On the face of it, things don't get much better for Galatasary fans. They have a team of top stars, are through to the last 8 of the Champions League and have now been drawn against Real Madrid - life is certainly sweet for the Turkish champions. However, the club has spent heavily and recent announcements from the club confirm the club has some serious, immediate problems.

Club President Aysal recently revealed that the club is teetering on the edge of bankruptcy with total debt of $328m. Worryingly, the club has $78m of short-term debt. Aysal explained that the club is financially exposed and that if anyone made a petition to wind up the club, it might prove successful. In a recent interview, he also advised that he would not have taken the job as President if he had known how bad things really were!

Galatasaray have spent heavily on an all-out assault on the Champions League - they are aiming to break into the top-tier of European football on a permanent basis. Just inside the top 30 in the Delloitte Money League, there is a belief that if the club can become a fixture in the top footballing tier of Europe, the commercial revenue will follow. The club have been paying high wages in pursuit of on-field success - January transfer window signings included Drogba (E4m a year and the club picking up his tax-bill) and Sneider (a deal that will cost the club around £22m in fees and wages over the three year deal). The players join established stars such as Eboue and Elmander.

Galatasaray don't operate on a 'benefactor model' like Man City or Chelsea but are part of Public Limited Company with shareholders. When it needs an injection of cash, the company needs to create more shares. In 2011 the company created new shares, raising around $50m. This was a highly controversial move, not least because it diluted the value of the investments of the existing shareholders (the chairman of the financial regulators, the Capital Markets Board, who allowed the share issue, was subsequently sacked).

After further heavy spending, the club now needs more capital. The club recently announced that it intended to raise $96m via a new share issue – the purchasers would be Russian bank VTB. Worryingly for the club, the proposed share issue has been blocked by Turkish regulators. The Capital Markets Board has ruled that making a further share issues would have a serious impact on existing shareholders and cannot be supported. An action by 16 private investors has also been launched aimed at permanently preventing the share issue. To make things worse for the club, in February the Capital Markets Board fined Galatasaray £250k for misleading the regulator and the public over player contracts in 2010. The regulator looks to be standing firm - currently the share issue is going nowhere. Politics and football are closely linked in Turkey and there remains the possibility that the club President may have somewhat overstated the threat of bankruptcy to help drive through the contentious share issue.

Club President Aysal announced that in addition to clearing part of the debt, some of the funds from the proposed share issue are required to meet FFP requirements. Under FFP rules, any new losses need to be covered by injections of equity from the club owners. For Galatasaray, the owners are the shareholders. Although we don’t yet know the size of the club losses over the 2011/12 and 2012/13 season, the President’s announcement suggests that a significant injection of cash is needed by the end of 2013 just to meet FFP requirements. Without the injection of equity from shareholders to cover the losses over the first Monitoring Period (2011/12 and 2012/ 13 ), Galatasary would fail the FFP test.