Financial Fair Play / Profit & Sustainability

[Peppe]

I haven't read all of this, and I don't fully understand it all, but: will any of this make us able to buy the players we want an need? Or will we still be held back from competing?

[Zero]

I think the only good thing to us is the burden of proof of APT now lies with the EPL, which means whenever they want to challenge our sponsor deals it will likely go to court and thus incur a lot of legal fees that they likely cannot do it every time.  We should have better sponsor deals coming which helps a bit

 

For the ownership loan interest, the impact is not that big if the club can simply change it from loan to equity interest. For some clubs with multiple owners that might be troublesome. It won’t be big enough to scrap the whole PSR

 

However, I think a lot of still yet to come. What we don’t know is how this first ruling affects the other 115 charges. Finger crossed 

[Keegans Export]

1 hour ago, r0cafella said:

Yeah, they will convene next week and work it out. It’s important to remember the cartel only needs 14 votes to change rules as long as said rules are lawful we are all left sucking our thumbs.  
 

I think too much water has passed under the bridge for these clubs to all work together as they used to come to a solution which works for everyone, we will likely sell the cartel get together horse trade with gravy train riders and continue along the path of gate keeping. 
 

Also, I don’t see a world whereby the interest being captured on ownerships loans have a negative impact on anyone as they can just write them off or tank them depending on PSR position.  Brightons PSR position is still probably good and selling players is what they do so no worries at all. 
 

Arsenal are fully owned by Kronke so he can write off the loans to himself no issue. 

It's not going to be an easy decision for the shareholders to just write off the loans. It can be done obviously, but if Bloom is £400m in, is he just going to write off a third of his net worth? (estimated as £1.3b)

[bobbydazzla]

According to the PL and a majority of PL clubs, the prospect of NUFC becoming competitive under PIF was actually anti-competitive and had to be blocked instantly

 

An Ashley owned NUFC whose stated aim was to not be competitive, that’s not anti-competitive in the PL’s eyes

 

It’s 1984 doublespeak or Animal Farm’s “all animals are equal but some are more equal than others”.
 

An established elite keeping the proles in their place. 

 

Samuel’s article sums it up perfectly:

 

City’s owners are not the first to throw money at a project and, it is to be hoped, they won’t be the last. Yet PSR behaves as if investment is bad, as if that drive to squeeze every last drop to achieve is actually the problem. Every financial constraint further cements an established elite — and even that wasn’t enough. So new rules were drafted to ward off, and warn off, interlopers

 

 

Edited October 8 by bobbydazzla

[r0cafella]

1 minute ago, Keegans Export said:

It's not going to be an easy decision for the shareholders to just write off the loans. It can be done obviously, but if Bloom is £400m in, is he just going to write off a third of his net worth? (estimated as £1.3b)

It’s a paper write off though, as long as Brighton continues to appreciate its fine. And in Brighton’s case they don’t need to do anything. They have plenty of FFP headroom and will continue to do so as they are a gravy train club who are happy to be here. 

[JigsawGoesToPieces]

15 hours ago, The College Dropout said:

The loan thing is a bigger win imo. It sinks a number of clubs. I assume some general rules will be relaxed. 

 

 

 

 

Wonder if this was City's ploy all along?

[Boey_Jarton]

7 hours ago, Colos Short and Curlies said:

Reading the Samuel article I don’t see how the rules can/will be changed. There’s too much potential impact/legal battles around what would have happened if the interest was in the calcs 2,3,4 years ago.

 

They have to change /go, I just don’t see how they change

Samuel's article is excellent and surprisingly well researched. 

 

The point you make here " how can they fairly introduce shareholder loans into PSR" is exactly the problem and why Samuel thinks PSR is in the bin. 

 

However they do it, there could be an endless backlash of legal battles. Clubs without shareholder loans will argue they should be given retrospective headroom, clubs with shareholder loans will argue that they structured finance in this way based on the rules at the time. 

