Elliott Advisors (UK) Limited has officially taken over control of AC Milan, as Yonghong Li defaulted on a capital increase payment of around €32 million to the hedge fund.
Li needed a €303 million loan (plus interest) from Elliott to buy the club last spring from Silvio Berlusconi for €740 million. The management group confirmed that ownership had been transferred to them from the Chinese businessman on Tuesday, and said it would invest €50 million in capital to help stabilize the club.
A statement from the Corporation said: “Ownership and control of the holding company that owns AC Milan has today been transferred to funds advised by Elliott Advisors (UK) Limited (“Elliott”). This transfer has occurred as a result of steps taken to enforce Elliott’s security interests after the previous owner of AC Milan defaulted on its debt obligations to Elliott.”
“Having assumed control, Elliott’s vision for AC Milan is straightforward: to create financial stability and establish sound management; to achieve long-term success for AC Milan by focusing on the fundamentals and ensuring that the club is well-capitalized; and to run a sustainable operating model that respects UEFA Financial Fair Play regulations.”
“Elliott fully appreciates the challenge and responsibility that ownership of this great institution entails. Elliott is pleased not only to support the club during this difficult time, but also by the challenge of achieving ambitious objectives in the future via the on-field success of coach Gattuso and his players.”
“As first measures, Elliott intends to inject €50 million of equity capital to stabilize the club’s finances, and plans to inject further capital over time to continue to fund AC Milan’s transformation.”
Paul Singer, Founder, Co-CEO and Co-CIO of Elliott, also said in the statement, “Financial support, stability, and proper oversight are necessary prerequisites for on-field success and a world-class fan experience. Elliott looks forward to the challenge of realising the club’s potential and returning the club to the pantheon of top European football clubs where it rightly belongs. Elliott also strongly believes in the value-creation opportunity at AC Milan.”
There is a lot to unpack here. First of all, this means that Elliott owns Milan, not Yonghong Li. After defaulting on his loans, and not selling the club to someone who could pay off the debt, Elliott is in control of Milan and its assets.
Fortunately for Milan, it does not appear that the management fund intends to sell Milan and each of its assets to make its money back (also known as the doom and gloom scenario). Rather, Elliott’s statement indicates it will inject money into the club to get the finances in order, as well as take a longer-term look at the club for financial stability and a sustainable business model. Clearly, that is something that Milan’s previous ownership group lacked, indicated partially by the fact that Elliott is saying that in the first place, as well as what UEFA’s reasoning was for banning Milan from the Europa League.
It appears that Elliott will keep hold of Milan instead of immediately flipping the club in a sale to get its money back, as there are reports that Elliott will assemble a board of directors, including a possible change at CEO (Fassone) and Sporting Director (Mirabelli). What Elliott wants to do is make Milan sustainable and stable, as Milan has continued to lose money over the years. The first step for that is the €50 million, and the other investment Elliott hints at. Once Milan is better on the field and as a business, it will bring in more capital. That makes the club more valuable, which means Elliott could then hang onto the club in a state of stability, or sell the club and get even more money for it than they would now.
Overall, although this is not the ownership that Milan fans may have envisioned a year ago, this may be a positive step. Elliott is a group that appears to have a clear plan for Milan, and a clear vision for what they want it to be. That is a step in the right direction for a club who just had an owner default on a massive loan, spent hundreds of millions a year ago for a squad that finished sixth in the league, and just got banned from European competition for a year. Yonghong Li, after defaulting, is out of the picture, as is the instability and question marks that came with him.
We may have said this last season, but this is the start of a new chapter for Milan, and hopefully it will be a bright, better chapter that gets Milan back “to the pantheon of top European football clubs where it rightly belongs.”
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