UEFA have thrown AC Milan out of the Europa League after the Italian side failed to comply with Financial Fair Play regulations.
The decision to impose a two season ban the 2007 Champions League winners is the boldest so far from UEFA and indicates a firming up of resolve on the issue with the Italian side going heavily into debt on the assumption that they can break even through success in Europe.
A decade ago Milan were easily among the top six clubs in Europe, regularly reaching the later stages of the Champions League and buying players such as Kaka, Clarence Seedorf and Andriy Shevchenko.
After slipping out of the Champions League spotlight the club has incurred increasing losses with the current Chinese owners taking on some high risk loans in order to bulldoze their way back to the riches that Barcelona, Real Madrid and Bayern Munich pick up every season from the Champions League.
Shedding light on the situation Lombardi Associates explained:
The Italian Club has been closely watched by UEFA since they were acquired by Chinese investor, Li Yonghong, through his investment company, Rossoneri Sport, in April 2017. In the summer transfer window following this AC Milan spent more than €200m on a number of players. UEFA’s concerns surrounded compliance with the “break-even” element of the Regulations, and the Club’s ability to repay loans, which were taken out to finance the purchase of the Club. An American hedge fund, Elliot Management, is reported to have loaned the Club in excess of €300m, which must be repaid by October 2018, together with more than €40m of interest. The Club is attempting to recover from years of losses incurred when it was under the ownership of Fininvest, an Italian investment company ultimately owned by the family of former Prime Minister, Silvio Berlusconi.
Following concerns raised by UEFA about the Club’s financial situation, the Club had requested to enter into a voluntary settlement agreement but this was refused by the European governing body due to ongoing concerns raised about their finances. UEFA advised that they would continue to monitor the club and assess the situation in early 2018. Following assessment, UEFA confirmed in May 2018 that: “After careful examination of all the documentation and explanations provided by the club, the CFCB Investigatory Chamber considers that the circumstances of the case do not allow the conclusion of a settlement agreement. In particular, the investigatory chamber is of the opinion that, among other factors, there remains uncertainties in relation to the refinancing of the loan and the notes to be paid back in October 2018.” As such, the Investigatory Chamber referred the Italian Club to the Adjudicatory Chamber of the Club Financial Control Body (CFCB) for breach of the Regulations.
The ‘business plan’ from Milan seems very similar to the way Dave King is running Sevco with just the scale of the loans/debt differing.
The South African based criminal has openly admitted to a policy of increasing debt which will only end with participation in the group phase of the Champions League.
Sevco’s last audited accounts confirmed soft loans of £17.7m, some of which can be called in on July 1.
It’s uncertain if any of the three bears will press that button but if UEFA decide to take a look at the running of the tribute act the route to European competition will finally be closed off.