Heavily indebted River face big losses in second division

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Heavily indebted River Plate face big losses in second division

28 June 2011 No Comment

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Relegation will bring huge financial hardship for “The Millionaires” as heavily indebted giants River Plate have been known since the early years of professional soccer in Argentina.

River Plate faces a major restructuring after relegation from the top flight of Argentinian football left the club facing a possible 90% drop in broadcast revenues.

River, the record 33 times champions who were relegated on Sunday, are grappling with a debt of 280 million Argentine pesos ($68.33 million) according to the website www.muyriver.com.ar and stand to lose 26.5 million pesos in television revenue when they play in the Nacional B division next season.

Arch-rivals River and Boca Juniors, Argentina’s most popular and successful clubs, take 26.5 million pesos a year in match broadcasting revenue in the top flight, but in the second tier teams earn 3.5 million pesos.

Other belt tightening losses are expected to include lower gate receipts at home and none on the road given the ban on away fans at Nacional B matches due to “barrabrava” violence set against the high costs of opening the Monumental.

River’s main sponsor is the Brazilian petroleum company Petronras whose contract of $2.5 million per season is up for renewal in June 2012. They are also being paid $600,000 by Brazil’s kitchenware manufacturers Tramontina in a deal until the end of this year.

Broadcast Revenue

According to TV Sports Markets, TV rights revenues could fall from the $7.5 million (A$30.7 million) to $855,000 (A$3.5 million) – the equal share earned by clubs in the second tier. In addition to the fall in its television contract, River’s lucrative sponsorship contracts, which were dependent on the club being in the Primera Division, are expected to fall by about 50%. River’s current deals include a $20 million contract over six years with Adidas, a $2.5 million annual agreement with Petrobras and a $600,000 per year partnership with Tramontina.

River also receive $1 million (A$4 million) per season in advertising revenue from the “futbol para todos” (football for everyone) government scheme. This figure is expected to fall to $320,000 (A$1.3 million) per season. River’s squad was valued at $78 million at the start of the season but relegation and the club’s dire financial status will mean that that figure will be significantly reduced as the club looks to reduce its wage bill.

Player Assets

Sports goods makers Adidas have a contract until 2014 for $3.3 million per season but much of that money, paid in advance, has already gone to settle debts inherited by club president Daniel Passarella from the previous administration 18 months ago.

There is a question mark over what new deals, if any, the sponsors, unwilling to discuss the future, will agree with River outside the first division.

River, who earned their nickname in the 1930s when they paid a then world record transfer fee for striker Bernabe Ferreyra from rivals Tigre, will have to sell players for revenue and to offload their highest salaries.

They had a golden era in production of world class players in the 1990s and early 2000s fetching big fees for the likes of Pablo Aimar, Javier Saviola and Andres D’Alessandro to name only three.

Now, their main assets are teenage playmaker Erik Lamela and 20-year-old striker Rodrigo Funes Mori, whose promising form has dipped badly with River’s recent poor run and the confused first team selections of out-of-depth coach JJ Lopez.

Passarella, former captain and coach of River and Argentina, has been waiting on improved offers for the pair after reported interest from European clubs willing to pay between $10 and $12 million but now risks having to settle for less.

Sources: reuters.com and sportbusiness.com