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AC Milan hit by debt problems

AC Milan have total debt of €300m which is similar to that of rivals Inter. However, the greater part of this debt carries an interest rate of 11 per cent and the rest is at 7.7 per cent. Inter Milan are paying 4.9 per cent on their debt. AS Roma carry a smaller debt at 7 per cent.

AC Milan is struggling to investors to refinance more than €300m in high interest loans it has from US hedge fund Elliott Management. If it is unable to refinance the debt by next October, Elliott Management will seize control. It is thought that they have a 50-50 chance of success. Uefa has voiced concerns about the club's financial situation.

Asset managers have typically been unwilling to lend to football clubs, due to the unpredictability of cash flows that can vary considerably depending on how a club does on the pitch.

Little-known Chinese investor Yunghong Li bought the club earlier this year for €740m from Silvio Berlusconi. The limited information about Mr Li's wealth is proving a barrier to AC Milan's efforts to refinance its debt.

Inter Milan, meanwhile, has issued a bond, the first public bond sale from a European club since Manchester United tapped the debt markets in 2010. Inter Milan is also now majority owned by a Chinese investor, but its owner, Suning, is a large publicly listed retail conglomerate.

The bond uses a 'waterfall' payment that ensures money is used to service debt before it is spent on the club. As a result, the bond was in demand and has been trading up in the secondary market. As well as paying off existing debts, the club has received a €82m cash infusion.

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