the new low profile era that had to come. Vicente Soriano, who had been a president on loan during all the season, had to resign. Juan Soler was tired of this situation and did not block any decision of the Assembly of shareholders, who gave the presidency to Manuel Llorente, who had been managing the finances of the club from 1995 to 2004, working with Francisco Roig, Pedro Cortés and Jaime Ortí. Manuel Llorente had a good reputation among the valencianistas since he was the main executive during the golden years until the arrival of Juan Soler.

Manuel Llorente was given the job in order to put order in the finances of the club or to find a buyer for the club. Ironically, Vicente Soriano, who had been promising to find the investors during the previous season, appeared with a company of Uruguay called Inversiones Dalport, who were supposed to bring 500M for the club, but they never presented the required guarantees, despite asking for 15 days extensions during all the summer. Manuel Llorente was not as a naive as Juan Soler had been in the past and refused to listen to the former president Soriano.

Manuel Llorente
Llorente asked Deloitte to due a due diligence to know the real economic and financial situation of the club and the report could have not been more scary. Valencia CF owed 547M euros and spent 112M per season only in the salaries of the players, while the overall incomes were 92M. The solution proposed by Llorente was an increase of capital of 92.5M euros. In this operation, Bancaja (now Bankia), a Valencian savings bank, would give a 72M loan to Fundación Valencia Club de Fútbol to buy the shares from Juan Soler without losses for him, despite the base prospectus of the operation had a clear disclaimer made by Deloitte and the Spanish stock markets public supervisor: the value of Valencia CF is zero.

The new owner was this foundation, which was the organization found by Bancaja (Bankia) and the Valencian  government to save the club from disappear. In fact, Bankia have the control of the club in the shadows forcing the club to accomplish with a tough program to recover the club and pay back the 240M loan they have with them. The exit of David Villa (42M euros). David Silva (33M euros) and Marchena (2M, but an important salary) were part of this program and so is the transfer of Juan Mata, probably the last high profile player Valencia CF had in their squad, which was replaced (given the results, with intelligence) with mid profile players with lower transfer costs and salaries.

At this point, the valencianismo is aware of their situation. The good old times of victories and finals has changed for a time of restrictions and low profile objectives. For now, Llorente and his coach Emery have been able to keep Valencia in the top-3, playing the UEFA Champions League, which is very important for the economy of the club. The exit of Juan Mata is one more step to save the club, hoping that the replacements allow the team to keep the position in the top continental competition one more year. Even though the club wanted to keep Mata one more year, a clause of his contract allowed him to leave for 22M euros. Valencia CF collect 30M with this operation now and Juan Mata may accomplish his dream to grow in a winning team, something that Valencia CF can not offer to him now.

Manuel Llorente is a man who likes to go step by step. Perhaps the transfer of the main assets of the club is the easy way to recover the economy of the club, but given the real estate and financial crisis, which blocks the selling of the lands of the old Mestalla, and the pressure of the creditors of the club, it looks like it is the only possible solution. Manuel Llorente considers that the new stadium is a priority in order to grow the operating income of the club and the massive restriction of expenses, which leads to cut the financial expenses too during his 2 years of presidency. If everything goes according to the program, Valencia may continue with the construction of the Nou Mestalla in the year 2012, hoping that a new era begin with the new fancy home of the valencianismo from the ashes of the "fallas" left by the years of the mad bubble.

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