(Bloomberg) --

Italian football club FC Internazionale Milano SpA may pay considerably more than its existing interest rate for a new bond, in a sign of the market’s rising unease with risky credits. 

The club, which suffered a rating downgrade deeper into junk since it last sold debt in 2017, may pay as much as 7% for a 415 million-euro bond ($464 million), according to people familiar with the deal. The new bond will refinance an outstanding debt that pays just 4.875%. The investor meetings which were arranged by Goldman Sachs concluded on Wednesday and the final price on the bond is yet to be set. 

Inter Milan needs to keep raising cash to fund operations while its majority shareholder, Suning Holdings Group Co., attempts to bring in more financial backers after securing a loan of 275 million euros from Oaktree Capital in May 2021. The club is opting to raise debt on the public markets, unlike its rivals Barcelona, Real Madrid and Manchester City, which issued loans and privately placed bonds even though they typically require higher coupons.

Representatives for Inter weren’t immediately available for comment.

Global markets are in a risk-off mood, following the comments by the U.S. Federal Reserve signaling an interest-rate hike as early as March. The cost of insuring European junk-rated debt jumped as much as 14 basis points on Thursday morning as investors retreated from buying risky assets. 

But even before the Fed’s meeting, the unofficial guidance investors saw in the marketing process was in the low-to-mid 6% range, because the market sought compensation for the club’s financial risks. That pricing, however, would’ve been significantly higher than the 4.5% average for comparably-rated -- single B -- companies, according to data compiled by Bloomberg.

The higher costs could hurt the group’s balance sheet as it attempts to improve its capital structure following the damaging impact of Covid-19 restrictions on the club’s finances. 

Investors noted the limited collateral that the company can pledge as assets. They own the training complex but not the headquarters, or the stadium, said Mark Benbow a high-yield fund manager at Aegon Asset Management, who passed on buying the new bonds. 

“It’s tricky because the business is run for trophies and not cashflow,” he said.

Inter Milan recorded the highest-ever loss by an Italian football club of 245.6 million euros in 2020/2021, as noted by KPMG’s Football Benchmark, the year it won the domestic league. 

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