Hedge Fund Billionaire Singer Takes Control Of AC Milan After Latest Chinese Default

Now that the great Chinese money-laundering M&A wave of 2016 is long forgotten, in some cases with tragic consequences such as Wednesday's freak death of HNA chairman Wang Jian, and the Chinese conglomerates and oligarchs who spent billions to fund acquisitionsin the US and  around the globe...

...are on the verge of bankruptcy or defaulting outright, it's time for their first-lien lenders to party as they are about to take over countless now-worthless equity tranches.

The latest such example is none other than infamous distressed investor, Elliott Management, whose founder Paul Singer once seized an Argentinian frigate, the ARA Libertad, in 2012 as part of his long-running debt dispute with the recently insolvent Latin American nation (which then went on to troll bond investors by selling 100 year bonds just a few years later).

And now, according to Bloomberg, Paul Singer is set to take full control of legendary Italian soccer club, AC Milan, after its shady Chinese owner, "businessman" Li Yonghong, failed to repay debt owed to Singer's Elliott Management by a Friday deadline, just one year after Li acquired the club.

What is perhaps most striking, is how modest the amount of money in dispute was: Li Yonghong was due to repay only €32 million of the more than €400 million ($469 million) of debt accumulated by the hedge fund, and less than 5% of Milan's purchase price.

As Bloomberg reminds us, Paul Singer’s hedge fund played a key role in allowing Li to conclude the €740 million purchase of Italy’s most successful football club at the international level, which was sold by Silvio Berlusconi’s investment company Fininvest at just the right time in April 2017 top-ticking China's M&A wave, by providing last-minute financing. Elliott then lent Li €303 million to complete the purchase "and provided a further €32 million to help the club resolve a dispute with soccer’s European governing body UEFA."

Meanwhile, Milan's troubles - now that it was owned by a largely unknown Chinese investor and whose funds in turn were sourced by the world's biggest "vulture hedge fund" - only grew and in May, UEFA said that the team "breached financial fair-play rules because of uncertainties about the team’s effort to refinance the loan provided by Elliott."  Because of this, AC Milan was banned from European competition.

But what we find most surprising is that Li was unable to kick the can indefinitely by coughing up a relatively modest €32MM, a fraction of the total purchase price, and an indication that behind every Chinese oligarch there is a financial black hole where money enters but never leaves.

That may also explain why the sale of AC Milan to Li was complicated until the very end:

The original investment group changed several times, and in September 2017 Bloomberg reported that it filed a false bank report during negotiations with Berlusconi’s company. Li denied the allegations.

But the biggest problem came to what has emerged as China's Achiles heel: cross border fund transfers, i.e. money laundering, which China cracked down in 2016 and 2017, following the unprecedented capital outflow surge that started in 2015 and drained China of billions in US Treasurys as it scrambled to defend the yuan:

the deal, originally scheduled to close in December 2016, also was delayed because the investment group lacked authorization to export funds from China. Regulators in China have been ramping up their scrutiny of outbound investments, with a particular focus on sports and entertainment.

Sensing the end was near, AC Milan hired Bank of America earlier in this year to refinance the team’s debt and according to Bloomberg, in recent weeks the club has attracted investors willing to buy controlling stakes, though no deals were secured.

Possible buyers included Italian-American media magnate Rocco Commisso and the Ricketts family, which owns the Chicago Cubs Major League Baseball team.

But how did Li emerge as the latest Chinese financial paper tiger? It turns out his exit plans were foiled by, what else, Chinese market turmoil. His original plan included IPOing the club on a Chinese stock exchange, and in a draft of the original fundraising materials, the Chinese investor group indicated the team’s value could multiply several times in the long term to reach €2.9 billion euros, rivaling Real Madrid and Manchester United, according to Bloomberg.

Those plans were indefinitely put on hold when potential investors fled, and instead Li had to use his personal wealth to help complete the deal and also pledged the team as a guarantee to secure financing from Elliott last year.

And now that Li can no longer afford to make even a nominal payment to Elliott, his equity stake is worthless which means that Paul Singer is now the proud owner of Italy's most iconic football club. One wonders how long until Elliott at least gets some free marketing out of the deal and its logo graces the shirts of Milan's players alongside that of the Emirates. A vulture, of course.

Comments

2banana Sat, 07/07/2018 - 09:37 Permalink

Argentina is in Latin America?

Who knew?

Also - since the "Trade/Tariff War" has started - the Chinese Stock Market is down 25%.  Add in 40:1 margins, lots of "rich" Chinese with cash flow problems now.

Croesus TeamDepends Sat, 07/07/2018 - 12:13 Permalink

Speaking of soccer, am I the only one who's disappointed by the last 3 WC matches? France, Belgium, and England are all at the semi-finals, and I was really hoping they'd all be out (Belgium, especially). I'm really hoping that whoever wins Russia-Croatia manages to win it all...

In reply to by TeamDepends

philipat powow Sat, 07/07/2018 - 21:09 Permalink

At least, like 96% of the world's population which is not in the US, they know to call it a "Football Club", which is a good start.

Note to US readers: Football was invented in England in the 19th century (like most popular global sports, including golf and tennis) and named football because it is played mostly using the FOOT. Certain other US games which usurped the name are played mostly with the HAND. So "Made for TV with advertising breaks that turn a one hour game into an eternity Handball" would be a more appropriate name?

In reply to by powow

Free This Croesus Sat, 07/07/2018 - 12:39 Permalink

I picked England to win it all right up front! They have not disappointed so far! Even though they are a socialist shit hole, they play as team...there is no "i" in team. Lookit, Messi, Renaldo and Naymar as brilliant as they are, are done!

Go England! France has a chance too, but I don't support their side at all. Russia is not bad either, and are the home side, They have a good striker, who was almost left off their side, but they do have a chance, a bit lumbering though. That is all I got at the moment.

Sic Semper Tyrannis

Oh, I have played all my life, since 5 years old, and am a student of the game.

In reply to by Croesus

Croesus Free This Sat, 07/07/2018 - 12:43 Permalink

"Even though they are a socialist shit hole" - EXACTLY why I really didn't want to see any of them this far along...especially Belgium.

Russia's done really well so far, but I am a fan of Modric, so I'm conflicted - I just hope whoever wins this match, takes it all.

Speaking of England, I really have to hand it to Jordan Pickford; he has done a terrific job.

In reply to by Free This

Free This Croesus Sat, 07/07/2018 - 13:14 Permalink

Agreed...Pickford is a top notch goalie, even though he doesn't look the part.

 

So has the coach, and he was a goat when he played! Vests are coming back in vogue because of his style though lol! I hope Russia wins it, it would be uplifted for that country, as they have been torn down a bit.

I still don't trust them though, not yet at least!

Sic Semper Tyrannis

In reply to by Croesus

Free This Mongoose Sat, 07/07/2018 - 13:18 Permalink

It's okay man, it is World Cup time! The beautiful game! I know, I know, we are all fags that play that game, eh? LOL

I do hate the way these professionals take to the floor at the slighest bump, shit when I played I ran right through the shit and scored goals that way, if not I usually had an assist, I refused to be a pussy!

Even 40 years after playing NCAA Div I soccer I am still in the record books!

Sic Semper Tyrannis

In reply to by Mongoose

DingleBarryObummer 2banana Sat, 07/07/2018 - 09:56 Permalink

the Chinese Stock Market is down 25%.

In that case, might as well go full balls

Donald J. Trump said he would favor a 45 percent tariff on Chinese exports to the United States, proposing the idea during a wide-ranging meeting with members of the editorial board of The New York Times - Jan 2016
https://www.nytimes.com/politics/first-draft/2016/01/07/donald-trump-sa…

In reply to by 2banana

Free This DingleBarryObummer Sat, 07/07/2018 - 10:06 Permalink

China ain't got shit but mal-investment and ghost cities! Too many plebes to feed and not much farmland - makes for a tinderbox. I say before anything happens bad here, China will be in flames!

Communism DOES NOT WORK! How they have managed to do this is because they took on some form of Capitalism, yet they are still centrally planned misfits!

They have no real free markets, never did! Hell no one writing on this board has experienced true Capitalism or free markets!

America is quasi-socialist now! Go back to FDR and Social Security to see the beginnings!

If we don't crush this communism here, we will be toast soon!

And for those who don't vote, if you don't stand for something, you will fall for anything - may the chains of Tyranny rest lightly on your shoulders! You throw away a RIGHT just like garbage, so you have no rights and you have no SAY! Morons!

Sic Semper Tyrannis

In reply to by DingleBarryObummer

Free This DingleBarryObummer Sat, 07/07/2018 - 10:19 Permalink

Shutter the illegal Fed. Does that help, I have said it on multiple occasions! Also the alphabet stazi agencies here! Look, I just gave you a two-fer.

You can keep the down arrow on me, I don't even look at them too much really. Sometimes, I like to have fun with them, beyond that, it your right to up or down me, I have zero control of that anyway.

