Last month should have been his crowning achievement. On April 22, on a rainy evening in front of 75,000 fans in the San Siro stadium, Inter Milan won the its 20th league title by beating hated city rivals AC Milan.

But Steven was absent from the directors box, as he had been all year, in part driven by a Hong Kong bankruptcy case. Instead, he appeared in a video on YouTube congratulating and thanking the club’s staff and players.

The morning after, Steven joined an Instagram live hosted by one of Inter’s star players, Turkish national Hakan Calhanoglu, with several members of the nerazzurri squad. Some players jokingly asked for a gift, others for a contract renewal.

It was Steven’s last trophy for Inter Milan. A month later, Suning lost control of Inter Milan after defaulting on a loan granted by Oaktree Capital Management, in an example of just how some of Europe’s greatest football clubs, in a bid to remain competitive, have crumbled under unsustainable debt and struggling owners.

Domestic troubles

Steven’s father started with a small air-conditioning store in Nanjing, Jiangsu, and turned it into a retail conglomerate amid China’s economic boom. Suning.com became one of China’s biggest retailers of appliances, electronics and other consumer goods, diversifying into an array of businesses, from football clubs to property.

In 2016, Suning bought about 70 per cent of Inter Milan for 270 million euros (US$306 million). In an event to mark the takeover, a press conference was held in Nanjing.

Buying control of the Italian club “helps Suning to capture the trend of sports and fitness interest in China, raise the standards of local football, and also raises Suning’s profile as it expands globally”, Zhang Jindong said in a speech.

The deal did not come out of the blue. Chinese President Xi Jinping is an avid supporter of football, and planned to build a sports industry worth 5 trillion yuan (US$760 billion) by 2025. At the time, Chinese teams were some of the biggest spenders on talent in 2016, and a Chinese investor group was also pursuing the takeover of AC Milan.

Over the next few years, on the pitch at least, Suning’s reign was a success. Inter won the league twice, and reached the Champions League final. Off it, the club was a disaster, driven in part by troubles back home.

By 2021, Suning.com was in financial jeopardy, after investing into China Evergrande Group, the world’s most indebted property developer. A group of investors, led by the Nanjing state asset management committee and the Jiangsu provincial government, took a stake in the struggling firm, while Zhang lost control of his own firm.

Suning was a major sponsor of Inter, with €260 million (US$282 million) in revenue coming from Chinese entities – equivalent to a quarter of total sales – between 2017 and 2019 from regional sponsoring deals. But when Suning ran into financial trouble, the money also stopped flowing to Milan. After the pandemic, the club even failed to pay regular salaries to its players after sponsorship payments dried up.

By then, Xi’s footballing dream had also died. China’s men’s football team had performed woefully in major tournaments, local clubs tied to real estate developers had become dragged into a wider financial crises, and Chinese backers of foreign teams were selling out.

By now, Inter was up for sale, but buyers failed to materialise. Private equity firm BC Partners had already walked away from a deal following doubts about the longer-term stability of the Chinese sponsorship payments.

Suning.com, the public-listed company, did not reply to an inquiry asking about personal business of the Zhang father-son duo. Steven still sits on the board of directors of the company.

Messages to Steven’s personal Instagram and Weibo accounts went unresponded. Oaktree declined to comment.

US interest

US investors have long been interested in European football, arguably starting with the 2005 takeover of Manchester United by the Glazer family for close to US$1 billion including debt. For more than a decade, American ownership was characterised by rich individuals with enough money to lose playing club owner.

Billionaire Randy Lerner – then owner of the Cleveland Browns – bought Aston Villa for about $110 million in 2006, selling it for $90 million a decade later, and spending about $400 million along the way.

In recent years, investment funds have started to not only buy stakes in European football teams, but also lend heavily to owners.

FC Barcelona borrowed €1.5 billion from private debt investors and banks to finance its own stadium revamp, while Chelsea FC has raised £500 million (US$636.4 million) of financing from Los Angeles-based Ares Management Corp. Carlyle Group’s global credit unit led a private debt package for Italian football club Atalanta BC.

