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> NYT: China’s Soccer Push Puts a Storied Team Under Murky Ownership

Fillipo Simone
post Nov 21 2017, 06:11 PM
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China’s Soccer Push Puts a Storied Team Under Murky Ownership

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BEIJING — When the Chinese businessman Li Yonghong bought A.C. Milan, the world-famous Italian soccer club, virtually nobody in Italy had heard of him.

Virtually nobody in China had, either.

Mr. Li had never been named to one of China’s lists of the country’s richest people. The mining empire he described to Italian soccer officials was hardly known even in mining circles.

Nevertheless, Mr. Li seemed to have what mattered most: money. He bought the club in April for $860 million from Silvio Berlusconi, the former Italian prime minister, to clinch China’s biggest-ever soccer deal.

Today, Mr. Li’s acquisition of A.C. Milan appears to be emblematic of a string of troubled Chinese deals.

The soccer club, bleeding money after a spending spree on star players, is seeking new investors or a refinancing of the high-interest loan that Mr. Li took to buy the club. That loan comes due in a year.

Chinese corporate records show that — on paper, at least — someone else owns his mining empire. That company’s offices were empty on a recent visit, and a sign on the door from the landlord cited unpaid rent. A spokesman for A.C. Milan said Mr. Li’s control of the mining business had been verified by lawyers and banks involved in the transaction.

Chinese records also show a series of business disputes and run-ins between Mr. Li and Chinese regulators.

China’s emergence as a world economic power came with a ready checkbook for major brand names. Chinese owners now control the Waldorf Astoria hotel in New York, AMC theaters, the Hollywood production company Legendary Entertainment and A.C. Milan.

Then Chinese officials began to worry that the spending was simply part of an exodus of money from China so vast that it once threatened to destabilize the country’s economy, the world’s second largest. This summer, the government ordered its banks to scrutinize lending to some of the country’s biggest deal makers.

Outside China, some of the deals led regulators to ask questions about the tycoons behind them. Some wealthy people in China list their holdings under the names of relatives or associates to avoid scrutiny, a practice that has attracted criticism inside and outside the country.

In the case of Mr. Li, the mines that he told A.C. Milan he controlled have been owned by four different people since last year, according to Chinese corporate records. The business changed hands twice for no money, the documents show.

Mr. Li declined an interview request through A.C. Milan. The club spokesman defended Mr. Li on his business disputes, saying that sometimes he was a victim and that sometimes he was not aware of complicated rules. The spokesman also said the club was evaluating several refinancing proposals and was confident it could cover the loan.

Chinese spending on soccer totaled $1.8 billion over the past five years, according to Dealogic, a data provider, but Chinese officials are putting a stop to the spree amid concerns about the flight of money abroad.

“There’s a lot of ways to invest in football and the sports industry for much less money,” said Mark Dreyer, who tracks Chinese soccer investments on his website, China Sports Insider. “People were basically using the government’s previous push for sports as a way to diversify into different industries and get their money out of China.”

Mr. Li had plenty of reasons to buy A.C. Milan. President Xi Jinping had professed his love for soccer and wanted China to be a superpower in the sport by 2050. The Chinese government had laid out a plan for increasing sports investment.

An acquisition of A.C. Milan would be a marquee deal. A decade ago, the club was home to some of soccer’s biggest talents, including Ricardo Izecson dos Santos Leite, who is known as Kaká, and Andrea Pirlo. It was a seven-time European champion.

But it has not won an Italian championship for six years or a European title for 10. Fans welcomed Mr. Li’s arrival as a potential catalyst. This summer, A.C. Milan began to spend on new players in a way that seemed to signal a desire to compete again.

Still, Mr. Li and Mr. Berlusconi struck the deal at a difficult time. Beijing, spooked by the unprecedented capital outflows and a weakening currency, had imposed restrictions on overseas investment at the end of last year.

Mr. Li set up companies in the British Virgin Islands and Luxembourg that would put the club’s legal ownership outside China, according to Marco Fassone, A.C. Milan’s chief executive officer. Mr. Li also borrowed about $354 million from the hedge fund firm Elliott Management, a loan he must pay back by October 2018. A spokeswoman for Elliott declined to comment.

A.C. Milan remains debt laden and unprofitable, and could have trouble repaying what it owes on its own. It spent about $274 million to sign 11 players this summer, according to the club spokesman, making it among the biggest spenders in European soccer.

In August, A.C. Milan had to wait for the transfer of two players it had signed from other teams because it had not deposited the required bank bonds. The club blamed a timing issue for the delay, and the transfers were eventually completed. The team is in seventh place but, with more than two-thirds of the season left to play, must finish among the top four to earn a spot in European soccer’s elite Champions League next season. The team could lose valuable television revenue if it fails to reach that level.

It is unclear how much Mr. Li’s wealth might help the club address its troubles.

He was initially unknown to the deal makers trying to sell the club, the people involved in the transaction said. He was originally part of a group that included Sonny Wu, a well-known investor who is chairman of the private equity firm GSR Capital, these people said. But Mr. Wu pulled out of the deal.

