Team Owners To Make Franchise Altering Financial Decisions

AC Milan

Rossoneri Sport Investment Lux acquired AC Milan in April for $905 million (Forbes valued team at $802 million), utilizing a $366 million bridge loan from Elliott Management to take control of the club and invest in high priced players. Now, with the loan coming due (and carrying a prohibitive interest rate), Li Yonghong and AC Milan are working to refinance the debt; though they just walked away from a proposed deal with Highbridge Capital, unable to come to terms on interest rates and the repayment period. If Rossoneri Lux is unable to pay off the loan, Elliott Management would take control of the Italian team. CEO Marco Fassone has promised the franchise would repay the debt before the October ‘18 deadline.

Howie Long-Short: Li Yonghong isn’t the only team executive making difficult financial decisions that will determine the ownership of a professional sports franchise; Grizzlies CEO Robert Pera must decide if he’ll be buying out the team’s minority owners or if he intends to sell the Memphis based NBA team. A unique clause in the partnership agreement gives minority owners Steve Kaplan and Daniel Strauss the ability to place a valuation on the team, 5 years after purchase. Pera then must decide if he’ll buy out Kaplan’s and Strauss’ shares at that price or if he’ll sell his majority stake to them, at their valuation. The group bought the team in 2012 for $377 million, and the Clippers, Rockets and Nets all sold within the last 12 months for more than $2 billion. While not the major markets NY, LA and Houston are, the individual(s) that sell their shares should still see a return of over 300%.

Fan Marino: Tom Dundon, who recently signed a purchase agreement (pending NHL approval) to acquire 52% of the Carolina Hurricanes at a $500 million valuation (Forbes values team at $370 million), will have a decision to make as well. In 3 years, he’ll have the option to buy the remaining 48% of the franchise from former majority owner Peter Karmanos Jr.; best known for moving the Hartford Whalers, just 3 years after he bought the team. Despite the league’s 2nd worst attendance (Islanders 31st), Dundon has no plans to relocate the franchise.

Exclusive: AC Milan’s dire financial situation is about to get much worse

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Author: John Wall Street

At the intersection of sports & finance.

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