The Final Night: Inter Milan Awaits Chinese Reversal, Oak Tree's Pledge of 99.6% Stake Officially Begins

In the early hours of today in Beijing, and last night in Italy, marked the final deadline for Zhang Kangyang to repay his loan to Oak Tree Capital. A number of Inter Milan fans and many Italian journalists gathered outside Inter's headquarters on Liberty Street, hoping for a miracle. Some even speculated on TikTok if there could be an "Olympics 2024 Reversal" kind of story.

So, what is the Olympics Reversal? Let’s briefly explain. Last month, the Paris 2024 Olympic Committee was in contact with the Ukrainian delegation regarding their accommodation in the Olympic Village. The response they received was that Ukraine could not participate in the Olympics. According to the Ukrainian Ministry of Youth and Sports, more than 450 Ukrainian athletes and coaches had died in the ongoing war that has lasted over 800 days. According to the Ukrainian Truth, the number 450 only represents those who have died. If we include those who have lost their athletic abilities due to injuries, the total number of affected athletes and coaches since February 2022 is several times that. This tragic situation left the Olympic Committee in silence, without words. However, a few days later, Paris received a notification from the Ukrainian Olympic Committee stating that Ukraine had decided to participate in the Olympics, although only about 10% of the original team might be able to go. This left the Olympic Committee members with mixed emotions, feeling both joy and sorrow, and a sense that they were witnessing history. This was the “Olympics 2024 Reversal.”

Last night, the people outside Inter Milan's headquarters had similar mixed emotions, feeling like they were witnessing history. However, they did not witness a reversal. When the last club employee left Inter’s headquarters, the confirmation was that there was no miracle from Zhang Kangyang and no funds from China. Instead, there was a collection notice from Oak Tree Capital. The purpose of this notice was not to collect the debt but to mark the start of the legal process for Oak Tree Capital to reclaim the pledged shares of Inter Milan. According to Gazzetta dello Sport, this formally ended the Suning era for Inter Milan. Sky Sports also confirmed that there was no miracle, and the Nerazzurri have entered the Oak Tree Capital era. Given Zhang Kangyang’s previous statements, there might be a legal battle between Zhang’s family and Oak Tree Capital, but the chances of Zhang winning are slim. In reality, the Californian consortium has already begun formally taking over Inter, and the process of transferring the major shares has started.

Financial experts answered some key questions. Will Oak Tree Capital reclaim Zhang Kangyang’s 68.55% stake in Inter Milan, or will they also acquire LionRock Capital’s 31.05% stake? The answer is that Oak Tree Capital will acquire 99.6% of Inter Milan’s shares. This is because the initial financing agreement included International Sports Capital SpA, a company under LionRock Capital registered in the Cayman Islands, as one of the four companies providing guarantees for the pledge agreement. Thus, it’s not just Zhang’s shares that are pledged. The only difference is that LionRock Capital’s company is governed by Italian law, while Suning’s company is under Luxembourg law, which might result in different legal procedures and timelines.

How long will the pledge process take? Using the example of Elliott taking over AC Milan from Li Yonghong, it started on July 9 and was completed by July 12. The process for Inter might take longer, partly due to the different legal jurisdictions and partly because there might be an additional compensation payment from Oak Tree Capital to Zhang Kangyang, which could delay the process. Sky Sports predicts that Oak Tree Capital will first issue a statement announcing the start of the pledge process, and within 2-3 weeks, all procedures will be completed. A new board of directors will be formed, and a shareholders' meeting will be held.

Over the past eight years, how much has Zhang Kangyang invested in Inter, and how much can he take away? In the past eight years, through debt repayments, capital injections, and debt-to-equity conversions, Zhang’s family has directly invested around €900 million in Inter Milan (see table). Calcio e Finanza estimates that, including subsequent compensation from Oak Tree Capital, Zhang Kangyang will be able to take away less than €500 million (including the amount borrowed from Oak Tree that has not yet been invested in Inter). The loss of billions of RMB is inevitable. All the events of these eight years, from the initial acquisition intentions to strategy adjustments, from the changing domestic economic landscape to the unpredictable international situation, from the chaos of changing managers three times in the first year to the success of winning seven trophies and adding a second star, from the disaster of disrupted cash flow due to the pandemic to the final exit in this manner – all of this cannot be explained in a few words.

At this moment, Inter Milan fans from China, Italy, and around the world are thanking Zhang Kangyang for his contributions over the past eight years. The reason is simple: the Zhang family has indeed suffered significant losses, but Inter Milan has benefited greatly.