Historically, private credit lenders have steered clear of the football because of profitability issues. But with private equity firms increasingly buying stakes in clubs or the owners, credit funds are more actively eyeing up financing the buyouts. There is another attraction – the collateral for the loan can be media revenues or the club itself.

Elliott Management Corp, the investment firm run by billionaire Paul Singer, took control of AC Milan in 2018, after the club’s Chinese owner defaulted on its €303 million debt obligations. Four years later, Elliott sold the club to US fund RedBird Capital Partners for US$1.3 billion.

Oaktree was founded by billionaire Howard Marks in 1995 with Bruce Karsh and five other partners from TCW Group Inc. Based in Los Angeles, it has grown to US$192 billion under management.

Born with a focus on distressed debt, the firm has a long link to sports investments. Until earlier this year, the fund also was a shareholder of French second division team Caen, and Steve Kaplan, an Oaktree co-founder, is a minority owner of the NBA’s Memphis Grizzlies, and is part of a group that has a controlling interest in Welsh football outfit Swansea City.

After Inter struggled to find a buyer in 2021, Oaktree stepped in with a €275 million loan. The debt would pay a hefty 12 per cent coupon, with ownership of the club as collateral. If Inter was finally sold, Oaktree would get a cut of the profits, according to a person familiar with the matter.

However, Suning’s problems continued. Zhang and his son were sued by China Construction Bank in August 2021 to recover US$255 million in debt. Zhang argued that his signatures, which appeared on the debt agreement and his personal guarantee, were forged. They lost the case. The Court of Appeal in Milan backed the ruling from the Hong Kong court.

Despite the success on the pitch, Inter continued to lose money, while investment banks including Raine Group and Goldman Sachs struggled to find a viable buyer.

In the financial year ended on June 30, 2023, Inter Milan posted a net loss of €85 million, compared with a €140 million loss the previous year. A good run in the Champions League, a clever transfer policy and new sponsorship contracts with Paramount+ and eBay helped stem losses. However, Inter Milan’s losses under Suning ownership reached more than €650 million, according to company filings.

Steven’s Instagram posts, usually a relentless stream of support for Inter, suddenly dried up. Days after celebrating its 20th Serie A title, Suning needed to pay Oaktree close to €400 million. The money never came, and Oaktree took over the club.

Zhang was worth about US$6 billion when he bought Inter Milan in 2016. The takeover by Oaktree has wiped out Zhang’s fortune, according to the Bloomberg Billionaires Index.

“Eight years ago, when a young man, who was 24 years old, stepped into San Siro to watch a football match for the first time, I had absolutely no idea what lay ahead of me,” said Steven in an Instagram post last weekend, thanking the staff and fans. “After significant investments and countless hours of work, Inter has transformed into a modern, innovative, and winning club at the pinnacle of European football.”

Market value

Despite the disastrous financial ownership of Suning, Inter Milan has ballooned in valuation, driven in part by its on-pitch performance and a global boom in sporting assets.

Inter Milan’s enterprise value is between €1.36 and €1.49 billion, according to Andrea Sartori, founder and chief executive officer of data platform Football Benchmark. Since his firm started to track valuations of football clubs in 2016, Inter’s has grown more than 200 per cent, beaten only by Tottenham Hotspur and Paris Saint Germain.

“Oaktree got a good deal because they took control of a club that is worth significantly more than its liabilities,” said Sartori.

Oaktree’s challenges will be to achieve financial sustainability without losing out on the pitch, and finding an eventual buyer for the club.

“We are proud our financing helped support the Club’s successes over the past three years and look forward to working closely with the current management team to build on the momentum of the historic second star,” Oaktree said in a statement on Inter Milan’s website on Monday.

“For this reason, we are focused on ensuring operational and financial stability to help deliver consistent success to the Club on and off the pitch.”

For now, Oaktree are planning to keep coach Simone Inzaghi and much of the existing management, according to local reports.

“The future is quite bright,” said Sartori. “Oaktree will certainly change the composition of the board, but I don’t think they will change the club management at top level because they have operated extremely well and is one of the most experienced in Italy.”