Oaktree’s €395M Inter Milan Takeover Highlights Private Debt Risks in Sport

Key Takeaway

• Oaktree Capital has taken control of Inter Milan after Suning failed to repay a €400 million loan, now totaling €395 million.
• Oaktree aims to ensure financial and operational stability for Inter Milan, with no immediate plans to sell the club.
• A board restructuring is expected, focusing on integrating more Italian and European members to strengthen community ties.

Oaktree Seizes Control of Inter Milan

Oaktree Capital, a Los Angeles-based investment firm, has taken control of Inter Milan after the club's Chinese owners, Suning, failed to repay a €400 million loan. The loan, initially provided by Oaktree in 2021 to help stabilize the club's finances during the pandemic, had an annual interest rate of over 12%, increasing the outstanding amount to approximately €395 million. Oaktree, known for its distressed debt investments, announced on Wednesday that it had "assumed ownership" of the Serie A champions.

Steven Zhang, the 32-year-old president of Inter Milan and son of Suning's founder, accused Oaktree of undermining efforts to find an amicable solution. Zhang warned that Oaktree's actions could jeopardize the club's stability. Despite attempts to refinance the loan with US bond giant Pimco, Suning was unable to secure a deal before the loan's maturity. A person close to Oaktree stated that Suning had "plenty of time" to refinance and that seizing the club was not Oaktree's "base plan," but necessary to protect their investment.

Financial and Operational Stability

Alejandro Cano, managing director and co-head of Europe for Oaktree’s Global Opportunities strategy, emphasized that Oaktree's initial focus would be on ensuring "operational and financial stability" for Inter Milan. The club recently won the Serie A title and was the runner-up in the UEFA Champions League last year. Cano stated, "We are committed to the long-term success of the Nerazzurri and believe our ambitions for the Club are united with those of its passionate fans in Italy and around the world."

Oaktree had anticipated that Suning would sell the club before the loan reached maturity and structured the transaction to benefit financially from a sale. However, Suning, despite working with advisers Raine Group and Goldman Sachs for at least 18 months, failed to find a buyer. A person close to Oaktree mentioned that the group is "in no rush to sell the club" and plans to invest time and effort into its management.

Board Restructuring and Future Plans

A shake-up of Inter Milan's board is expected, with plans to bring in more Italian and European members. The person close to Oaktree highlighted the opportunity to connect with the community, institutions, and companies around Milan. Oaktree's involvement in Inter Milan marks the first time the investment firm has owned a major football club, although it has previously taken over troubled French side Stade Malherbe Caen in 2020 and exited its stake later.

Oaktree co-founder Steve Kaplan is also an investor in Welsh team Swansea City. The firm has a history of investing in distressed assets, including helping a Chilean airline emerge from bankruptcy and supporting the heavily indebted business empire of an Indian commodities tycoon. Two years ago, Oaktree seized a vast plot of land in Hong Kong from Chinese property developer Evergrande.

Street Views

• A person close to Oaktree (Neutral on Inter Milan):

  "By taking over Inter Milan, it was protecting the investment of its limited partners."