Turkey plans debt restructuring for top football clubs

Istanbul’s Galatasaray, Fenerbahce and Besiktas as well as Trabzonspor make up the bulk of the $2.6bn debt.

Turkish Super League - Fenerbahce v Kasimpasa
Turkish football has been dominated by Istanbul's Big Three for decades [Murad Sezer/Reuters]

Ankara, Turkey – Turkish football has been dominated by Istanbul’s Big Three for decades.

As a result, this week’s revelation that Galatasaray, Fenerbahce and Besiktas had been forced to seek help in paying off crippling debt sent a shiver through the recession-threatened country.

The trio, as well as the Black Sea club Trabzonspor, make up the bulk of the $2.6bn debt owed by Turkey’s top clubs. These four clubs have won all but one Super Lig title since the league was formed in 1959.

The Istanbul clubs also have huge support across the country, where their fans often outnumber those of local clubs even in the capital Ankara.

For many followers of the Turkish game, the deal to give the clubs a “chance to breathe” through debt restructuring, as Turkish Football Federation (TFF) Chairman Yildirim Demiroren put it on Monday, was the culmination of years of financial mismanagement coupled with a bleak economic outlook in Turkey.

“Turkey is a country that is very passionate about football,” said Ferda Halicioglu, an economics professor at Istanbul Medeniyet University who has done research on Turkish football.

“In the past, we turned a blind eye to what was happening on the financial side, but it was always going to come to a point where it was not sustainable. It has come to that point now because of the financial crisis and an accumulation of bad management.”

Tumbling lira

Top-flight clubs have been particularly hard-hit by the tumbling lira – which lost nearly a third of its value against the dollar last year – 20 percent inflation and a sharp rise in interest rate as they struggle to pay big-name foreign stars signed to please their fanatical supporters.

These overseas players command hefty transfer fees and wages paid in foreign currency.

The clubs’ falling balances have seen them jettisoning some of their marquee signings. Besiktas recently released Portuguese defender Pepe six months before the end of a two-year deal reportedly worth $11m.

During last summer’s transfer window, most Super Lig teams looked to cheaper homegrown talent to refresh their squads rather than emulate the big-money deals of seasons past which saw stars such as Didier Drogba and Robin van Persie come to Istanbul.

In part, these expensive foreign players were hired by club presidents elected by members often numbering in the tens of thousands for terms of a few years.

Critics say this, coupled with a lack of transparency, encourages presidents to opt for headline-grabbing signings to secure re-election.

Galatasaray, Fenerbahce, Besiktas and Trabzonspor make up the bulk of the debt [Orhan Cicek/Anadolu]
Galatasaray, Fenerbahce, Besiktas and Trabzonspor make up the bulk of the debt [Orhan Cicek/Anadolu]

If the deal fails to produce results on the pitch, the problem of paying the wages falls to their successor.

“Nobody’s responsible for the money. They leave it to the next guy to clear up,” said Murat Yildiz, a Fenerbahce member.

Halicioglu added: “If you’re one of the top three teams, you always want the championship that season and that puts a lot of pressure on those in charge. They’re not prepared to wait a year or two for success.”

According to Tugrul Aksar, a banker and newspaper columnist who has written several books on football, the 18 Super Lig clubs have combined debts of $2.6bn against the league’s annual income of $600m and club assets of around $1bn.

“The financial structure we’re in is unsustainable,” Aksar told the Futbol Ekonimisi website. “We’re dealing with a league that can’t create financial income with its own dynamics.”

Turkish clubs have also come under the spotlight of UEFA’s Financial Fair Play regulations which, since 2011, have sought to keep football clubs’ spending in line with their income.

In October, UEFA ordered further investigation of Galatasaray’s finances after the club had earlier paid a $7m penalty for breaching the rules.

Turkey’s most successful side was banned from European competitions during the 2016-2017 season for previous offences.

Enhanced oversight

This period of enhanced oversight has seen the clubs that took their positions at the top of the table for granted drop down the pecking order with just Trabzonspor and Galatasaray currently in the top five.

Besiktas lie seventh while 19-time champions Fenerbahce are just one spot of the bottom with threats of relegation for the first time.

At the top of the table, six points clear of Trabzonspor, sit Basaksehir, a club founded in 1990 as the team of the Istanbul municipality.

They were promoted to the Super Lig for the first time in 2007 and recently competed in the Europa League.

The club’s management points to its status as a joint-stock company to explain its success as well as its ability to scout young Turkish players such as Cengiz Under, now a hot talent at Roma.

Its detractors, however, point to ties to the ruling Justice and Development Party (AKP), saying sponsorship by public companies has enabled Basaksehir to retain foreign players such as former Arsenal and Manchester City duo Emmanuel Adebayor and Gael Clichy and Brazilian Robinho despite drawing crowds of just a few thousand.

Many remain unconvinced that anything will change unless the clubs are overhauled [Murad Sezer/Reuters]
Many remain unconvinced that anything will change unless the clubs are overhauled [Murad Sezer/Reuters]

Club President Goksel Gumusdag is linked by marriage to the family of Turkish President Recep Tayyip Erdogan, himself a former semi-professional footballer who played in a match to mark the opening of Basaksehir’s new stadium in 2014.

“The current ruling party wants new clubs to reflect its New Turkey ideal but these clubs don’t have a supporter base,” Halicioglu said. “They have small capacity stadiums that they can’t fill.”

“The financial situation is not transparent so we don’t know how they generate their money, but they seem to get a lot from sponsorship from companies close to the ruling party, which is unfair competition. They are artificial clubs.”

Although Basaksehir is on course to become just the sixth club to win the Super Lig, it is questionable whether it can achieve the long-term success of its established rivals given its limited fan base in a country where team support is usually passed down in the family.

‘Financial burden’

The Banks Association of Turkey, which arranged the restructure with the TFF, said that the clubs would not see their debts written off or restructured at reduced rates. They would not be offered further loans either, it said.

Instead, they would be run under a strict financial regime to strengthen their structures under the TFF’s supervision.

But, like many commentators, economics professor Halicioglu questioned the terms of the agreement.

“This financial burden is not going to go away, even if it is deferred for five or 10 years at a lower rate of interest,” he said. “I don’t think restructuring will resolve the problem because they will probably accumulate new debts.”

The deal has been also criticised by opposition politicians amid suggestions that the help for the clubs is linked to local elections in March.

Orhan Saribal, an MP for the Republican People’s Party (CHP), queried the public benefit in helping football clubs rather than farmers suffering under the AKP’s “incorrect agricultural policies”.

For all the debate around the effort to save Turkey’s biggest clubs, many remain unconvinced that anything will change unless the clubs themselves are overhauled and subjected to oversight, including measures such as independent audits.

“Like many things in Turkey, the rules and regulations are there but in practice, there’s no enforcement,” said Yildiz.

Source: Al Jazeera