Thread by @ReyesDeUniverso

REAL MADRID - PROVIDENCE EQUITY PARTNERS deal details!

Debunking the myth that the deal didn't comply with UEFA's regulations as per English Journalists.

Also, providing the possible description of the 122M Euros "Other Operating Expenses".

//A MEGA THREAD//

(1/N) #RealMadrid

At the annual meeting of the board members in mid-2018, Florentino Pérez announced that Real Madrid signed a partnership with the giant investments company of "Providence Equity" to sell their future SPONSORSHIP RIGHTS INCOME for an amount of €164M net as per reports.

(2/N)

The American investments company were slated to pay Real Madrid a whopping sum of €41M annually from 2018 to 2021 to reach a base level of sponsorship.

The agreement revealed between PEP and Real Madrid was linked to the growth and development of sponsorship revenues.

(3/N)

After achieving the base level of sponsorship rights, PEP will assume full control of the club’s future off-field sponsorship rights, with exception to stadium naming rights, training ground naming rights and shirt sponsorship deals as well as other Major Sporting deals.

(4/N)

It is notable to mention here that Real Madrid had already sold their INTERNET IMAGES RIGHTS to Providence in 2017 for an estimated amount of around €500M for ten years until 2027.

The alleged discrepancy is regarding this deal which we'll discuss later in the thread.

(5/N)

Now, after achieving certain economic gains, PEP had been in negotiations with Real Madrid since 2021 January to extend their partnership until 2027.

The agreement was finally reached for a sum of €203M spread over 7 seasons. The annual installment this time was €29M.

(6/N)

This agreement with Providence Equity Partners was mainly done to repay the annual instalments of the Santiago Bernabéu's loan which is now worth around €38M(€29M in 2021) per year from 2022-23 onwards after the club took an additional loan of €225M in 2021-22.

(7/N)

Now that the details of both the PEP deals are explained, we'll now jump to the part which some random English Journalists are claiming to be illegal or "non-compliant with UEFA's FFP regulations".

It's not something new, because Spanish Press knew about this way earlier.

(8/N)

Real Madrid were aware that payments on a €500 million letter of intent signed with PEP in 2016 for a 10 year sell of Internet Image rights would be facilitated through two companies based in the Cayman Islands.

But here comes the alleged "disparities" in the deal.

(9/N)

Real Madrid did not sign the proposed agreement with Providence but with one of its SUBSIDIARIES, Luxembourg-based PQ VII Sarl, which reportedly had a social capital of just €20K. Behind PQ VII Sarl were two companies registered in the Caymans who were the main ones.

(10/N)

Real Madrid’s the then financial director, Julio Esquerdeiro, recommended that any deal be signed off with a company “resident for tax purposes in Spain and directly/indirectly owned by investors” should be structured in a proper way to evade enquiries by tax agencies.

(11/N)

On the letter of understanding, Esquerdeiro noted: “Given its structure, which can be easily identified by the Tax Agency, the exemption of retentions in the payments from Real Madrid to PQ VII SARL, as a company resident in the EU, will almost certainly be questioned."

(12/N)

The summary of the story is, Real Madrid signed that deal with Luxembourg-based PQ VII Sarl JUST BECAUSE IT IS A SUBSIDIARY OF THE PROVIDENCE EQUITY PARTNERS ONLY, and not an independent company who has a social capital of €20K. It's capital gains are funded by PEP too.

(13/N)

Florentino Pérez devised the deal in such a way that REAL MADRID FACED NO QUESTIONS FROM SPANISH TAX AGENCIES. They signed the deal with the Canary Islands (Low Tax Zone) based outfit to avoid payment of high taxes, which in turn evaded enquiries by Spanish Tax agencies.

(14/N)

So, as you can see, the so called "illegal" deal by some random English journalists is clean on every front.

Everyone knows Real Madrid does internal audits and no anomaly has been found in any of them. The club complies with all the information requirements ordered.

(15/N)

Now the other prominent as well as interesting part of the tweet comes.

EXPLANATION OF THE "OTHER OPERATING EXPENSES" in the Real Madrid Accounts published for the 2021-22 season.

This was such a small thing, but that English journo had to make an agenda out of it.

(16/N)

It was clearly mentioned in the 2018 deal between Real Madrid and PEP that after the initial investment of €164M net from the American company to reach the base level of sponsorship, they will receive the investment back as well as any 10% of any new income generated.

(17/N)

This repayment of the PEP investments was due to start in 2021 when the new deal was announced, and from that financial year the "Other Operating Expenses" shot up to a staggering amount of €136M in the 2021-22 from €78M in the previous season.

Here you can see it.

(18/N)

So these "Other Operating Expenses" are nothing but basically the repayment of previously received investments from various organizations as well as the advance payments done to Sixth Street/Legends to secure the future sponsorship rights of Bernabéu.

Nothing to worry.

(19/N)

And yes, Real Madrid shares it's full accounts report of a season with the Board Members as well as with it's various partners all around the world like Emirates, Adidas, PEP, SS, Legends.

IT WON'T PAY HEED TO A RANDOM JOURNALIST SEEKING INFORMATION ABOUT THE ACCOUNTS.

(20/20)

//END OF THREAD//

Likes and RTs Appreciated. Took a hell lot of time to research about this whole PEP deal.