May 24, 2024

The change of ownership of Inter

22 May 2024 is a date that Inter fans will remember not for a sporting victory, but for yet another change of ownership. In fact, the club no longer belongs to Chinese businessman Steven Zhang, but to the investment fund Oaktree Capital Management.

The facts

In May 2021, the fund made a loan of EUR 275 million plus 12% annual interest to Inter's holding companies in order to clean up the balance sheet at the time.

The financing agreement between Zhang and Oaktree had three peculiarities:

  • the repayment of the principal together with the annual interest accrued at maturity and not phased in;
  • The right to obtain 20% on the price of any future sale of Inter;
  • A pledge on the shares of the company that owns the club.

Steven Zhang failed to repay the debt of a total of EUR 395 million, despite the fact that he tried to obtain a new loan from another investment fund (Pimco).

Oaktree has therefore enforced the pledge on shares and became owner of Inter.

The Pledge

A pledge is a security right in rem, specifically (Art. 2784 et seq. of the Civil Code), if affixed to shares, it constitutes a constraint on their circulation.

A pledge is a contract in rem that is normally constituted and perfected by the delivery of the asset to the creditor, it is necessary the divestment of the debtorin the case of equities this may also be lacking.

Pursuant to Art. 2787 para. 3 of the Civil Code, two elements are required to constitute a pledge:

  • A written document with a certain date with an indication of the guaranteed claim;
  • Delivery of the good.

In the case of a pledge on shares, specifically, the discipline varies because it can be constituted through two mode between them alternatives governed by Article 3 of Royal Decree 239/1942:

  • Annotation of the pledge on the stock e in the shareholders' book, c.d. double annotation. It serves to make the bond public vis-à-vis third parties.
  • Delivery stock by means of endorsed under warrantybut will only produce effects vis-à-vis the company with an entry in the shareholders' book as the mere delivery of the security produces effects only between the parties.

Thus, in the case of a pledge on shares, delivery of the share may be missingbut what cannot miss is the double annotation on the title and in the shareholders' book.

The discipline changes in the case of dematerialised sharesthey may not be issued for company decision pursuant to Article 2346 of the Civil Code, or, in the case of listed companies (Legislative Decree 213/1998). In this case, physiologically the delivery of the asset cannot take place so the pledge is created without the physical delivery of the security.

In the first case, the pledge can only take place if it results from deed with date certain and with subsequent annotation on the company's register of shareholders with constitutive effects of the security interest.

In the second case, on the other hand, the guarantee is established through a accounting record system made by an intermediary authorised to do so to a dedicated account, in each case evidenced by a written deed with a certain date.

It should be noted that the pledge gives the creditor security over the value of the secured claim and not over individual assets belonging to the company's assets, e.g. the creditor may not proceed with the sale of the company's real estate.

Pledge Exclusion 

Upon maturity of the loan, the creditor, in order to obtain what is due to it and realise its interest, may either

  • Far sell the thing received as a pledge (Art. 2796 Civil Code) in the manner of Art. 2797 Civil Code;
  • Ask the assignment of the thing in payment (Art. 2798 Civil Code) up to the amount of the secured debt according to the appraisal to be made by expert opinion or according to the current price if the thing has a market price.

Oaktree, therefore, requested and obtained the allocation of Inter's shares as security for the loan granted, the fund, from a mere creditor, became the club's main shareholder.

Who is Oaktree

It is an investment fund and asset manager specialising in alternative investments, managing $192 billion in assets. The fund's investment areas are credit, private equity, real estate and equities.

He was already active in the world of football as he holds 80% of the shares of Caen, which currently plays in Ligue 2 (French second division).

Dr Francesco Laface