Show caption Milan players celebrate beating Macedonia’s Shkendija to reach the group stages of the Europa League. Photograph: Anadolu Agency/Getty Images Sportblog Milan’s Chinese owners take high-risk gamble in search of lost glories Milan, now owned by a China-backed holding company, need to qualify for next year’s Champions League to pay back huge debts, some at 11.5% interest, to a US private equity fund Ed Aarons @ed_aarons Sun 27 Aug 2017 05.00 EDT Share on Facebook

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When Marco Fassone was contacted last summer by someone claiming to represent the latest Chinese businessman looking to invest in one of Europe’s most successful clubs, the likable 53-year-old, who has held senior posts at Juventus, Napoli and Internazionale, was unsure what to make of the approach. “I came into the project with some doubts at the beginning because I wanted to understand exactly what their vision was and why they wanted to make such a huge investment,” Milan’s chief executive explains to the Observer. “It was important for me as a European to understand what is the vision that Chinese entrepreneurs can have behind their dream. After month after month working with them, I started to understand their vision. It is a very exciting project.”

It is now more than five months since Li Yonghong’s Luxembourg-based holding company, Rossoneri Sport Investment, completed the €740m takeover of Milan after almost three decades under the control of the Italian media mogul and former prime minister Silvio Berlusconi. On Sunday, Li – who has already spent more than any of his compatriots in a spate of Chinese investment in European clubs over the past two years – is expected to make his first appearance at San Siro since attending the 2-2 draw with Internazionale in April, when the seven-times European champions meet Cagliari in their first home match of the Serie A season.

Following a summer spree when Fassone and the sporting director, Massimo Mirabelli, committed more than €150m on players, including the eye-catching purchase of Leonardo Bonucci from Juventus, a 3-0 victory over Crotone last Saturday was the perfect start for one of Europe’s great clubs that have found themselves in the doldrums in recent years. Not since the 2013-14 season, when Clarence Seedorf’s side were thrashed 5-1 on aggregate by Atlético Madrid in the last 16 of the Champions League, have Milan played in Europe’s premier club competition. This year’s participation in the Europa League, after pipping Inter to sixth place last season under the current coach, Vincenzo Montella, is the first time they have qualified for a continental competition in three seasons.

Fassone says: “We are probably the most international club in Italy – Juventus has more domestic titles but European football is in Milan’s DNA. We are pleased to have reached the Europa League because it represents an important step and it will be a priority for us this year to come back on to the international stage. But the natural home the club has to be in is the Champions League.

“That’s the target that our owners have given to us. They would like to be consistently part of the Champions League in the coming years. They know that on the sporting side and on the economic side, it changes the life of a club – especially in Italy because the revenues are really impressive. We are lucky because this is the first season that Italy will have four clubs who qualify [for 2018-19] so the target is difficult, but not impossible. It represents the minimum goal that we want to achieve. The club is a giant that’s been sleeping for two or three years, but it’s like a Ferrari that’s been kept in a garage – you need to let a Ferrari out on the track to be free.”

While the arrival of big names such as Bonucci (£35.2m), Portugal striker André Silva (£33.6m), the attacking midfielder Hakan Calhanoglu (£22m) of Turkey and the Croatia striker Nikola Kalinic (costing an initial €5m loan fee with Milan obliged to spend a further €20m next summer to make the move permanent) has already raised expectations among success-starved Rossoneri supporters, questions over the sustainability of the club under its new owners have refused to go away.

When promised investment failed to materialise, Li instead turned to the US private equity fund Elliott Management – which has been described as 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, although Fassone insists that neither will be an issue. “We are already working to reimburse them and we will actually do this really early, possibly at the start of 2018,” he says. “The level of interest Milan is paying on the €120m is high of course but not terrible. If you consider the debt that Inter or Roma contracted with Goldman Sachs when they were financing, which was about 6.5%, of course this is higher but it’s not something terrible. For Chinese people, when you see interest on loans in double digits, for them it’s completely normal.

