The Blaugrana may have the opportunity to refinance their huge obligations, but the BBB- grade is a warning things must improve at Camp Nou
Barcelona have been handed a rare piece of positive economic news after credit rating agency Fitch opened the door for the club to refinance their debts in order to ease their troubled balance sheet.
The Catalans’ financial situation has severely affected their ability to operate in the current transfer market, due to their massive wage bill and losses over the last year.
But the agency’s decision will allow them to take on further funding as they hope to complete several pending deals as well as Lionel Messi’s long-awaited renewal.
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Still in credit
Fitch has informed the club that their BBB- rating has now been approved, effectively a vote of confidence in their ability to manage this current financial situation.
“It is a very good piece of news, very positive, we could have expected a worse rating” financial analyst Marc Ciria affirmed.
“Generally, it is a rating which will impart trust in the financial markets.”
What does it mean?
Credit ratings agencies are tasked with assessing the stability and viability of nations and businesses in meeting their debt obligations.
There are three principal operators in this field: Moody’s, Standard and Poor’s and Fitch.
Clients are rated with a letter grade, from AAA+, judged to be the safest, most stable investments, to C-, regarded as ‘junk bonds’ which entail the most risk.
Barcelona’s BBB- rating therefore leaves them in a fairly good position and able to continue taking on debt at an annual rate of three per cent or lower.
The club hopes to refinance up to €1.2 billion (£1.02B/$1.4B) of obligations, including €750m (£639m/$890m) of short-term debt, and give itself more time to pay back creditors.
Fitch’s decision, however, is also a warning for president Joan Laporta to drastically improve the club’s administration.
“The negative sign is due to how we are placed,” Ciria added. “If we continue on the same road we will lose that BBB-.
“A BBB+ means you are on track to be very stable. The BBB- warns that if you don’t change, you will fall down to CCC+, which is not a good grade.”
The bigger picture
Unable to spend any large sums in this transfer window due to their financial difficulties, Barca’s principal objectives are now two-fold.
The Catalans must cut costs and raise new funds in order to meet Liga economic regulations, which will allow them to register four new signings: Memphis Depay, Eric Garcia, Sergio Aguero and Emerson.
Furthermore, unless the wage bill is significantly reduced they are also unable to confirm Messi’s new contract, despite already coming to an agreement which will see the star slash his salary in half when he puts pen to paper on a five-year extension.
Konrad de la Fuente, Jean-Clair Todibo, Francisco Trincao, Carles Alena and Junior Firpo have all left Camp Nou so far this summer, while Barca will also listen to offers for the likes of Philippe Coutinho, Ousmane Dembele and Antoine Griezmann in their bid to balance the books.