 

Samuel also hits the nail on the head on 'fair value commercial deals'. It is economically flawed to value a commercial deal based on historical deals. NEOM Vs McEwan's larger is an extreme example, but demonstrates that the fair market value of a commercial deal is entirely dependent on the two parties involved. Expect City to sue for lost earnings due to their delayed deals. 

 

In short, it's a buggers muddle - the PL have tied themselves in knots and the more regulations they introduce, the more they will keep tying themselves in knots. 

 

The PL have already spent £100m on legal fees and I expect this distraction is their number one priority when they should be focused on growing the product. 

 

 

 

 

 

[PRL]

I must admit I think people are underplaying the significance here. Crystallisation of the sums being talked about from loans to equity will just not be palatable for some of the clubs and folk involved, and commercial loans are way higher rates than BoE. You’re looking minimum 8% and someone like Everton absolutely astronomical if you are treating them based on fair market value. I cannot see a way past deadlock as there’s not going to be 14 clubs who will sign off on changes that both stitch up the 6-7 already giving evidence against the PL as well as leave clubs like Brighton and their owner having to move all cash to equity. While in practice it’s very easy to convert a loan to equity, what that means for the people providing the loan is very different - it moves them from the front of the queue to the back of the queue in terms of repayment, making recovering cash dependent on a successful sale at high market value. Not a huge risk for Arsenal, but for e.g. Brighton owner that’s a big roll of the dice. 
 

if new rules cannot be agreed on then the whole thing will need scrapping and redoing from scratch which will take years as the amount of lawyers needed will be insane, with every PL club coming in with their own red lines and groups of clubs pitching together to block one another. The requirement of 14 clubs to agree will come back to bite them at this point. 

[geordiesteve710]

1 hour ago, r0cafella said:

It’s a paper write off though, as long as Brighton continues to appreciate its fine. And in Brighton’s case they don’t need to do anything. They have plenty of FFP headroom and will continue to do so as they are a gravy train club who are happy to be here. 

Aye.

 

Bloom might lose a £300m asset on the loan to Brighton, but at the same time £300m is removed from the liabilities on Brighton's balance sheet meaning the club's value (on paper) rises by £300m. Given that Brighton is wholly owned by Bloom, his asset has just appreciated by £300m and his theoretical net worth isn't affected.

 

Brighton must have a massive ffp headroom due to consistently buying players cheap and selling them for megabucks.

[Elliottman]

3 minutes ago, PRL said:

I must admit I think people are underplaying the significance here. Crystallisation of the sums being talked about from loans to equity will just not be palatable for some of the clubs and folk involved, and commercial loans are way higher rates than BoE. You’re looking minimum 8% and someone like Everton absolutely astronomical if you are treating them based on fair market value. I cannot see a way past deadlock as there’s not going to be 14 clubs who will sign off on changes that both stitch up the 6-7 already giving evidence against the PL as well as leave clubs like Brighton and their owner having to move all cash to equity. While in practice it’s very easy to convert a loan to equity, what that means for the people providing the loan is very different - it moves them from the front of the queue to the back of the queue in terms of repayment, making recovering cash dependent on a successful sale at high market value. Not a huge risk for Arsenal, but for e.g. Brighton owner that’s a big roll of the dice. 
 

if new rules cannot be agreed on then the whole thing will need scrapping and redoing from scratch which will take years as the amount of lawyers needed will be insane, with every PL club coming in with their own red lines and groups of clubs pitching together to block one another. The requirement of 14 clubs to agree will come back to bite them at this point. 

 

I think its fair to say 95% of us on here probably havent really got a clue what it means and what impact it will have, we'll just have to see how it unfolds over the next couple of months. 

[PRL]

1 minute ago, geordiesteve710 said:

Aye.

 

Bloom might lose a £300m asset on the loan to Brighton, but at the same time £300m is removed from the liabilities on Brighton's balance sheet meaning the club's value (on paper) rises by £300m. Given that Brighton is wholly owned by Bloom, his asset has just appreciated by £300m and his theoretical net worth isn't affected.

 

Brighton must have a massive ffp headroom due to consistently buying players cheap and selling them for megabucks.

