December 18 – AC Milan’s troubles on and off the pitch have taken a massive hit after UEFA rejected a request to waive Financial Fair Play (FFP) rules, saying they remain unconvinced about the club’s Chinese backers.
AC Milan is 99% owned by a Luxembourg-based vehicle, Rossoneri Sport Investment Lux, which is controlled by Chinese entrepreneur Li Yonghong. He completed the deal only after a protracted negotiation with former owner Silvio Berlusconi’s holding company as he struggled to raise the €740 million to complete the acquisition. After finally being sold last summer to Yonghong’s investment group, more than €300 million was spent on new players by the seven-time European champions.
Under UEFA regulations, any team that spends more than its generated revenue faces possible sanctions. However teams are able to ask for a waiver to FFP rules under a so-called ‘voluntary agreement’ scheme.
Milan have incurred losses of €255 million in the past three seasons – significantly more than the €30 million million allowed – and last month a Milan delegation reportedly travelled to UEFA headquarters to explain the current business plan.
But UEFA were clearly unimpressed.
“There are still uncertainties in relation to the financing of the loans to be paid back in October 2018 and the financial guarantees provided by the main shareholder,” UEFA said in a statement.
“AC Milan will continue to be subject to the ongoing monitoring process and the situation will be assessed again in the first months of 2018,” it added.
In September AC Milan CEO Marco Fassone suggested the Chinese owners plan to invest in a new stadium and could eventually list the team on a stock market. The club has been desperately looking for new investors to take it forward.
Yonghong funded part of the buyout the club with a $360 million loan from venture capitalists Elliott Management who have a track record of lending to failing companies before acquiring them fully and selling off their assets.
That loan has an 11.5% interest rate, and requires AC Milan to repay $418 million by October 2018 or risk defaulting. At that point Elliott could take control of the company.
Despite their summer outlay, Milan currently sit in seventh in Serie A and their miserable season hit a new low when they slumped to a 3-0 loss at struggling Verona on Sunday. With form deteriorating and European football with it, the financial issues become even more acute.
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