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Milan’s Imminent Financial Implosion: Why Milan Must Make the Champions League

Milan may, inadvertently, drown itself in debt.

AC Milan v Juventus - Serie A Photo by Marco Luzzani/Getty Images

On November 9th, Milan was scheduled to meet with executives of UEFA over their financial fair play agreement. After spending around 220 million euros on players, Milan will have to propose a plan to pay back their debts.

To reimburse the dues, Milan needs to make the Champions League. There need to be no excuses. There needs to be no maybes or buts. If Milan does not get their act together, meaning if they do not start consistently winning games, not only will Milan's ever-weakening reputation take a blow but, more importantly, Milan could have a financial implosion by not gaining any significant revenue.

Again, let us not forget that Milan spent upwards of 200 million euros on players from Leonardo Bonnuci to André Silva. Part of this money didn’t magically appear in Li Yonghong’s, Milan’s new owner, pocket. Indeed, the acquisition by the Chinese-led consortium nearly fell apart until the US private equity fund “Elliott” agreed to hand around 308 million euros to not only invest in players but also finalize the takeover with Berlusconi. These loans currently have an interest rate of 10% and are expected to be repaid by October 18th of next year, but will be restructured. Either way, and in other words, Milan needs to make a lot of money, fast.

One of the most foreseeable ways to do this is by making the Champions League. However, currently, Milan is underperforming. The Rossoneri sit in 7th place with 19 points, a far cry from Lazio’s 4th place positioning with 28 points.

If Milan continues to underperform and do not make the Champions League, the Rossoneri will not receive the subsequent influx of cash from TV rights and sponsorships that naturally follow a Champions League finish. Considering Milan’s financial distress, this outcome is, blatantly, not an option. Milan would feel the repercussions of failing to make the Champions League for the next five or six years as they would be forced to sell off assets (meaning players) to repay the hedge fund.

This potentially imminent financial implosion could permanently keep Milan as a midlevel team.

Seems far-fetched? Take Leeds United for example. In 2001, the club played in the Champions League semifinals. Today, the club is in the Championship — the league below the Premier League. Why? A former Leeds United Chairman took out massive loans which was supposed to propel Leeds United to make the Champions League. But after the club failed to make the Champions League and, thus, gain revenue, they started selling their players. From then on, they went through a downward spiral and never recovered. Take a look at Portsmouth as well.

This, unfortunately, could happen to Milan. Unless, ofcourse, they make the Champions League. Milan’s whole future could be dependent on their form this season.