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Thread: Inter's Financial Situation

  1. #5201
    Fapuccino's Avatar
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    Worst part about this is we might miss out on Messi.
    Team #Dare2Mazzari #Messi4Inter #Messi4AsadoClan


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    Let's talk about the sale in Suning thread as the discussion has concentrated to that thread. Thanks!

  3. Thanks (1): thatdude

  4. #5203
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    Inter Handed €20M Financial Boost As UEFA Relax Salary Rules, Italian Media Report

    Inter have been given a financial boost by UEFA after European football’s governing body relaxed its rules on salary payments, according to an Italian media report today.

    As per Tuttosport’s print edition, Inter owe their players no less than €24.8 million in outstanding wages for the months of November and December 2020.

    The Nerazzurri would previously have had to pay all of this by March 31, in order to be eligible for a UEFA licence ahead of next season’s continental competitions.

    However, UEFA have loosened guidelines to help clubs out during the COVID-19 pandemic, which previously required clubs to have paid all its wages from the previous calendar year by the end of next month.

    In order to be compliant now clubs must only have paid 85% of their annual salaries, provided they can prove that they have lost revenue due to COVID-19 and present a detailed plan of how to repay the wages by June 30.

    Inter still have €24.8 million before tax to pay their players in wages for November and December last year, but the new 85% threshold means they can defer €22.3 million of this beyond March 31.

    The Nerazzurri therefore only need to pay a further €2.4 million before the end of next month, saving them almost €20 million in the immediate term as owners Suning battle a serious lack of liquidity.
    #CONTEOUT


    "When I had just become President, I went to Austria for our match. On the stadium billboard it was written: 'Inter Milan'. I went to report to the manager of the opposing team that it was enough to leave Inter. So they canceled Milan "

    Massimo Moratti

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    This is a good boost indeed but we still need to pay the first tranche of Hakimi transfer fee by March.

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    Inter Media Notes on Rating Watch Negative

    Fitch Ratings - Madrid - Fitch Ratings has placed Inter Media and Communication S.p.A.'s (MediaCo) notes, which have a 'BB-' rating, on Rating Watch Negative (RWN).



    RATING RATIONALE
    The RWN action is in response to significant liquidity issues that we expect over the coming months at FC Internazionale Milano S.p.A (TeamCo) and the resulting deterioration in Inter Milan's consolidated financial position.

    TeamCo has had about a 20% reduction in revenue in financial year ending June 2020 (FY20) year-on-year due to all games being played behind closed doors with no fans in attendance. The club's player wages are also about 20% above our initial expectations for FY21 due to a significantly weaker player transfer market across Europe. This has led to limited cash inflows from the sale of players and ensured player wages are considerably above expectation. In addition, difficulties in collecting revenue from Asian sponsorship partners have continued.

    Overall, under Fitch rating scenarios, this will lead to significant liquidity requirements in the coming months for TeamCo. However, the club has historically received strong support from its shareholders.

    The RWN will be resolved when we have greater visibility on the solution to the liquidity shortfall and on the evolution of the Group's capital structure.

    MediaCo, the notes issuer, is fairly insulated from liquidity pressure at TeamCo due to it being a bankruptcy remote SPV and having preferential recourse to certain media and commercial revenues. Despite this, MediaCo's long-term viability, and therefore ability to refinance the notes, is intrinsically linked to the performance of TeamCo to ensure media and commercial revenues continue at current levels. This relationship is reflected in the consolidated approach we use to reach the long-term credit rating.

    KEY RATING DRIVERS
    Prestigious League with Access to UCL - League Strength/Business Model: 'Midrange'

    Serie A is the fourth most valuable football league by annual revenue and the distribution mechanics of league broadcast rights allow a largely stable base revenue stream for clubs, regardless of league position. Broadcast rights for Serie A are in the process of being renewed for the 2021-2022 to 2024-2025 seasons and are expected to result in stable revenue. The league also benefits from the top four finishing positions giving access to the lucrative UEFA Champions League (UCL) competition, in which Inter Milan has competed the past three seasons. The UCL carries significant broadcast revenue for participating teams and increases exposure to international audiences.

