In 2004, Borussia Dortmund needed a €2m loan from Bayern Munich
just to help pay their players’ wages. It was a remarkable situation.
Firstly because of who was giving the help, but secondly because – today – Borussia
Dortmund are a model of sensible investment and one of the better run clubs in Europe.
So how did they almost end reaching the point of near-ruin?
In 1997, Dortmund summited the European game.
Under Ottmar Hitzfeld, they had won the Bundesliga in 1995 and 1996 and, most memorably, via goals
from Karl-Heinz Riedle and Lars Ricken, they beat Juventus in the Champions League final of 1997.
It was an era backed by aggressive spending and generous wages, though. Matthas Sammer had
been signed from Inter Milan for £3.8m in 1992, Riedle had arrived from Lazio for £4m in 1993,
Andreas Moller returned to Germany from Juventus for another £4m in 1994, and Heiko Herrlich joined
from Borussia Monchengladbach in 1995. All four deals established new Bundesliga transfer records.
On reflection, the irony of Ricken, an academy product, scoring his famous goal against Juventus
and becoming emblematic of that triumph, is that one of Dortmund’s problems during that era was
their failure to produce homegrown players. He was one of very few graduates during the 90s,
with the club instead buying their quality off-the-rack to ensure the team’s evolution.
As a result, in the years after winning the European Cup,
and under the leadership of president Gerd Niebaum and business manager Michael Meier,
Dortmund spent extravagantly to capitalise on, and sustain their success.
£13.5m went in 1998, including on Bachirou Salou,
Dede and Jens Lehmann. A vast £24m was spent the year after in recruiting, among others,
Christian Worns (£6m), Viktor Ikpeba (£5.4m), Evanilson (£5.9m) and Fredi Bobic (£5m). And
the club would then break the German transfer record twice more in successive summers. First for
Tomas Rosicky (£13m) in 2000, then for Brazilian forward Amoroso the year after (£23m). All told,
between 1998 and 2001, in addition to many player contracts renegotiated in light of success,
Dortmund had spent in excess of £170m and recouped just £37.3m in sales.
There were other expenses too. The club also attempted to capitalise on their domestic
success by expanding the westfalenstadion. Most grounds in German were still owned
by regional governments at the time and depended on public money for redevelopment.
But, in the first case of privately financed stadium development in German football,
additional tiers were added to the east and west stands after winning the Bundesliga in 1995,
at a cost of 60m DM. And after capturing the European Cup, the southern and northern ends
of the ground were also expanded for a further 40m DM, taking the ground’s capacity to nearly 69,000.
All of which was fine, of course, but only if the club’s success on the pitch continued,
title success became the norm,
and Champions League qualification – and its revenue – was guaranteed each year.
It didn’t. After six years in charge, Ottmar Hitzfeld stepped aside after lifting the
European Cup and became director of football, and that preceded a tumultuous period of change
and flux. Dortmund were managed by five different coaches between 1997
and 2000 (Nevio Scala, Michael Skibbe, Bernd Krauss, Udo Lattek, Matthias Sammer), and
they wouldn’t re-qualify for the Champions League again until 2002,
when Bayer Leverkusen’s collapse handed them an unlikely Bundesliga.
It was a strange period. In his book, Building the Yellow Wall,
Uli Hesse describes a changing attitude in the Westafalenstadion,
and a creeping arrogance at odds with Dortmund’s People’s Club reputation.
Among the squad, too, fractures and factions began to grow in the late 1990s – during more
divided moments, players who had joined the club from Serie A teams would reportedly speak Italian
to each other on the training ground, rather than German, as egos and agendas began to clash.
As perilous as Dortmund’s financial situation became during that period, it was actually
more complex than it ever appeared. In an attempt to increase short term revenues,
Niebaum and Meier had – in the words of The Athletic’s Rafael Honigstein – “used every
trick in the book to keep the club afloat and hide the true extent of the crisis.”
Those other, sometimes curious details, included selling the stadium to an investment fund in
a hazardous sale-and-leaseback deal. It was a scheme designed to pay for another costly upgrade.
By filling in the Westfalenstadion’s corners, it was hoped that it would become a profitable host
for games during the 2006 World Cup, and the €75m sale was the club’s way of financing the project.
In an act of part-creativity, part-hubris, they had also attempted to cut out the middle-man of
kit supply by launching their own sportswear company. It too, however, would be sold and
leased back at considerable cost and, as part of the same agreement, the rights to the club badge
and name was also vended. When that detail was finally revealed in 2005,
it was a scandal that drew a thousand-strong supporter protest before a game with Bochum.
And, in another issue which came to light years later,
it was revealed that they had received a €15m loan from a property magnate named Albert Sahle
and that it had been secured against the transfer rights of three players, including Tomas Rosicky.
Other factors, sometimes outside of Dortmund’s control,
also contributed to their financial demise.
In October 2000, they became the first German club to profit from new legislation
which allowed sports clubs to run their football arms as PLCs, selling an initial 13.5m shares
and earning around £95m. However, in 2002 German media mogul Leo Kirch
was declared bankrupt and his Premiere channel, a major Bundesliga rights holder,
fell into insolvency, leaving holes in the accounts of clubs all over Germany.
For Dortmund, an unlikely Bundesliga champion in 2002, the worst was still to come. They
would finish third in 2003 and be eliminated in a qualifying playoff ahead of the Champions League
group stage. Moreover, they would suffer early elimination after tumbling into the Europa League
and suffer another major loss of revenue – probably as much as €30m – in the process.
So, while the most famous anecdote of the episode is, of course, that Bayern Munich loan in 2004,
that €2m was just a drop in the ocean of such grave dysfunction. In October 2004,
the extent of the turmoil was revealed: despite the issuing and sale of new shares – and the
devaluing of the share price as a result - the club reported a six-month loss of
nearly €70m and a debt of nearly €120m. Niebaum would resign; the club badge and
name scandal did for him, rather than the debt. He was replaced by Hans-Joachim Watzke, then
the parent club’s treasurer, in February 2005. Watzke is still CEO of Borussia Dortmund today
and he oversees a very different sort of club. In those first few months, however,
his role was to construct and sell a recovery package to the more than sixty creditors,
including the hundreds-strong investment group that owned the club’s stadium.
That’s the beginning of a different story. The one about Jurgen Klopp, his heavy metal football
and a journey which would end with the Bundesliga title again and another European Cup Final. But it
was very close to not happening. Had the club’s creditors not been convinced to accept the
recovery plan and the staggered repayment of their debts, Borussia Dortmund – who flew far
too close to the sun and lived well beyond their means - would not exist in their current form.