Brighton spent the best part of quarter of a billion this summer gone. If they end up mid table again and nobody wants to do a Chelsea and pay an insane amount for any of their players, it won’t be long until they are pushing up against the 3 year period with caicedo etc dropping off the books at the end of the following season. Doesn’t take long for the smaller clubs like Brighton, Southampton and Leicester to be up against it. Basically need to be perfect or they’re done. That’s what these rules mean in their present state, the elite can fuck up repeatedly without concern while everyone else (ourselves included) skate the finest of lines knowing one or two season of mis-steps takes down any progress and leaves us selling our best assets or having points deducted. It’s also why someone like Bloom, who is a very canny investor, will be nervous about switching debt to equity. 

[r0cafella]

Just now, geordiesteve710 said:

Aye.

 

Bloom might lose a £300m asset on the loan to Brighton, but at the same time £300m is removed from the liabilities on Brighton's balance sheet meaning the club's value (on paper) rises by £300m. Given that Brighton is wholly owned by Bloom, his asset has just appreciated by £300m and his theoretical net worth isn't affected.

 

Brighton must have a massive ffp headroom due to consistently buying players cheap and selling them for megabucks.

Absolutely this is one approach they can take without a doubt, as I’ve mentioned in Brightons case they can also do nothing the loan will remain interest free it’s just a rate of interest will be applied for PSR purposes but if you have headroom it doesn’t matter at all. In terms of Arsenal, the 10m per year they would need to find isn’t much. And hey, an easy workaround ie for the owners to just sponsor the equivalent amount as the fair market will have to be proven by the league. 
 

I personally don’t see how this ruling fundamentally changed any of the entrenched positions and without that change then I don’t expect anything particularly beneficial to come out of this where we are concerned. Basically back to the status quo before the obnoxious burden of proof rules were brought in. 

[Elma]

1 hour ago, r0cafella said:

It’s a paper write off though, as long as Brighton continues to appreciate its fine. And in Brighton’s case they don’t need to do anything. They have plenty of FFP headroom and will continue to do so as they are a gravy train club who are happy to be here. 

Maybe I've got this wrong, but if Tony Bloom 'wrote off' his investment to mitigate the interest payments and fall into line, what's to stop the PIF giving us a 'loan' and then writing it off? Would this not equate to just ploughing cash into the club?

[r0cafella]

Just now, Elma said:

Maybe I've got this wrong, but if Tony Bloom 'wrote off' his investment to mitigate the interest payments and fall into line, what's to stop the PIF giving us a 'loan' and then writing it off? Would this not equate to just ploughing cash into the club?

The loans don’t count as income and thus don’t help with PSR in terms of allowing us to spend more. 

[Guest]

 

sad

[madras]

2 minutes ago, Jack27 said:

 

sad

But but but "unlawful" ?

[bobbydazzla]

39 minutes ago, geordiesteve710 said:

Aye.

 

Bloom might lose a £300m asset on the loan to Brighton, but at the same time £300m is removed from the liabilities on Brighton's balance sheet meaning the club's value (on paper) rises by £300m. Given that Brighton is wholly owned by Bloom, his asset has just appreciated by £300m and his theoretical net worth isn't affected.

 

Brighton must have a massive ffp headroom due to consistently buying players cheap and selling them for megabucks.

 

I'm no Gordon Gekko so there's a decent chance this isn't right.....

 

But if Bloom switches from loan to equity, doesn't that mean he has to sell a stake / all of the club to ever release that equity

 

Whereas, if it's a loan he can recall it and his ownership of all the shares in Brighton isn't affected

 

 

 

 

Edited October 8 by bobbydazzla

[WilliamPS]

Just now, bobbydazzla said:

 

I'm not Gordon Gekko so there's a decent chance this isn't right.....

 

But if Bloom switches from loan to equity, doesn't that mean he has to sell a stake / all of the club to ever release that equity

 

Whereas, if it's a loan he can recall it and his ownership of all the shares in Brighton isn't affected

 

 

 

 

 

No, he could do a dividend to release equity which doesn’t touch the club ownership 

 

The reasons for loans is it’s more tax efficient for him personally, as this would incur tax.

