Club news

ABANCA WILL OWN DEPORTIVO

19 Feb 2020
ABANCA will be the main shareholder of Deportivo with an operation that will give the bank between the 45% and the 78% of the club’s capital. There will be a shareholders meeting on March 16/17.

The club announced last week the details of the operation that will raise the club’s capital between €35 million and €70 million. This is the base of the project that was presented by president Fernando Vidal and that allowed him to win the elections had last month.

First to all, there will be a shareholders meeting on March 16/17 that will vote for this increase in the club’s capital. In case it is approved then there will be three phases to fulfill it. The first two mean the possibility to increase the capital in €5 million and €30 million respectively, and only ABANCA can participate on both.

ABANCA already conceded a loan of €5 million to Deportivo, which was used to increase the salary cap in €1.25 million during the winter window. The reason why the 100% of the loan wasn’t used is that La Liga (LFP) doesn’t allow the use of the 100% of a loan as part of its strict financial rules; the LFP only allow using the 25% in the next transfer window, always with the promise that this amount will be later converted into capital. The rest of the money can be added to the salary cap in future transfer windows if it’s capitalized first.

It is the reason why the first phase is only dedicated to convert this loan into capital. The second phase also involves ABANCA and will allow the bank to increase their participation in the club in additional amount of €30 million. The bank already promised Vidal to fulfil the amount.

But ABANCA will not put more money into the club, instead they will reconvert part of the debt that Deportivo currently have with the bank, in other words they are capitalizing part of the debt. This second phase means that the debt of the club will be reduced to €53 million as ABANCA will capitalize €35 million of the global debt (€5 million of the first phase + €30 million of the second phase).

This move will also influence in the salary cap of future seasons, because it reduces the future obligations of the club, and therefore there will be more money that can be invested in signing new players and strengthen the first team.

The third and final phase in the operation will allow anyone else apart from ABANCA to get shares from the club. The amount of the operation is €35 million, which is exactly the amount that ABANCA will invest in the first two phases. If the €35 million of this phase are fulfilled then ABANCA will only have the 45% of the club’s capital, and if no one shows up then the percentage raises to 78%. In any case the bank will now be the main shareholder of the club.

This third phase will be divided in three parts and the whole phase lasts 65 days. Between March 21 and April 24, any of the current shareholders can buy news shares and the limit for each shareholder is the current participation they have. In the second part, the shareholders that participated in the first part can buy more shares, this part will last between April 25 and May 9. Then, the third part will take place between May 10 & 24 and will open the club to any investor that currently doesn’t have shares of Deportivo.

CONCLUSION
It’s improbable that the current shareholders will cover the third phase for €35 million, so ABANCA will easily end having 50% or even more of the club (the top is 78%). This breaks the tradition of having a club owned by everyone and opens the possibility of a future arrival of a big investor.

There’s a positive and a negative factor in this situation. The positive thing is that its sure that the salary cap for future transfer windows will have an improvement of at least €33.75 million, which is the capitalization that ABANCA will make resting the part already used this winter window. This means an important asset ahead of future seasons.

The negative thing is the uncertainty, many are speculating that ABANCA is only paving the way in order to allow the arrival of a big investor. And this means uncertainty in a Spanish market that’s full of bad examples like Málaga CF or Racing Santander.

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