Oak Tree Capital’s Overbearing Clauses Pin Down Steven Zhang: Inter Milan Crisis Illuminates Financial Awareness for Chinese Enterprises

Before delving into the core of this discussion, let’s be clear: sports are just sports. While some may use competitive sports as a weapon to attack opponents, people in China prefer not to complicate, weaponize, or ideologize pure sports issues. I understand that among Inter Milan fans, some are vehemently anti-American while others are fervently pro-American, and that’s perfectly normal. However, this article will focus solely on the realms of sports, business, and issues pertinent to Chinese enterprises, avoiding any other sensitive topics. I hope readers can appreciate this stance.

This morning, the official ceremony for Inter Milan’s 20th league title was held. The banners at the Meazza Stadium read "Thank you, Steven (Zhang Kangyang)," reflecting the fans’ recognition of Zhang’s leadership over the past eight years. Zhang steered the Nerazzurri out of the "Thohir mire," securing seven trophies and twice reaching European finals. However, could this be the last hurrah for Zhang’s era at Inter Milan? At present, it’s hard to say. Gazzetta dello Sport headlined their piece “A Chaotic Celebration,” noting that “Zhang will try his best to keep Inter, but his chances of winning this battle are slim.”

Many are puzzled: Zhang was clearly financing through Pmico to repay Oak Tree Capital, so why was Oak Tree able to obstruct and sabotage the refinancing deal? What draconian terms did Zhang agree to when borrowing from Oak Tree? Sky Sports revealed that in 2021, amid the financial strain from the pandemic, Inter’s cash flow dried up. They faced unpaid wages, debts to sports suppliers, and even overdue utility bills at their training base. With domestic funds struggling to cross borders, a desperate Zhang turned to Oak Tree Capital for high-interest loans to keep Inter afloat. At that time, the California-based consortium was one of the few available lifelines.

Sky Sports believes that the extensive financing contract signed back then contained numerous clauses, one of which stipulated that if a third-party institution intervened in the Zhang-Oak Tree transaction, Zhang would incur a €50 million penalty, on top of the €385 million loan principal and interest. This explains why Oak Tree can now thwart Inter’s refinancing through Pmico. It’s important to note that this is Sky Sports' interpretation based on the documents they reviewed, and the exact figures have not been officially confirmed. However, this explanation sheds light on why Zhang issued such a combative statement yesterday, using terms like “threat” and “malicious” to describe Oak Tree Capital.

Given the current situation, does Zhang have any room to maneuver? Sky Sports suggests that Zhang still has three potential ways to retain control of Inter Milan. Gazzetta dello Sport also believes that it is too early to conclude that Inter will definitely change hands, stating that “nothing can be ruled out” at this stage. Marotta, having spoken with Zhang, expressed “great optimism that we can continue moving forward.”

Experts suggest Zhang has three possible paths. First, he could negotiate with Oak Tree Capital to extend the loan, reaching a compromise for a peaceful resolution. Second, Zhang could raise a significant sum of money within the next 48 hours to repay Oak Tree directly. In the business world, short-term "bridge" financing for emergencies is not uncommon. Third, Zhang could take Oak Tree Capital to court and win through legal means, though this is highly unlikely. Regardless of the approach, Zhang’s task is far from easy.

In summary, Inter Milan’s future remains uncertain. Some have asked me how I view this turmoil at Inter. Personally, I believe that if this situation helps many Chinese citizens and enterprises better understand the risks associated with capital and financial products, it could have positive implications. A few years ago, many intellectuals called for China to dismantle its "firewall" and fully open its financial market. The government’s response was that the conditions for completely opening the financial market were not mature, emphasizing a focus on manufacturing and the real economy due to the significant risks otherwise. Implicitly, the message was: Chinese enterprises are competitive in manufacturing; in finance, not so much. The current crisis at Inter validates this prudent judgment.

No matter what the future holds for Inter Milan, if this episode enhances the public’s awareness and caution in signing financial contracts, it will have been meaningful. As I’ve always said, compared to grand issues like national interests, peace, development, health, and family, sports are ultimately a matter of passion and sentiment. But if we can learn or draw lessons from the vicissitudes of the sports world, isn’t that also a good thing?