    Competitiveness of the league is supported by UEFA Financial Fair Play (FFP) regulations which, among other conditions, monitor the club's financial sustainability. While the ability of UEFA to strictly enforce FFP rules is unclear, the sustainability of European football has improved, in part due to the regulations.

    Iconic European Football Team - Franchise Strength: 'Stronger'

    Inter Milan has a 113-year history and historically has the highest attendance in the Italian football league. It also has a history of strong performance, having won 18 leagues and three UEFA cups. In 2010 Inter Milan won the 'treble' - the Serie A, the Champions league and the Coppa Italia. The club is also the only Italian club that has never been relegated.

    While Milan has two main clubs (AC Milan and Inter Milan), the large metropolitan area, being the business capital of Italy, is largely economically supportive of both clubs. It is also the most populous metropolitan area (over 7.5 million people) and the wealthiest region in Italy.

    The club has improved revenue diversity over the past three years due to increased commercial revenues, although collection of these has been significantly delayed in practice. Cost management has also improved in recent years, although has proved challenging throughout the coronavirus pandemic due to a high fixed-wage bill.

    Historic but Dated Stadium - Infrastructure Development/Renewal: 'Midrange'

    Inter Milan plays at San Siro, a renowned and historic stadium in Milan of around 80,000 seats. The stadium belongs to the city. The stadium, one of the largest in Europe, and the largest in Italy, is also home to AC Milan (another major Italian football club). Inter Milan has a concession until 2030 with rental payments that are shared 50% with AC Milan, and amounting to around EUR5 million a year for Inter Milan alone. Inter Milan typically offsets the rental payment with capex work agreed with the city at around EUR3 million a year.

    The stadium is old, although is considered a UEFA category-four stadium, the highest possible, despite lacking modern facilities and the large number of executive suites as seen in modern European stadia.

    Significant Refinance Risk - Debt Structure: 'Weaker'

    Debt is senior at MediaCo, mainly bullet and carries refinancing risk given the upcoming maturity in December 2022. On a consolidated basis the group also has access to a EUR50 million revolving credit facility (RCF), which is fully drawn down.

    Despite Fitch's analysis being based on a consolidated approach to MediaCo and TeamCo, the structural features at MediaCo create protection for investors to limit their exposure to operating risk at TeamCo. The cashflow waterfall at MediaCo gives investors a senior claim on pledged revenues, with only a small portion of MediaCo's operating costs falling above investors' in the waterfall. This ensures payments are made to investors and reserve accounts are funded before any distributions are made to TeamCo.

    While this is a beneficial feature Fitch considers the refinancing risk to be broadly linked to the performance of the consolidated group, a feature that was particularly highlighted by the suspension of Serie A as a result of the pandemic. Therefore, limited benefit is given to structural protections on a consolidated basis but a rating uplift is applied through the application of our Parent Subsidiary Linkage Criteria (PSL).

    Financial Summary

    The financial analysis is based on Fitch's consolidated approach where the consolidated Fitch-adjusted net debt/EBITDA is the key metric due to MediaCo's largely balloon debt structure and clear interconnection with the team's performance on the pitch.

    The group is currently under liquidity pressure and its trading performances, due to the pandemic-related restrictions, are expected to remain weak with a knock-on impact on the projected leverage profile. However, there is still limited visibility on group future operating and financial strategy, including possible shareholders support and evolution of shareholder base. Fitch will update its Fitch Rating Case assumptions when there is greater visibility on Group financial and commercial strategy.

    Parent Subsidiary Linkage

    Fitch has assessed the structural protection afforded by the MediaCo ring-fencing provisions as constituting 'Weak' legal ties between the parent company Inter Milan and MediaCo. Inter Milan controls MediaCo, which contributes roughly 40% of TeamCo's revenue. MediaCo has its own cash flow waterfall that governs the senior claim over the pledged revenues for the bond investors before distributions can be made to TeamCo. We have assessed the operational ties between both companies as 'Moderate'. As per the combination of 'Weak' legal ties and 'Moderate' operational ties, our criteria allow us to notch up from the consolidated group profile by a single notch to arrive at the rating of 'BB-'.



