Steaming Over Suning's loss of "Inter": mountains of debt drive change in ownership
Struggling financially yet thriving on the field: Unveiling Inter's route to Champions League semi-finals amidst mounting debts
In the heart of Italian football, "Inter" clinched their 20th championship last May, sparking a sea of black and blue celebrations. Yet, the festivities were soured as the club changed hands, with Asian retail titan Suning forced to hand over control to American investment firm Oaktree Capital Management due to ballooning debts.
Suning, led by billionaire Steven Zhang, had ruled the three-time European Cup champions since 2016, shelling out €800 million in the club during his tenure, according to La Repubblica. However, the devastating impact of the pandemic left Suning scrambling for a €295 million emergency loan from Oaktree, which grew to €395 million over three years. Even reaching the 2023 Champions League final didn't salvage the situation.
Tired of the financial struggles and lacking cooperation from Oaktree, Zhang lamented, "For several months leading up to the expiration of the credit line with Oaktree, we did everything possible to find a friendly solution with our partner, including offering the creditor multiple options for full and immediate financial return. Unfortunately, all our efforts were thwarted by legal threats and a lack of significant cooperation from Oaktree. Such behavior creates a risky situation for the club, which could seriously threaten its stability."
Billionaire Engulfed by Bankruptcies: The Fall of Zhang and Suning
Zhang's fortune was built on retail success, but his questionable investments in Evergrande's stock (collapsed with a debt of $300 billion in 2021) and other faltering projects led to Suning's downfall. By the start of this year, the company declared bankruptcy.
Inter and Milan: Twin Clubs Tangled in Financial Woes
Sharing more than just the San Siro stadium, Inter and Milan find themselves in similar circumstances as a result of shifting ownership. In 2018, Chinese businessman Li Yonghong failed to repay a €32 million debt to Elliott Management. Four years later, Elliott sold Milan to RedBird Capital Partners for €1.2 billion, while Oaktree aims to orchestrate a similar deal for Inter, once they've managed to improve the club's financial stability.
Debt in Italian Football: The Elephant in the Room
Italian football clubs, including Inter, struggle under the weight of staggering debts totaling €3.2 billion. Apart from Juventus (€638.9 million), Roma (€636.3 million), Milan (€324 million), Lazio (€282.7 million), Napoli (€242.5 million), Atalanta (€181.1 million), and Bologna (€140.1 million), Inter's debt stands at €734.8 million, as of June 30, 2024, a slight decrease from the previous year.
Yet, Italian clubs pale in comparison to other leading European teams, with Inter ranking just 14th with €391 million in revenues during the 2023/24 season. Inter's major revenue sources include TV broadcasting deals (€198 million), commercial agreements (€112 million), and matchday revenues (€81 million). In contrast, Real Madrid topped the charts with over €1 billion in the same period.
The High Cost of Stardom: Inter's Hefty Wage Bill
One of Inter's main challenges is their highest wage bill in Serie A at €206 million, encompassing salaries for the first team players, youth divisions, coaching staff, and technical personnel. "Juventus" (€200 million), "Milan" (€163 million), "Roma" (€160 million), and "Atalanta" (€106 million) follow closely. The leading candidate for the 2024 scudetto, Napoli, currently spends €104 million on wages.
Climbing Out of the Abyss: Strategy to Repay Debts
By 2027, Inter's new owners, led by Oaktree Capital Management, aim to pay off a significant portion of the club's €403.9 million debt. The value of Inter's squad, compiled by Football Benchmark, ranks highest in Italy at €709 million, surpassing Milan (€684 million) and Juventus (€647 million).
Inter has plans to scale back squad costs, but this hasn't been too successful so far, with the champions spending €186 million on wages during the 2023/24 season. The team's highest earner, captain and main striker, Lautaro Martinez (€16.6 million per year), is followed closely by midfielders Nicolò Barella (€12 million), Hakan Çalhanoğlu (€11.1 million), and defender Alessandro Bastoni (€10.1 million).
To rejuvenate the oldest team in Serie A (29.1 years), the club will need to offload some older players, such as Yann Sommer (36), Henrik Mkhitaryan (36), and Francesco Acerbi (37), and focus on investing in younger talent at more affordable prices during the summer transfer window.
A New Dawn: Future Plans for Inter
"In recent years, we've invested little in the squad, signing free agents. We have plans to return to big investments, but this doesn't mean replacing 12 players. Primarily, it means rejuvenating the squad, which is achieved through investments. Oaktree has given us this opportunity. We also plan to create a U-23 team that will compete in Serie C," noted Giuseppe Marotta, Inter's general director, to La Stampa.
The passage out of the financial crisis might be eased by Inter's impressive performance in the 2023/24 Champions League, reaching the semi-finals and pocketing €118.1 million. However, the majority of progress in paying off debt still hinges upon Oaktree's comprehensive repayment plan, which outlines closure of the €403.9 million bond debt by February 9, 2027.
Expert Analysis
Oaktree's strategy for Inter's debt repayment remains somewhat unclear, as specific details have yet to be disclosed. However, their broader financial approach typically revolves around managing risk while maximizing investment returns. Perhaps they will focus on improving Inter's financial health through strategic management and restructuring options to eventually sell the club for a substantial profit, estimated to be between €2-2.5 billion.
- In the realm of European football, the Asian retail titan Suning, known for ruling the three-time European Cup champions Inter, faced a significant change as they were forced to hand over control to American investment firm Oaktree Capital Management due to escalating debts.
- The explosive growth of Fintech, a new industry, has been a topic of interest in banking and insurance circles, as it seeks to revolutionize traditional methods of finance and investing, much like how Real-estate and sports sectors have been disrupted by similar technologies.
- The stock market, driven by the investments of numerous players, witnessed a surge following the announcement of a potential takeover of football giants Inter and Milan by renowned firms like RedBird Capital Partners and Oaktree Capital Management.
- The debilitating impact of the pandemic further compounded the financial burdens of these sports entities, leading teams like Inter and Milan to resort to emergency loans, a trend not uncommon in the business world.
- Meanwhile, European leagues like the Champions League and the English Premier League, akin to the stock market, provide lucrative revenue streams for clubs through television broadcasting deals, sponsorships, and matchday revenues, much like how stocks generate returns for investors.
- As football teams navigate through this financially challenging landscape, they must implement strategic measures to rejuvenate their squads, invest in young talent, and offload older, high-earning players, all while striving to retain their positions at the top of their respective leagues, much like how savvy investors focus on maximizing returns while minimizing risks.
