A decade of Espanyol in Chinese hands: what now?

BarcelonaIn a few months, Rastar Group will celebrate a decade at the helm of Espanyol. A journey full of ups and downs, marked by two relegations, two promotions, and one European qualification. Chen Yansheng, owner of the Chinese holding company and also of the blue and white club since late 2015, has not set foot in Barcelona for almost three years, but from his offices in Guangzhou, he oversees and closely monitors all decisions related to the club's management. No momentous decision is authorized without his approval, whether it's a signing for the first team or a new sponsorship.

Since his arrival, there have been constant rumors of a possible sale to various investment groups, but the message from the owners has always been clear: they remain firmly committed to Espanyol. However, the fact that he has no intention of selling doesn't mean that, if a sufficiently attractive offer ever comes along, he won't be able to change his mind. In the meantime, he has no alternative but to continue supporting a club that has already cost him around 255 million euros.

Nearly 40 million were allocated to obtaining the majority shareholding. The remainder, more than 220 million, has gone directly to the club. First, with the first capital increase of 75 million in 2016. Following the Chinese government's ban, the two subsequent increases (50 million in 2019 and 38 million in 2021), as well as the one planned for this summer, come through the capitalization of participating loans (converting debt into equity). But how has it managed to circumvent Chinese government regulations, which since 2018 explicitly prohibit Chinese companies from exporting capital in sectors like soccer?

Rastar's Hong Kong subsidiary saves Espanyol

The mechanisms Rastar Group has found to continue providing liquidity to Espanyol demonstrate the group's intention not to abandon the club. In the case of the second and third capital increases, the money did not come from China, but had already entered the club in the form of a loan before the regulatory change. As ARA already explained in 2022With no room to contribute more money from abroad through new capital increases, the Chinese holding company has made do with it in recent years through a small legal loophole, which has ended up being a lifeline for Espanyol: Rastar's branch in Hong Kong. There, the company accumulated capital from exports or sales of the video game division and sent part of the money it invoiced to Barcelona.

Through small monthly loans, which could reach up to a million euros, the Asian company has been accumulating a line of credit that has given Espanyol cash with more advantageous economic conditions than those offered by the market. In other words, the Rastar Group has been providing the liquidity that other clubs would have requested from financial institutions by using audiovisual rights as collateral with these small loans. Espanyol currently has a debt of around 52 million with its parent company, so once it capitalizes the aforementioned 38 million—the maximum that La Liga allows it to compute this summer regarding the salary cap—it will still owe around 14 million. A figure that could increase again in the future, if the club's treasury so requests, and that.

Espanyol will be able to benefit this summer from the latest flexibility announced by La Liga, which allows capital contributions to clubs that meet certain financial sustainability requirements to be spread over two years—and not four. The club has survived in recent years thanks to Rastar's contributions, but this mechanism is not infinite: the ownership's intention is for the club to be self-sufficient. And to achieve this, it needs to consolidate its position in the First Division and generate capital gains through transfers. This summer it will be Joan Garcia's turn, wanted by Barça and major Premier League clubs.