    PEER GROUP
    Fitch rates a number of sports franchises globally, which generally benefit from creditor-protective features to offset the intrinsic risks present. Relative to global peers, Inter Milan's rating is held back by the 'Weaker' debt structure assessment, combined with relatively high leverage, leading to the 'BB-' rating level.



    RATING SENSITIVITIES
    Factors that could, individually or collectively, lead to positive rating action/upgrade:

    - The Rating Watch Negative will be resolved and a Stable Outlook will be assigned again if the group restores a solid liquidity position and the leverage profile is on a clear downward path.

    - The rating could be upgraded if Fitch-adjusted net debt/EBITDA falls significantly below 5x as a result of sustained period of high revenue and evidence of prudent cost management

    Factors that could, individually or collectively, lead to negative rating action/downgrade:

    - Failure to resolve the upcoming liquidity shortfall in a timely manner could lead to a one-notch or a multiple-notch downgrade

    - Deterioration in Fitch-adjusted net debt/EBITDA to significantly above 6.5x as a result of reduced revenue stability or increased costs or material increase of player trading expenses.

    - Deterioration in the ring-fencing provisions between TeamCo and MediaCo.

    - Failure to refinance the notes maturing in December 2022 well in advance.

    ESG CONSIDERATIONS

    Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. ESG issues are credit neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg.



    BEST/WORST CASE RATING SCENARIO
    International scale credit ratings of Sovereigns, Public Finance and Infrastructure issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of three notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit [https://www.fitchratings.com/site/re/10111579].



    CREDIT UPDATE
    Performance Update

    For FY20, the effects of pandemic led to a sharp decline in revenue. Overall FY20 financial performance was slightly ahead of our initial expectations and showing positive consolidated EBITDA. The drop in revenue was largely driven by the fall in international commercial revenues as three relevant contracts expired June 2019. The performance was also affected by the temporary suspension of games imposed by the pandemic.

    On-pitch performance in the current season of Serie A is still positive. Inter Milan finished fourth in FY18 and FY19, and finished second in FY20, hence qualifying for the lucrative UEFA Champions League for three years in a row. Inter Milan finished FY20 as runner up in the UEFA Europa League, losing the final to Sevilla FC. For the current season (FY21) Inter Milan is ranking first in Serie A with 15 games still to play. We believe the club's high wage spend could be downsized in the medium term and could still permit Inter Milan to qualify for international competitions.

    Asset Description

    Inter Milan is one of the most renowned Italian football clubs with a long history of strong fan support despite previous seasons of under-performance. The club is the only Italian club that has never been relegated from the top tier. In recent years on-pitch performance has improved, with the team qualifying for the lucrative UEFA Champions League for three years in a row.



    FINANCIAL ANALYSIS
    Fitch analyses the club on a consolidated basis and focuses on Fitch-adjusted net debt/EBITDA as the primary metric. As part of our financial analysis we have updated our assumptions to reflect the latest financial and on-pitch performance, participation in international competitions, expectation for fan stadium attendance, player salaries and net player trading. This results in poor cash flow generation leading to significantly increased leverage in the near term and progressive deleveraging towards 6.5x by 2024. However, there is still limited visibility on the Group's future operating and financial strategy, including possible shareholder support and the evolution of the shareholder base. Fitch will update its financial cases and analysis once greater visibility on the evolution of the capital structure is available.
    https://www.fitchratings.com/researc...ive-24-02-2021
    #CONTEOUT


    "When I had just become President, I went to Austria for our match. On the stadium billboard it was written: 'Inter Milan'. I went to report to the manager of the opposing team that it was enough to leave Inter. So they canceled Milan "

    Massimo Moratti

  7. Thanks (1): Sqnalkel

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