Sic Semper Tyrannis

In reply to by DingleBarryObummer

Quantify Justin Case Sat, 07/07/2018 - 11:17 Permalink

Communism didn't create any. The ready built capitalist society of Hong Kong given to China via the British helped quite a bit. The commies still think they can micromanage the country however with their firewalls and massive trade surplus. Well they still have the firewalls anyway. Economy is about to go in the shitter. No one wants to make deals with a country that claims an entire ocean and can't be trusted. EU told them too go pound sand, whats Russia got to offer China? Their economy is a fraction of Europe's or the U.S. And they aren't buying many Chinese tv's or phones.

In reply to by Justin Case

107cicero Free This Sat, 07/07/2018 - 11:36 Permalink

Hey idiot brain China is NOT Communist.

Yes they have a Communist government but they are more capitalistic than the West.

No pensions, low tax, if labour has problems, like not getting paid,  govt. doesn't get involved.

And if someone is too corrupt,  be they a billionaire or a politician the govt.  shoots them or jails them.  In China Hillary, Obama, Mueller , Cheney, Blair would have been shot already.

You are about 30 years behind on your Chinese politico/economic knowledge!

In reply to by Free This

SoDamnMad Free This Sat, 07/07/2018 - 11:40 Permalink

I:m reading an article in MSM about Happy Village, China switching it's 2400 acres over and planting soybeans because of the tariff on American soybeans. I certainly hope you planted these long before the first of July if you hope to harvest them. And do you have equipment to harvest and process them not that 2400 will make any kind of a dent and feed many PIGS.

In reply to by Free This

nmewn DingleBarryObummer Sat, 07/07/2018 - 10:31 Permalink

Very good.

And in that process we can begin a parallel discussion track on the deleterious effects and perils of GSE's (government sponsored entities) which are really nothing more than cronyism between merchants and their respective .gov's at the expense of the people. 

A unique feature of Fascism/Communism/Socialism/Marxism in my opinion where, the state (and associated cronies) have their greedy little paws in every aspect of "the means of production" ;-)

In reply to by DingleBarryObummer

francis scott … Kayman Sat, 07/07/2018 - 11:04 Permalink

             "The U.S. can live well without China."

 

From what other country will they they get the cheap

crap that 80% of its citizens can't live without?  Who

else will convert their balance of trade surpluses into 

practically worthless US bonds?

 

Today the MSM devotes most of its lies and fake news 

to how bad the Chinese economy is; and how great the 

US economy is doing. 

 

Americans have always been patsies for propaganda. 

 

And today make their $21 trillion National Debt merely

a speed bump on the road to Nirvana, compared to all

the economic problems they hope and pray the Chinese

system is suffering from. 

In reply to by Kayman

William Dorritt LeftandRightareWrong Sat, 07/07/2018 - 13:00 Permalink

I guess the Commies in the Faculty and Admin won't be getting 7% pay increases this year and won't be able to expense their cost of participating in ANTIFA events.

University Commies are more equal than the rest of us for the past decade. Cut off the Govt funds to the Universities, it only goes to create more Marxists by ruining young minds.

In reply to by LeftandRightareWrong

nmewn Sat, 07/07/2018 - 09:43 Permalink

Its all some sorta massive financial plot to exploit overextended innocent Chi-Com businessmen in order to corner the markets in Italian soccer clubs and old Argentine sailing vessels!

Very clever ;-)

BritBob Sat, 07/07/2018 - 09:51 Permalink

Elliott Management, whose founder Paul Singer famously seized an Argentinian frigate, the ARA Libertad, in 2012 as part of his long-running debt dispute with the recently insolvent Latin American nation (which then went on to troll bond investors by selling 100 year bonds just 5 years later).

Singer did a good job with Argentina finally making them pay for their default. Cristina Kirchner dodged the reality and left Macri to pick up the pieces. Then Cristina Kirchner did and said a lot of silly things...

including calling the Falkland Islanders ''just''squatters and doubted that they had ''rights'' ?  She had this funny view on implanted populations. I guess we're all implanted at some time or other so the legislation had to start somewhere ...1949 - 

Falklands – Implanted Population:

https://www.academia.edu/30505159/Falklands_Implanted_Population

SmedleyButlersGhost Sat, 07/07/2018 - 09:52 Permalink

So a shady Chinese guy borrows money from a Jewish guy to over pay for a soccer team from an Italian fraudster in a plan to dump the thing for yet more money on a bunch of Chinese investors.

 

Sounds like a plan.