From debt to dominance, an Argentine legend rises again

Clubs in debt pay attention to one team's financial revival.


When a soccer club sits at the top of the league, it is usually because it has more skillful players, more prolific goal-scorers, or a better defense than its opponents.

With Racing, Argentina's legendary soccer club, that's only half the story. The team is in first place and on the verge of claiming the country's soccer championship for the first time in 35 years, only 18 months after they were declared bankrupt and thrown out of the league. The success of the club is as much due to strong management as it is to strong goals.

Unlike its rivals in the first division, Racing is run by a private company that revived the moribund club with a deal that gave them control of the club's stadium, assets, brand name, and even 20 percent of the players' contracts. Racing's success is being watched closely by other clubs - many of which operate in the red - who see it as a potential model for their own cash-strapped and debt-ridden teams.

"Everyone is looking to see if we are a good example," says Fernando de Tomaso, a former Goldman Sachs trader who is now vice president of Racing's parent company, Blanquiceleste. "This is a test case for clubs who are in a terrible state and for private companies that are interested in football and want to see how we do."

The march to the top of the league has capped a remarkable few years for Racing. Founded in 1903, the club quickly established itself as one of the country's preeminent sides, winning nine Argentine league titles between 1913 and 1925 and producing so many great players that they became know as La Academia (The Academy).

In 1967, it reached its apex by beating the Scottish club Glasgow Celtic, and became the first Argentine club to win the much-coveted Intercontinental Cup played between the champions of Europe and South America.

That was its last major achievement, however, and the club limped through the next three decades, accumulating scorn and debt in equal measure.

By 2000, Racing was $64 million in debt, and, with no way of paying creditors, it was kicked out the league.

The response from the club's fans was overwhelming. After missing just two games, fans forced authorities to grant the club a reprieve and pressured Congress into investigating the directors who presided over the club's fall from grace. Most memorably, on the first day of a league championship from which Racing was banned, 30,000 fanatical supporters turned up at the stadium to watch a game they knew was not going to take place. The fans, holding banners with messages like "Racing, Till Death Us Do Part," spent 90 minutes singing songs and cheering their absent heroes.

Such devotion convinced entertainment mogul Fernando Marin that Racing had a future. Marin formed Blanquiceleste, or sky blue and white (the team's colors), a company that has effectively leased Racing for 10 years and assumed 100 percent of the club's debt. It has nine years to pay it off. While little of the debt has been paid off so far, the deal has breathed fresh life into the Academy. New managers were brought in along with new players, many of whom where bought on "lease" to save on transfer fees.

The deal turned Racing's fortunes around, primarily by instilling a professionalism and fiscal order that the previous directors - those elected by public ballot among club members, the same as in most Argentine clubs - had failed to instill. With the new money men in charge, Blanquiceleste has formed lucrative partnerships with Coca-Cola, SKY broadcasters, and Topper sports-clothing manufacturers - and helped increase business by 50 percent compared with the same period five years ago.

"Usually Argentine clubs spend money that they don't have, and we don't do that," says Mr. de Tomaso, referring to some teams that contract expensive players even though they don't have the money to do so. "We are tidy and efficient."

The most unexpected efficiency, however, has been on the field, where Racing has outperformed wealthier clubs to rise to the top of the league. The players say the new order off the field was fundamental in helping them impose a new order on it.

"We know that we will get paid. Before, we were never sure, and that was not a good environment to work in," says team captain Claudio Ubeda.

After a 0-0 tie with Banfield on Sunday, Mr. Ubeda and his teammates need to secure just four points from a possible six in their final two games to secure the title. "We never know when we are beaten," says Colombian Alex Viveros, one of only two international players in the squad. "This team has the soul of a champion."

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