Yonghong Li must pay €32 million to American hedge fund Elliott Management, who lent him €303 million (plus interest) to help him buy the club from Silvio Berlusconi, in the latest installment in a capital increase (which he could not pay and Elliott had to step in), or he will lose the club by defaulting on the loan.
Li has to pay that €32 today, as reports say that he asked for an extension of the deadline from Elliott, who refused. If he does not come up with the money, that is the start of the defaulting process, and AC Milan will fall into Elliott’s control.
Meanwhile, the Chinese businessman has reportedly resumed talks with Rocco Commisso, owner of the New York Cosmos, who was previously in negotiations to buy a 70% stake in the club with a valuation of €500 million. Reports say that Li is in New York for face-to-face negotiations, while other reports say that Li has been talking to another mystery person (for months) for possible investment.
According to reports, Li intends to pay the €32 million and maintain control of the club, at least for now. Li clearly wants to keep control of the club, and the possibility of selling it, despite the uncertainty that he brings to the club.
The endgame for Li is simple: money. At this point in his ownership, he has come within 24 hours, at most, of losing the club to Elliott by defaulting on his loan. In that scenario, Li comes away with no money, in the red for the cash he bought the club for, and probably being investigated in some way for fraud. It is unclear how Li has been able to come up with some amounts of money but not others, and why there are consistently delays in payments (hint: it’s the same reason he needed to borrow money in the first place). But if Li is able to sell the club, to the Ricketts family, Commisso, or some mystery Asian investor, that person will pay the money to Elliott so long as they are majority owners. Li would not have to deal with the loan and would either still be involved in Milan, or would walk away with around €500 or so in his pocket.
In this scenario, Li either comes away with no money, or a lot of money. What would he prefer? He would obviously want to hang onto the club so that HE is the one that sells it to the next owner, instead of Elliott repossessing the club and being the ones to sell the club to Commisso or the Ricketts, likely for a lower amount of money. On that note, Elliott is also interested in one thing: money. The hedge fund will get their money one way or another. That money will either come from Li, or they will take the club away from an owner who cannot pay back a loan he took. Elliott will then sell the club to the highest bidder, likely either Ricketts or Commisso, and in the process will make back the money lent to Li plus interest, plus a profit (€303 million in the loan, €77 million in interest, and possibly €120 million in profit if the club if purchased for €500 million). In that case, Elliott is all set. They have their money, and the club has a new owner.
For Li, it is clear what the focus is. Keep the club by hanging on for dear life, and any chance of selling it and getting the money. The odd thing is that at this point, any leverage he has in negotiations with a potential buyer or with Elliott is gone. To Elliott, they do not want to wait anymore. To a new buyer, why would they follow every changed condition of Li, if he is just hours away from losing the club and any sake? If Li has no leverage left, why has the club not been sold already? One would think he would just take the money and ride away. But here we are, still waiting for a resolution after UEFA handed down a ban from European competition. That said, Li can WANT and INTEND to pay back Elliott their €32 million as much as he wants. If he does not today, Elliott get the club, and then the buyer will go through them.
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