FEATURE | Why have Lyon been relegated to Ligue 2 and how could Crystal Palace offer them a lifeline? | OneFootball

Although the dramatic consequences of Lyon’s problems have just come to fruition, the issues that have led to their relegation to Ligue 2 stem back further than recent years. OL have been relegated to the French second-tier by the Direction Nationale du Contrôle de Gestion (DNCG). The DNCG operates as French football’s financial watchdog, ensuring all teams comply with the budgetary and financial requirements to be run sustainably. Les Gones have been punished for that reason – a lack of financial sustainability.

This lack of financial sustainability pre-dates John Textor. To fully understand Lyon’s administrative demotion to the second tier of French football, you have to look at the ownership of the club under long-term owner and president Jean-Michel Aulas.

Unsustainable Management

Under Aulas’ 34-year reign as Les Gones’ president, there were many highs. From conquering France by winning 7 consecutive Ligue 1 titles to reaching the UEFA Champions League semi-finals twice, the former president is largely responsible for the club’s transformation into one of the powerhouses of French football. However, towards the end of his tenure, the cracks began to show.

In 2016, Lyon left their old stadium, Stade de Gérland, and moved to a new start of the art of facility in the east of the Roman city. Combined with a new 60,000 seater stadium and a brand new training centre, OL spent €600m during the move to the new site. Despite securing a title sponsorship with banking giants, Groupama, the investment was a considerable outlay and saw debts rise significantly. Additional investments into the surrounding areas on shopping centres, restaurants and the LDLC Arena saw other major investments from OL Groupe.

To secure the “sustainable” running of the club, Aulas sought to secure bridging loans to ensure that the club could remain competitive on the pitch, whilst enjoying the benefits of their new facilities. By the time the notorious president left his beloved club, debts had risen to an all-time high of €458m in June 2022, and there had been a notable regression in performances on the pitch, which is where the complications with the DNCG began.

Broken Promises

When the French football financial authority began to take stock of the unsustainable financial management of Lyon, a series of promises and statements were made to the body by Aulas to convince them that they would be able to recover debts quickly and dramatically improve the financial situation of the football club.

Promises were made, including generating €112m worth of player sales where he quoted overinflated prices for players, refinancing the stadium debt, and the sale of assets like OL Reign and OL Valléé. These financial plans were accepted by the DNCG, but by the time they were reviewed in 2023, it was clear they were not met.

For example, Aulas promised to sell Karl Toko-Ekambi for €20m. Upon review, the DNCG deemed this valuation unrealistic compared to market benchmarks. The Cameroonian international was valued at €8m by Transfermarkt at the time. He was eventually sold to Abha for €1.5m following a loan spell. These unfulfilled promises and a lack of transparency during the takeover involving Textor set Lyon on a dangerous slide.

Textor’s Turmoil

The announcement of Eagle Football Group taking majority control of Lyon was initially met with optimism when the takeover was completed. John Textor committed €86m of capital to support the takeover. However, this would be a mere splash in the ocean given the significance of the debts that hung over the Rhône club. There were debts amassing €300m when the takeover was completed, including €150m which Aulas failed to mention during takeover negotiations.

Following a fallout between Aulas and the American businessman, the Eagle Football Group CEO took complete control of the club, and one of his first actions was to secure the refinancing of the club’s core debts. A €385m debt restructuring deal was confirmed in December 2023, brokered by Goldman Sachs.  This development looked to be positive in securing the financial sustainability of the club, but the situation still worsened.

Asset Fire Sale

In a further bid to convince the DNCG, that Lyon could meet their budgetary requirements. Textor began a fire sale of assets hoping to raise enough capital before the latest meeting which confirmed their fate. OL Féminin was sold to Michelle Kang, OL Reign swiftly found a new owner, various units and outlets on the OL Vallée complex were sold and the LDLC Arena was also sold – facilities were being sold in quick succession as the club acted urgently to generate enough capital. Other cost-cutting measures included voluntary redundancies and €62m in player sales in the January transfer window. The asset sales proved fruitful and generated over €150m, but this still wasn’t enough.

