Elliott Management Corporation, the U.S. private hedge fund that provided a financing lifeline to rescue the deal to sell Milan to Yonghong Li, has secured ironclad guarantees to protect its investment.
Details within the documentation consulted by Calcio e Finanza have emerged since the reporting of Milan’s €74.9 million loss that ended Berlusconi’s era.
In the event the new owners are unable to repay their debt and fulfill their obligations, Elliott will become the de facto owner of Milan by repossessing all of the shares. This was a known fact.
What was unknown is the particulars of other guarantees Elliott has secured, ensuring an ironclad protection in the event of default.
Here are some examples of liens that have been reported:
- Lien on all assets on all AC Milan trademarks
- Lien on all intellectual property
- Lien on the revenue account of the Banca Popolare di Milano
- Lien on credits from various commercial contracts and sponsorships
- Lien on credits from media contracts
In addition to the liens, there are other guarantees stipulated such as:
- Acquisition of Milan’s archive of data, images, videos, etc
- Acquisition of 100% of Milan Entertainment Srl
- Acquisition of Milan Entertainment commercial and sponsorship contracts
Interestingly, the widely reported terms of the financing (interest rate of 11%, 18 month duration) was not mentioned on the financial statements. Yonghong Li has to figure out how to repay approximately €350M (capital plus interest) by October 2018.
If he does not repay his debt, Elliott will acquire Milan and execute all its guarantees like a regular bank would when someone defaults on their mortgage. The difference however is Elliott will not only take the house (Milan) but also the car, the furniture, and everything else it can get its hands on that has commercial value.
Elliott Management Corporation has a reputation of being a vulture fund, however by taking on risks that others have avoided the reward has to be great. The financing provided to Milan goes along their objectives of getting more involved with active equity investing.
Needless to say, new Milan CEO and Managing Director Marco Fassone has to work fast to ensure Milan increases its revenues in a short time frame to properly manage the large debt and reassure the fanbase that all is well.