In an email, Mr. Wu said he had not talked to bankers about Mr. Li or his consortium. Rothschild & Company, the investment bank that advised Mr. Li, declined to comment.

Mr. Li told A.C. Milan that his holdings included phosphate mining operations in the city of Fuquan in Guizhou Province.

But Chinese corporate filings show that the mines are owned by another party: Guangdong Lion Asset Management, an investment company. And Guangdong Lion has had a complicated ownership record over the past two years, involving a number of people with similar family names. (One court proceeding suggests Mr. Li has a relationship with Guangdong Lion, although it is not clear what kind.)

Originally, Guangdong Lion was ultimately owned by two investors, Li Shangbing and Li Shangsong, according to filings. Like Li Yonghong, the two men come from the same area of Maoming, a city on China’s southern coast, according to the documents. But in a phone interview, Li Shangbing said he did not know Li Yonghong.

Li Shangsong, who declined to comment, sold his interest in Guangdong Lion in 2015 to a person named Li Qianru, according to the documents. The documents did not include personal information about Li Qianru, who could not be reached for comment.

In May 2016, according to the filings, Li Shangbing and Li Qianru, sold Guangdong Lion to yet another Li: Li Yalu. The sale price: $0. The filings do not provide personal information about Li Yalu.

Three weeks later, Li Yalu sold a half stake in Guangdong Lion to a similarly obscure investor, Zhang Zhiling. The price: $0. Neither could be reached for comment.

Li is a common surname in China, and the relationships among the various Lis are unclear. The A.C. Milan spokesman declined to comment.

Li Yonghong, the A.C. Milan owner, and Li Shangbing have two things in common.

The first is a relationship with Guangdong Lion. A Chinese court cited Li Yonghong and Guangdong Lion in April for failing to resolve a loan dispute with another Chinese company, saying both parties had disappeared. The court did not specify the relationship. The A.C. Milan spokesman said that Li Yonghong had merely guaranteed the loan and that “he is a victim in this case.”

The second is an interest in investing in European sports.

In May 2016, a day before Li Shangbing sold Guangdong Lion for no money, he started a company called Sino-Europe Sports Asset Management Changxing Company, according to China’s corporate database.

Two days after he registered the Sino-Europe firm, another person registered a new company with a strikingly similar name: Sino-Europe Sports Investment Management Changxing Company. The two companies’ headquarters were in the same building in the city of Huzhou.

Sino-Europe Sports Investment owns a stake in A.C. Milan as a result of its role as a shareholder in Rossoneri Sport Investment, a Chinese company that is part of the group led by Li Yonghong that owns the soccer club.

In the phone interview, Li Shangbing denied setting up either Sino-Europe company and said he did not own any part of A.C. Milan. He declined to answer further questions. A.C. Milan declined to comment on Li Shangbing. The listed owner of the Sino-Europe Sports Investment Management Changxing Company, Chen Huashan, could not be reached for comment.

Guangdong Lion’s listed headquarters are in a fancy skyscraper in Guangzhou. In August, the offices were closed, with an eviction notice on the door. Inside, desks and chairs were in disarray, computers were missing hard drives, and maggots festered in a trash can.

The phone number listed for Guangdong Lion connects to a woman who said she helped companies register with Chinese regulators.

Li Yonghong has an extensive business history, but Chinese records show it includes disputes with regulators and others.

In 2013, China’s securities watchdog fined Mr. Li $90,250 for failing to report the sale of $51.1 million in shares of a real estate company. A.C. Milan said Mr. Li had simply been unfamiliar with listing rules.

In 2011, that same real estate company said in a stock filing that Mr. Li was the chairman of Grand Dragon International Holding Company, a Chinese aviation company. Grand Dragon said in June that he had no present or past association with the company. The A.C. Milan spokesman said he had no knowledge of this.

In 2004, Mr. Li’s family business, the Guangdong Green River Company, teamed up with two other companies to bilk more than 5,000 investors out of as much as $68.3 million, according to The Shanghai Securities News, the official newspaper of China’s financial watchdogs. They had sold contracts for lychee and longan orchards and promised investors hefty returns, according to the report.

Mr. Li’s father and brother were sentenced to jail. Mr. Li was investigated but not accused of wrongdoing, the report said.

A.C. Milan said the episode had nothing to do with Mr. Li, adding that “he was not aware of the situation until the investigation.”

Amid Chinese concerns about deals abroad, China’s purchases of soccer teams with prestige names is likely to slow considerably for some time to come.

“If outbound investment should have the purpose of ‘strengthening the nation,’ even within the broadest of definitions,” Peter Fuhrman, chairman of the investment bank China First Capital, said in an email, “buying a soccer team in the U.K. or Italy would hardly seem to qualify.”

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post Nov 21 2017, 09:09 PM
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Prima Squadra
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I'll read that tomorrow at work and get back to you (IMG:style_emoticons/default/biggrin.gif) (IMG:style_emoticons/default/tongue.gif)
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Fillipo Simone
post Nov 22 2017, 02:06 AM
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And well, wile we're at it:

Forbes: 'Milan sold at bargain price?'
By Football Italia staff

Forbes have now reported that Milan are in financial trouble and Yonghong Li could sell the club soon “at a bargain price.”

