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Transfer needs for Serie A's giants

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Transfer Rater: Carlos Bacca to Arsenal

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Long-running saga of AC Milan sale drags on for another month

Silvio Berlusconi
Owner Silvio Berlusconi should just keep the investment group's non-refundable deposits and come out way ahead.

The story regarding the sale of AC Milan becomes more grotesque week after week. A quick recap for those whose eyes glaze over when talking about money and football: Last August, Milan agreed a sale to a Chinese investment group, Sino Europe Sports (SES), run by a guy named Li Yonghong. It valued the club at €740 million ($818m) at the time. SES made a non-refundable deposit of €100m ($110m) with the rest of the cash due in December.

In the meantime, to show its credibility, SES hired a chief executive, Marco Fassone (who had previously worked at Inter Milan and Juventus) and a director of football (Max Mirabelli) to get a head start on their inevitable purchase of the club. Except December came and went and the remaining €640m didn't materialize. Not to worry: SES made another non-refundable deposit of €100m just to show how serious they were. The rest of the cash, they said, would arrive in early March. Except, you guessed it, they missed that deadline too.

Apparently, SES is blaming government restrictions on taking money out of China but again, there's no reason to be concerned as a new deadline has been set: April 14. This time, they'll be good for the money because according to Italian daily Gazzetta dello Sport, SES has restructured itself, setting up a new company in Luxembourg and borrowing some €303m ($330m) from Elliott Management, an American hedge fund that manages some $27 billion in assets. Except, according to Gazzetta, Li's group is borrowing €180m and the other €123m is being borrowed by ... Milan themselves.

To summarise: Milan are effectively borrowing money so that the guy who wants to buy them can complete the purchase. Makes sense, no? (At least Milan are getting a better deal. They're paying interest at 7.7 percent whereas Li is getting charged 11.5 percent.)

What seems to be happening is that Li is effectively financing the purchase of the club by borrowing against the club itself. It's sort of what the Glazers did when they bought Manchester United, except this seems like a far more risky operation, and that's before we even mention the lender itself.

Elliott Management specialises in distressed assets and has been called a "vulture fund." They're not in the business of running football clubs and don't want to be. If somebody defaults, Milan's assets (first and foremost, Gianluigi Donnarumma, assuming he actually extends his contract at some point) become fair game.

Of course, in the middle of all this is the elephant in the room. Milan's owner Silvio Berlusconi has received that €200m non-refundable deposit, right? He could just say "arrivederci" to Li and his crew, keeping both the money and the 99.93 percent of the club he owns via his company, Fininvest. He could then either sell the club at a discount to somebody else or invest the money in Milan or pay down its debt or whatever. Either way, he comes out way ahead.

So why doesn't he do that?

To read more of Gabriele Marcotti's thoughts on what happened over the previous week, click here.

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