Parma Face Uncertain Future As Debt Mounts Up

Time is running out was the message from bewildered Parma captain Alessandro Lucarelli who is facing up to the realistic proposition that he may be unemployed soon. The Italian side faces a bleak future after it was announced that the club is riddled with debt and unable to pay its players or bills. News surfaced about the extent of Parma’s debt after the club was forced to scrap last weekend Serie A clash with Udinese as it couldn’t afford to pay for the stewards or police.  A bankruptcy hearing date of March 19th has already been set with the Italian authorities looking to wind up the club before it melts down any further. It’s a dramatic fall from grace for a club who are due to celebrate its twenty year anniversary this May of their biggest triumph, the 1995 UEFA Cup final win over Juventus.

Sadly this isn’t the first time this club has teetered on the brink of extinction. In 2004, the club was declared insolvent following the financial meltdown of Parmalat, the multinational Italian dairy and food corporation founded by Calisto Tanzi and then Parma owner. Tanzi, along with several other senior executives at the company were charged with financial fraud and money laundering in one of Italy’s biggest financial scandals with Tanzi accused of embezzling an estimated €800million. He was sentenced to eight years and one month in prison initially before having an additional 27 years added later for his part in letting Paramlat and Parmatour fall into bankruptcy. After three years of administration, Param were rescued by engineering entrepreneur Tommaso Ghirardi who created a holding company called Eventi Sportivi which would control the club and its assets.  Up until December 2014, Ghirardi continued to own Parma but after being sensationally banned from competing in Europe this season due to an unpaid tax bill, Ghirardi finally relinquished control Albanian businessman Rezart Taci before he flipped it only months later to its current owner Giampietro Manenti.

Once seen as the savior of Parma, public opinion of Ghirardi has shifted dramatically since the revelations of the extent of Parma’s debt. When he took over the club, the club had a gross debt of €16m which has now risen to an amazing gross debt of €197m (net debt of €97m) in a seven year period.  Where the money has gone is anyone’s guess however many will point to the fact that over a two year period between the summer of 2012 and summer 2014, Parma has been involved in 450 player transactions ranging from full purchase deals, co ownership agreements, loans and transfers. The effect of this is that Parma now has a total of 143 players on its books; with 85 of them currently out on loan and 11 of them under co-ownership agreements with other clubs. The architect of this idea was not Ghirardi but instead Parma’s director of Football Pietro Leonardi. In place since 2009, Leonardi created a system that he believes will be beneficial to the club in the long run. In a move similar to an over excited Football Manager player, Parma acquires all the most promising free agents on the European market targeting quantity over quality. They then send them throughout Europe to allow the players to develop both in terms of skill and value in exchange for either a monthly fee or full coverage of the player’s wages.  At the end of the loan, the player can be sold for a fee, loaned back out again or in a rare case promoted to the Parma first team. In theory the system creates a continuous cycle of money and a production line for talent.

The system has generated a lot of criticism to date with some complaining that Parma are treating players like cattle or stock, trading their careers away on a whim in order to make a quick buck. Whilst the club insists that it’s simply developing young players for the future, the sheer scale of its loan project is staggering and hints back to why the club finds itself riddled with debt. Leonardi insists that the cost of running such a scheme is minimal but the club has yet to break even on player transfers in the last five years. The debate on whether the system is working or not has been paused as the club switches it focus to remaining in business. Current owner Manenti is confident of sorting the clubs problems out but with a rising debt, drastic changes will be needed to ensure he can. A short term loan of €5million is needed urgently to cover the running costs of the club until May allowing Parma to complete the Serie A season.  Long term, refinancing or a new wealthy owner need to be found to secure the clubs future for the next few seasons.

The club will be dragged over the coals and scrutinized by the Italian authorities for every deal that it has struck since recovering from administration in 2007. However this may be a lengthy process given the number of player transactions made by the club since then. The extent of which Leonardi’s scheme affected the club will become apparent with the club potentially facing further sanctions by UEFA for its mismanagement of players and bending of the rules. UEFA has yet to crack down on schemes like Leonardi has created with other clubs like Chelsea and Manchester City also guilty to a lesser degree. Nothing however will be done by UEFA until the summer and by that point the issue may be null in void in Parma’s case if the club no longer exists.

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