[Keegans Export]

2 minutes ago, bobbydazzla said:

 

I'm not Gordon Gekko so there' decent chance this isn't right.....

 

But if Bloom switches from loan to equity, doesn't that mean he has to sell a stake / all of the club to ever release that equity

 

Whereas, if it's a loan he can recall it and his ownership of all the shares in Brighton isn't affected

 

 

I think you can just create shares, is he the only shareholder?

[Jackie Broon]

3 minutes ago, Jack27 said:

 

sad

 

And not really accurate, the amendments were significant to us, more than Man City, because they would have really hampered our ability to grow sponsorship revenues as we grow. The amendments have been completely thrown out and it's going to be very difficult if not impossible for the PL to make PSR and APT any more stringent than it was before the amendments again.

[bobbydazzla]

Just now, Keegans Export said:

I think you can just create shares, is he the only shareholder?

 

If he issues new shares and sells them to a 3rd party then he's still diluting the ownership and he's no longer in full control of Brighton. I think that's how it works innit

[Zero]

Only Everton would be massively hit by the notional interest added to PSR, assuming the annual rate around 5%. For Arsenal it’s just 12.5m per year - it’s easy.

[The College Dropout]

36 minutes ago, PRL said:

Brighton spent the best part of quarter of a billion this summer gone. If they end up mid table again and nobody wants to do a Chelsea and pay an insane amount for any of their players, it won’t be long until they are pushing up against the 3 year period with caicedo etc dropping off the books at the end of the following season. Doesn’t take long for the smaller clubs like Brighton, Southampton and Leicester to be up against it. Basically need to be perfect or they’re done. That’s what these rules mean in their present state, the elite can fuck up repeatedly without concern while everyone else (ourselves included) skate the finest of lines knowing one or two season of mis-steps takes down any progress and leaves us selling our best assets or having points deducted. It’s also why someone like Bloom, who is a very canny investor, will be nervous about switching debt to equity. 

Nah. Leicester had massive wages.  Brighton don’t.  Brighton wages are like bottom 10.  And until this summer, they didn’t reinvest the profits in the summer. 
 

Kasper Schmeichel, Vardy etc. all on good wedge at the time. Brighton don’t have players on 6 figures a week.  Even this summers splurge the highest wages will be £80k odd. 
 

We are handing out megabuck salaries. Brighton would have sold Bruno, Joelinton and Gordon rather than give them megabuck contracts. 

[Keegans Export]

5 minutes ago, bobbydazzla said:

If he issues new shares and sells them to a 3rd party then he's still diluting the ownership and he's no longer in full control of Brighton. I think that's how it works innit

 

He can just sell them to himself as I understand it. We've done the same thing whenever PIF/Reubens have wanted to put cash into the clubs accounts.

[Mahoneys Tache]

1 hour ago, Boey_Jarton said:

Samuel's article is excellent and surprisingly well researched. 

 

The point you make here " how can they fairly introduce shareholder loans into PSR" is exactly the problem and why Samuel thinks PSR is in the bin. 

 

However they do it, there could be an endless backlash of legal battles. Clubs without shareholder loans will argue they should be given retrospective headroom, clubs with shareholder loans will argue that they structured finance in this way based on the rules at the time. 

 

Samuel also hits the nail on the head on 'fair value commercial deals'. It is economically flawed to value a commercial deal based on historical deals. NEOM Vs McEwan's larger is an extreme example, but demonstrates that the fair market value of a commercial deal is entirely dependent on the two parties involved. Expect City to sue for lost earnings due to their delayed deals. 

 

In short, it's a buggers muddle - the PL have tied themselves in knots and the more regulations they introduce, the more they will keep tying themselves in knots. 

 

The PL have already spent £100m on legal fees and I expect this distraction is their number one priority when they should be focused on growing the product. 

 

 

 

 

 

Football being described as a product is the fundamental problem.