Questionable Transfers

Despite being under financial pressure and placed under supervision by the DNCG, Lyon spent heavily in the transfer window last season. The club’s eventual outlay totalled €147.79m – an eye-watering total considering the financial situation of the club. This could have been overlooked perhaps if the transfer business ended up being good value for money and would benefit the club financially longer-term. However, just 12 months on, big question marks hang over several of the signings made.

OL broke their record transfer to sign Moussa Niakhaté from Nottingham Forest for €31.9m. The Frenchman found himself under fire and criticism for several mistakes last season, prompting scrutiny over the transfer fee. Additionally, Orel Mangala’s loan move from Forest was made permanent, but he would not play for Lyon come the end of the summer transfer window. The Belgian midfielder was loaned to Everton in another strange turn of events. Mangala cost €28.5m.

Textor authorised significant expenditure when financial restraint was needed and this has seen them punished.

European Disappointment

The final nail in the coffin for Lyon could have been their failure to qualify for the UEFA Champions League. Les Gones were in the driving seat in the UEFA Europa League quarter-finals against Manchester United before a late collapse saw a two-goal advantage slip in extra time. OL could have secured an additional €13.2m in prize money had they won the competition.

The UEFA Europa League wasn’t Lyon’s only failed attempt to qualify for Europe’s premier competition.  With 5 matches to go in Ligue 1, Les Gones looked serious contenders to book themselves a spot in the Champions League next term. However, with 3 losses in their final 5 league games, any hopes disappeared, and they were forced to settle for a spot in the Europa League again.

Qualifying for the Champions League would have banked Les Gones a minimum of €18.6m for just participating in the league phase, plus an additional €2.1m for every win recorded in the league phase. This extra cash would have allowed them to present a bigger budget for next season and convince the DNCG that there would be increased finance incoming due to participation in the competition.

The long-awaited meeting

The key stumbling block at the meeting was the number of financial transactions that had not yet been accounted for. OL’s financial budget included pending sales from Lyon’s sister club (Botafogo) and the pending sale of John Textor’s shares in Crystal Palace which are yet to receive Premier League approval.

A full breakdown of why the decision was made is not yet available, but initial signs point towards a series of claims being made which could not be guaranteed. The DNCG have seen promises broken before, and it appears that they were unwilling to let this happen again by rejecting claims of hypothetical revenue.

Lyon were confident of a positive outcome due to the capital raised through the sale of Rayan Cherki and the various assets that have been sold over recent months. Textor argued that these sales and an equity infusion of €83m improved the liquidity of the Ligue 1 club, leaving the club well funded for the 2025/26. The DNCG argued otherwise with OL Groupe’s consolidated debts amounting to above €540m in March, and the club reporting a loss of €177m, not offering the body enough assurance to avoid issuing a sanction.

A deepening crisis

The Rhône club now find themselves in a crisis they deeply wanted to avoid. Several bills have gone unpaid in recent months at the club and hunreds of employees have lost their jobs through redundancies as they looked to reduce their payroll costs. With OL relegated to Ligue 2, the situation is likely to worsen, with staff members said to be losing trust with Eagle Football Group due to the lack of transparency. The rhetoric issued to them has been one of confidence and reassurance, only for this to be contradicted on three occasions after the club met with the authorities.

A potential lifeline?

Premier League approval of John Textor’s sales in Crystal Palace could act as a potential lifeline for Lyon. The Rhône club still have the opportunity to appeal and confirmed their intention to do so after the sanction was issued. If this transaction is approved before the appeal takes place, Les Gones will be given a stronger foothold to state that the sale has been completed and the money can be seen in the accounts.

However, ARES, the American investment fund which Textor borrowed from to buy Lyon, have only agreed to set aside €40m to OL following the sale of the Premier League club’s shares to Woody Johnson. This is a figure which the DNCG were hoping to be higher. The American businessman may be hoping that he can get a further guarantee from the investment fund, but relations between the two parties have eroded due to the ongoing situation. Additionally, if the ARES group were to make an additional financial contribution, this could see them seize control of the general management of the club away from Textor.

Hope still exists for Lyon, with the opportunity to appeal, but with the club teetering on the edge, one more push could see another of French football’s giants buckle due to poor financial management.

GFFN | Liam Wraith