Southampton owner Dragan Solak has to pay back £110m loan by end of 2024
Dragan Solak, a 59-year-old Serbian-born businessman, took over Southampton in January last year but club are now odds-on to be relegated
Martyn Ziegler
, Chief Sports Reporter
Monday April 10 2023, 1.45pm, The Times
The owner of relegation-threatened Southampton faces having to pay back a £110 million loan, money he used to buy the club last year, by the end of 2024.
Dragan Solak, a 59-year-old Serbian-born businessman, took over Southampton in January last year. The club sit bottom of the Premier League and are odds-on to be relegated to the Sky Bet Championship, which would cause their turnover to drop by at least one third.
Solak’s spokesman said that repayment of the loan is not related to Southampton’s financial or footballing performance, and the club’s cashflow would not be used to repay the loan.
The details of the loan are provided in the accounts of a Luxembourg-registered company, Summer Invest Sarl, which is owned by Solak and a private equity group. It is also the majority shareholder in the United Group, the telecommunications and media operation he founded in 2007, which made the loan to Solak.
The Summer Invest accounts also reveal that an extra £50 million loan facility was available to be accessed by Solak, though it is not clear if he has used this. The accounts state: “In December 2021, the group provided a loan in the amount of £110 million (€129.4 million) to Mr Solak based on the loan agreement dated December 14, 2021. The loan is secured by shares in Summer Parent Sarl which are held by an entity controlled by Mr Solak.
“The terms were negotiated on an arms-length basis and include a three-year term, customary mandatory pre-payment provisions and a loan-to-value financial covenant.
“An additional £50 million amount remains available for drawing under the loan prior to December 15, 2022.”
It adds that the latest the loan should be repaid is 36 months after the date of the loan agreement, which would be December 2024.A spokesman for Solak’s family office told The Times: “Repayment of the loan is not related to the performance and financials of Southampton FC. There isn’t and hasn’t ever been any intention to repay the loan from Southampton FC cashflow.”
It is understood that Solak is prepared to provide additional funding to Southampton should it be needed, and he had not expected his investment in the club to provide an immediate return.
Solak’s takeover of Southampton followed his company Sport Klub losing the Premier League rights in Serbia and the Balkans to the state-owned broadcaster, Telekom Srbija. Sport Klub had paid €12 million (about £10.5 million) a year for the rights, but were blown out of the water by a €600 million, six-year deal for the 2022-28 rights.
Many saw this as a political move by Serbia’s president, Aleksandar Vucic, as Solak’s media companies have been among the few that have been openly critical of his government.
The existence of the loan to Solak comes at a time when the credit rating agency Moody’s changed its outlook for the United Group’s parent company Adria Midco from stable to negative in January, citing “the company’s high leverage and weakened liquidity over the past 12 months”. It did, however, maintain the B2 corporate credit rating for €4.58 billion owed by the United Group to bondholders.
The Moody’s release cited the loan to Solak, stating: “In addition, its liquidity has weakened owing to . . . other uses such as related party transactions including a loan to the founder.”
The B2 rating affirmation did reference “the company’s solid operating momentum and growth opportunities, improved scale and scope of operations over the past few years, and its strategic shift to focus on cash flow generation, liquidity and deleveraging”.
Solak’s family office referenced the ratings agency S&P affirming the rating and outlook of United Group last month, stating it expects it to “continue to post solid revenue growth and improving [financial performance] despite macroeconomic headwinds and inflationary pressures”.
