Oaktree bets on history repeating in Milan
An aggressive US investment firm. A Chinese owner struggling to meet debt payments. And an Italian football club steeped in history.
This week Inter Milan treated fans of football finance to a reboot of the 2018 saga in which Elliott Management became the owner of stadium roommates AC Milan.
A quick summary of the Inter situation. The club was acquired by Chinese electronics retailer Suning in 2016. When the pandemic ravaged Inter’s finances in 2021, the owners turned to Oaktree — a specialist in debt — to borrow €275mn. The three-year loan came with a 12 per cent interest payment, so when the debt came due for repayment this week, the figure had jumped to almost €400mn.
The Zhang family that controls Suning tried to refinance with Pimco, another big US debt investor. But Oaktree decided to exercise its right to seize the club instead, just weeks after it was crowned Serie A champion.
As the FT’s Lex column notes, the Inter story is just the latest sign of increased activity of debt investors in European football. Specialist funds have stepped in to offer expensive loans based on punchy valuations.
Elliott’s experience at Inter’s fierce rivals points to the potential for attractive returns from such a move. Elliott stepped in at AC Milan after its Chinese owner failed to pay interest on a €300mn acquisition loan. The fund installed its own management team, revamped the playing squad, and swiftly returned the club to the top of Serie A.
In 2022, it sold up in a €1.2bn deal with private equity firm RedBird Capital, but provided about half that sum in the form of vendor financing. Elliott’s return from the deal equated to around 15 per cent per annum of ownership, plus the ongoing interest payments of around 7 per cent from the vendor loan.
Meanwhile AC Milan has started making money, recording its first profits in over 20 years last season.
Los Angeles-based Oaktree had said previously it had no desire to own or run a professional football team — it has zero experience in the sector. The expectation was initially of a quick resale, but now there is talk of a boardroom shake-up.
“We are committed to the long-term success of the Nerazzurri and believe our ambitions for the club are united with those of its passionate fans in Italy and around the world,” Oaktree said this week.
With big debt, persistent losses, and a new stadium to build, Oaktree will have a lot to deal with if it decides to stick around in Milan. But it’s not hard to see why it might still be worth rolling the dice.