The Rossoneri continue to insist the balance sheets are fine and they will refinance the loan from hedge fund Elliott Management, but after The New York Times and Marca, now Forbes have become the latest foreign media source to claim they have serious problems.

Forbes are considered the leading source on finance, industry and investment.

Their reporter Mike Ozanian put together a summary of the various investigations into the takeover from Silvio Berlusconi and predicted a bleak future.

“Don't be surprised if AC Milan changes hands again soon at a bargain price.

“To me it seems that AC Milan, which will likely miss the lucrative Champions League again next season, will be sold again, sooner rather than later - and for less than what Li paid.

“Another, perhaps more important consideration: where were the soccer authorities when Li was putting pen to paper to buy the team?”

He also points out why Elliott being a ‘vulture fund’ is particularly worrying.

“A vulture fund owing to its tendency to buy up debt owed by failing companies and states including Peru, Congo-Brazzaville and Argentina at knockdown prices - for a loan of €300m, with €180m set aside to help complete the purchase of Milan and the remainder earmarked for buying players.

“Repayment of the whole loan is due in October 2018, with interest rates for the larger sum set at 11.5% and 7.5% for the rest...”

NY Times: 'Milan takeover embarrassing'
By Football Italia staff

The New York Times reporter who investigated Yonghong Li claims “it could be an embarrassing situation for Italian football. If I were a Milan fan, I’d want to know who owns the club.”

The paper published an analysis of the situation, including interviews and visits to the supposed offices in China, finding dead ends and a surprising lack of information.

“We started concentrating on football in China when it became a priority for Xi Jinping,” New York Times reporter Tariq Panja told La Gazzetta dello Sport.

“We wanted to understand why China were investing in football abroad and who the investors were. Milan are the most intriguing case: it was by a long shot the most expensive club and involved a person who was largely unknown. The owner of Inter (Suning Group), on the other hand, is very well-known.

“We worked on this story for a few months, in China and in other areas of the world. We tried to talk to as many people as possible and almost nobody had ever heard of Li Yonghong in China. They asked us how it was possible that someone like that could be behind the purchase of such a famous club.”

His wealth is the subject of some confusion too, as the New York Times found “no evidence that he is the owner of Guandong Lion, the company that controls the mines.”

The American newspaper even visited the supposed offices of Yonghong Li in China and found them practically abandoned.

The club was purchased after many delays with the aid of a high-interest loan from hedge fund Elliott Management, so why did the Italian authorities approve the takeover?

“You’d have to ask them. In my view, they should’ve checked more carefully,” continued Panja.

“Considering the way things are going now, it looks as if it could conclude with an embarrassing situation for Italian football. If I were a Milan fan, I’d want to know who owns the club. It ought to be clear.

“The price of the purchase was already very high and the other Elliott assets are all timebombs waiting to go off. I don’t see how Milan can pay their debts with the current cash influx.”

Elliott Management are a ‘vulture fund’ – so they tend to offer high-interest loans to companies who are in serious trouble, then buy the debt at a discounted price and sell it off in pieces.

Milan director of sport Massimiliano Mirabelli was asked specifically about the New York Times story on Saturday.

“We look only at concrete facts. We won’t reply every time a newspaper writes something about us, as we are accustomed to it now,” he told Mediaset Premium.
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Jack Sparrow
post Nov 22 2017, 11:49 AM
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I think this is really delayed reporting. So it is still falling back on the Elliot fund repayment and where the money is coming. There already was news that Milan had managed to get agreements to re-finance the loan with someone else.

Milan with BGB Weston

I get that the model is quite leveraged and maybe not offering the same security as if a rich Arab sheikh plopped down the cash (R7, (IMG:style_emoticons/default/unsure.gif) got your annual bonus ready? (IMG:style_emoticons/default/tongue.gif) ) but it doesn't look as terrible.

I do notice an agenda of media houses to constantly pain Milan as a disaster, when all the companies talked about as investing in us are renowned firms. They wouldn't fall prey to some 'Ponzi scheme' as Li Yonghong is supposed to be running. Do I think Li Yonghong or Li Han are completely legit businessmen? OF COURSE NOT! Neither was Silvio - I'm not in some dreamland to think that none of Milan's transfers came from organized crime money ; but whatever. I isolate that part from my support of footballing matters.

But I do worry about some sort of media agenda. There were all those reports at the beginning that buying is just extended further and further and it's never going to happen. And then that proved false. Now the legitimacy of the businessmen. Meanwhile, also rumours that UEFA rejected our exemption request and were ready to pass sanctions. That got shot down recently saying no decision has been taken.
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post Nov 24 2017, 12:04 AM
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Yeah I wouldn't buy into all that, we wait for facts. If Elliot is repaid we are good and that is the owners business how to do it.

Squad is brand new, always needed time especially given the average age of the squad. I was excited at first but slowly learned this is gonna take sometime to get back to winning ways. And this type of media does not help.
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