“In a worst-case scenario, because a lot of fans and shareholders have been asking me this, it means that in October next year, the owners of Milan will be Elliott.

“This is really the worst case but, just to ensure, the future of the club is not in the fog. No, 99% we will go ahead with Mr Li and we hope our project will be successful. But in the worst case, be relaxed because Elliott are not ‘desperados’ – it is one of the biggest hedge funds in the world that could keep the club or resell it. They would have paid only €300m, which is a very low price, and they can make business, which is their job.”

Yet Li’s approach has prompted a backlash from some of his new rivals. Last month, the Roma president, James Pallotta, was forced to apologise after he accused Milan of “losing their minds” in spending so much money at a time when they have such unprecedented debts, while a Sky Italia reporter was banned last week after suggesting the club’s spending was unsustainable.

“As you can imagine, I have a plan A and a plan B,” says Fassone. “To Uefa, I have presented a more conservative plan which shows a progression even if the club is still out of the Champions League next season. In that case, my investment in the market cannot be high and we would also have to consider a sale of one of our top guys. But we also have a scenario that says: ‘Marco, what happens if the club doesn’t achieve the Champions League?’ The investors and I want to be there but we are prepared if we don’t make it we will ensure that the club is protected.”

In May, Elliott – who also have a stake in the French club Lille – listed two bonds on the Austrian stock market for a total value of €128m in what could end up being the first step in floating Milan. Together with a new approach to expanding their business in Asia that will lead Milan to set up a subsidiary arm known as AC Milan China to deal with marketing, licensing and commercial operations, pursuing a public listing on the stock market appears to be Li’s main tactic in his attempt to transform the finances of a club that had a consolidated net loss of €74.9m in Berlusconi’s last season.

“Before new business starts, you need a couple of years when you still lose money,” says Fassone. “This year and next year, we have forecasted more losses for the club and Mr Li is taking care of this. He has increased the capital and putting money in. The fans appreciate this man who is not so visible here but is spending money.

“Don’t forget this is the most expensive investment that there has been in European football after the Manchester United takeover. They hope in two or three years maximum to make the club worth double what they paid for it. But to do that we have to perform on the pitch and off the pitch.”

Li is believed to own a 28% share in Renshuo’s New China Building project in Guangzhou – a 48-storey development of offices and shops that is estimated to be worth around €1bn – and has owned shares in packaging companies and phosphate mines A photograph of him and his family watching the 3-0 victory over the Macedonian side Shkendija in the first leg of the Europa League qualifier on his iPad circulated on social media last week. However, despite his heavy investment, the billionaire has been conspicuous by his absence in Milan.

According to Fassone, however, he is in almost daily contact with his right-hand man, Li David Han, who “wants to know all the details of the club and all the strategies we are implementing”.

“For us in Italy, for our culture, it is very different,” he adds. “For example, the habit was to have owners and presidents who were very physically present: attending the matches, attending the training sessions, doing interviews. It’s like an insurance for the fans in Italy to know who exactly the president is and know what he can do for the club.

“To have a president that is not so present, that doesn’t do interviews and has a profile that is partially unknown from everyone, especially, at the beginning, has represented a partial obstacle with the fans. But what I see now the situation is different. The fans globally are really supporting the club and the new management.

““For example, on Sunday in Crotone, Mr Han Li was at the match and I saw lots of the fans wanted to have photos with him. At the beginning a few suspicious people were asking: ‘Who are these Chinese guys?’ but now it’s different. They know more about them and they see that they have invested a lot for this club. It’s not an owner who is coming in just to make a speculation, like has happened with other clubs in Italy. This is one who wants to make the club great again and is investing with his own money.”

But with repayment of the loan to Elliott and a number of large financial commitments from this summer’s spending looming next year, it is clear that Montella’s new-look Milan will be under severe pressure to hit the ground running.