UK bank saves Benfica

Benfica, once one of the great names of European football, is to be rescued from near-bankruptcy in a 45 million euros (£27m) deal put together by Altium, the British merchant bank.

Benfica, once one of the great names of European football, is to be rescued from near-bankruptcy in a 45 million euros (£27m) deal put together by Altium, the British merchant bank.

The refinancing is expected to lead to a flotation of the Lisbon-based club in the next two or three years, making it the first team in the Iberian Peninsula to become a public company.

Benfica rose to fame in the 1960s when, led by Portuguese star Eusebio, it won the European Cup two years running and then lost in the final in the third year. Its 82,000-capacity Stadium of Light was the envy of British clubs which, at the time, were struggling to come to terms with the Lisbon giants.

But, according to Benfica's president, Joao Vale de Azevedo, 12 years of mismanagement meant the club was "completely in bankruptcy" when he took over in October 1998.

Two years ago the Benfica sporting club was £50m in debt, losing around £1m a month, and could not pay for players it had bought, such as Czech star Karel Poborsky, just arrived from Manchester United.

Dr Azevedo, a tycoon who made his money from sugar and property, put in £10m of his own money and set about turning the club around. Controversially, he pulled it out of the collective media and merchandising deal Portuguese clubs have with marketing group, Olivera do Sport, and struck his own television deal with commercial network SIC.

This raised revenues by 300 per cent, while new merchandising and sponsorship deals nearly tripled that source of income. He also decided to restructure Benfica from the old sporting club into a private business.

Traditionally, European clubs are collective organisations owned by their thousands of members. Presidents are elected every three years, leading to wild election promises that can bring trouble later. This was graphically shown recently when Real Madrid, which is believed to be £140m in debt, agreed to pay £44m for Luis Figo, the Portuguese winger, after an election promise by new Real supremo, Florentino Perez.

"Real Madrid today is like Benfica when I took control," says Dr Azevedo.

He decided to split the football side from all Benfica's other operations - which included a loss-making basketball side, cycling and handball teams, chess and swimming clubs, and even a choir.

The sporting club will have 20 per cent of the new football company, which will be controlled by Dr Azevedo and the media group, SIC. Altium - the bank formerly known as Apax Partners that has floated clubs including Leicester City and Sheffield United - is underwriting a 45 million euros fund-raising bid which is being offered club members.

The money is to be used to revamp the Stadium of Light, which will gain a roof and 180 corporate boxes, as well as developing the operations, commercial and on-line businesses. Benfica is particularly excited at the prospect of webcasting games over the internet, as there is a massive expatriate community in the United States, South Africa and Luxembourg.

Glen Cooper - an Altium director who is joining the board of Benfica - says the structure could provide a template to sort out many of the more financially-troubled clubs in Europe.

"Pele argues that clubs in Brazil have to be companies to be competitive, so Benfica is only putting the words of the greatest footballer of all time into action," he said.