Zhang’s match seems to have come to an end with a result unfavorable to him. This is implied by the painful statement, released yesterday, in which the current president accuses Oaktree of having “exasperated” (sic) with legal threats the efforts to find an “amicable solution” with the fund, curiously defined as “partner” rather than financier. A surreal message with which he blames the creditor for his own insolvency. What is certain is that Tomorrow the loan granted three years ago to the Inter owners expires (not at Inter) from the American fund, guaranteed by a pledge on 99.6% of the club’s shares parked in a Luxembourg holding company. Oaktree’s position is clear, like that of any creditor: it awaits the repayment of the loan, which must arrive on Tuesday because tomorrow is a holiday in Luxembourg. Failing this, the procedure for enforcing the pledge will begin immediately and ownership of the shares will pass from Suning to Oaktree.
Inter, Oaktree is unassailable
In recent weeks, Zhang first asked for an extension of the financing which the fund denied, not having, as we had already reported in recent months, any tangible advantage. He then started looking for a new financier to refinance the Oaktree loan, but the negotiations started with the American fund Pimco do not seem to have yielded positive results. In the absence of sensational surprises, Oaktree will likely take ownership of Inter on Tuesday. In his statement, Zhang seems to foreshadow potential legal disputes, saying he hopes for a “peaceful resolution”, but, in the absence of full reimbursement, Oaktree’s position is unassailable. Once the pledge has been exercised, an expert will establish the value of Inter (net of debts and losses postponed to the future) and Oaktree will have to pay Zhang the excess over the 390 million owed for the repayment of the loan. It would be technically possible to convert this difference, if positive, into a minority share which would allow Zhang, whose margins for maneuver remain very limited, to earn from a possible resale.
The future of Inter
Many wonder what will happen from the day after the change of ownership, in particular if the management style and approach to the market will change. It should be noted that Oaktree did not plan the acquisition of Inter, but financed Zhang in the expectation that he would find a buyer and obtain the resources to repay the loan from the sale. In three years, however, this has not happened despite research by Goldman Sachs and Raine. This does not mean that the fund must sell Inter immediately and under any conditions. Indeed, the hypotheses of a buyer around the corner are not supported, logically improbable precisely because in that case the auction door would not have been reached. Today, the rumored proposals from Arab investors seem even more unlikely. Oaktree will likely aim to ensure management continuity, first of all confirming the current management which has operated well in difficult conditions. But also ensuring the financial stability of the club, which will certainly not be jeopardized by the transition from an insolvent shareholder to a much more solid one, as Zhang threatens in the statement. However, Oaktree will hardly be able to postpone the economic rebalancing of the management (still not achieved) by covering the deficits with continuous capital injections. Funds move on a clear and predictable financial horizon. They define precise budgets that cannot be derogated from, as Elliott’s virtuous experience with Milan demonstrates. On the renewals of the big names, the management will have to follow defined lines, just as the balance between purchases and sales is unlikely to return negative in the short term.
Inter, letter from Zhang:
