Recently, AC Milan held a shareholders meeting with the new owners as well as everyone still on board from the previous regime. These are the things they discussed.
Marco Fassone is a man with clear ideas and great predisposition to dialogue. The current CEO of il Diavolo attended the shareholders meeting at Casa Milan, outlining projects and strategies for the new Chinese-owned property.
The phrase that captured everyone’s attentions was: “In the coming year we will have no outstanding balance, even though we will spend big amounts to strengthen the team.”
Music to the ears of millions of fans: Milan has moved, is moving and will continue to move towards a big return. Fassone also talked about the stadium: “I know very well, how to run a club owned stadium.”
Fassone has already taken care of the launch of the Juventus Stadium, and also focused on the new Chinese company, AC Milan China, which is under preparation and will develop merchandising and commercial partnerships in China.
The CEO also clarified the aspects of club debt that “remains under control”, a very important detail at this historic moment.
The debt with the American fund Elliott; a loan with strong interest rates to be returned within 18 months. The strategy is clear: Rossoneri Luxembourg, the owner of AC Milan, has contracted €180million to reach the closing. When signed, the new property immediately covered Fininvest’s ordinary operations as of December 31, 2016, and extinguished the bank debt previously contracted by the company, amounting to €73million.
They now represent the first of the two lines of debt. That plus the other line of about €50million, a budget for future investments, which in total makes €123million, the debt with Elliott.
How will Milan cover this debt? With two bonds of €70m and €50m issued by a financial institution on the stock market in Vienna that will be collected by Elliott to cover all expenses. This explains the debt mechanism with the US fund, which actually buys Milan’s debt in the form of bonds. And potentially, to speculate, it can resell it to prospective buyers and get a further interest by playing on rates (starting from 7.7%).
Today’s assembly approved two more important measures. A 60 million euro increase in capital demanded and obtained by new Chinese owners, and another €60 million increase has already been deliberated.
It is a clear sign that the Chinese Milan wants to invest and will do so, always keeping under control the debtor situation. If the voluntary agreement with UEFA is approved, (a response from UEFA is expected in the coming days) Milan will have to revert back to the permissible parameters by 2021.
The capital of AC Milan, which is currently €24million, as a budget, with these two increases going up, both would have to be leveraged at €144million for the money that will be used to cover the management expenses of the club.
AC MILAN CHINA
How will Milan find the money to cover it? Fassone also clarified this for the shareholders. On the horizon there is AC Milan China that is about to materialize. The new company will see fruition in China most likely starting in July.
It will be a branch of Chinese management and composition and will be a strategic asset for the club because there are important trade agreements and a shared plan with the People’s Republic led by Xi Jinping. In fact, the Chinese state will allow Milan to bring it’s football know-how to football schools and put their facilities at disposal of the club via Aldo Rossi.
This in turn will generate indirect revenue, because it will aim to sign business agreements with big companies by sponsoring this plan. For example, Adidas could sign an agreement with Milan and secure its technical material to all AC Milan football schools in China. The estimated goal is to generate revenue that covers 25% of current club revenues: if the revenue is 230 million from the 2016 budget, the turnover of AC Milan China should reach 60 million euros.
Milan will do business in China and will immediately increase its turnover and recover from debt by adjusting the budget over the years.
The stadium is an additional avenue of business for the Chinese Milan. However, it is not said if the stadium is a new stadium or San Siro revised and remodeled as if it were a stadium owned in agreement with Inter.
Members of the assembly have also been given resumes of all the members of the board. So now we know the financial background of Yonghong Li is as well as his right hand man, Han Li. One revelation was on the key figure of the whole operation, Lu Bo. The general director of the Haixia state-owned venture is the investment manager of the fund and is fully involved in the financial plans of the SDIC (State Development Investment Corporation), the branch of the Chinese state which is about to sign wide-ranging strategic agreements With AC Milan China.
This article was originally transcribed in Italian by renowned journalist Pasquale Campopiano.