Earlier today we reported via Milannews.it that Milan are the only club with no debts in the club. At a time when the coronavirus has taken a toll on business all over it is indeed a very big victory for the owners and the management of the club despite Milan bring close to accumulating a €100am loss to close this season.
What does it mean ? And what are its implications ? Let us take a look.
MEANING
To Finance everyday activities as well as tranafers, football clubs need a lot of money (as much as €10M) every week in terms of wages and bills and this needs to be in liquid form (Liquid cash includes proper cash and not in the form of assets or commodities like land or things). So therefore club has various factors routes like taking a bank loan or issuing bonds/debentures. As per accounting terms these are liablities for the club as Milan have to pay a certain interest along with the prinicpal amount taken
IMPLICATIONS
While taking over, Elliot had a total debt of €150M accumulated via the previous managements. Elliot paid all the people Milan owed money towards and brought down the debt to 0. In the current situation Elliot are completely financing activities of the club.
A company with 0 debts shows a company with healthy finances and strong owners which makes it attractive for getting new investors (sponsorships) on board. Sponsors would want to invest in companies where they have a good brand image which Milan aleeady have.
With the new stadium agreement obtained from the council and clean finances it would help Elliot to sell the company, as it is their modus operandi, to a more illustrious investor. Names like Arnault and a Qautari funds have been sounding in the Italian press and Elliot will look to sell the club.
A clean balance sheet with no debts would be a bargaining point for Milan with UEFA to get releaxations in terms of their settlent agreement.
The Milan Blog 