Financial Fair Play / Profit & Sustainability

[Ben]

The system seems fair, 20 clubs with an equal share, any votes must have 14 to pass. How the fuck has it come to total capitulation.

[gbandit]

1 minute ago, Ben said:

The system seems fair, 20 clubs with an equal share, any votes must have 14 to pass. How the fuck has it come to total capitulation.

Because people haven’t been voting in their own interest at times because they have no power. Therefore, rules that suit a smaller number of clubs have come into effect to their detriment

[madras]

1 minute ago, Ben said:

The system seems fair, 20 clubs with an equal share, any votes must have 14 to pass. How the fuck has it come to total capitulation.

Because some clubs ( and I'll include us under Ashley) would rather be 14th with a share of the current TV money than fighting  for a title after the cartel clubs have fucked off to form their own league and the TV deal they'd then get

 

[Jackie Broon]

4 minutes ago, gbandit said:

Because people haven’t been voting in their own interest at times because they have no power. Therefore, rules that suit a smaller number of clubs have come into effect to their detriment

 

They have been voting in their interest, PSR maintains the gulf between the promoted clubs and the mid-table clubs as well as pulling up the ladder to clubs wanting to break away from them into the top 6.

[Abacus]

35 minutes ago, Jackie Broon said:

 

The Vlachodimos - Anderson deal etc.

 

 

 

Except he refers to these as being potentially treated as APT deals, which they clearly weren't and aren't. It makes me doubt his analysis overall.

 

Unless he is talking about everything being classed as if it were an APT deal, which is clearly nonsensical as well.

 

Edit - in fact, wasn't he one of the people downplaying the significance of the ruling in the first place? Memory may be wrong, but that's quite the volte face if it isn't.

 

 

Edited October 13, 2024 by Abacus

[Heron]

1 hour ago, bobbydazzla said:

I’ve said this as part of other rants I’ve made in here, but I’ll raise it again as a single point:

 

Why didn’t the PL investigate Ashley’s APT’s between NUFC & Sports Direct, which were clearly not FMV?

 

I think the maximum he paid to plaster our entire ground in SD logos was £2m in a season. And for the last 2 seasons of his reign, SD paid NOTHING. We were being financially abused by an APT parasite

 

When it came to protecting NUFC from this parasitic abuser, the PL didn’t give a fuck

 

But surprise surprise they reacted within days when we potentially had the financial clout to challenge the cartel 

 

 

 

Very valid point.

[Abacus]

They're only looking at ATP's above market value, not below.

 

Though you might argue that if the true aim was sustainability to stop clubs going bust, why that shouldn't have been the case.

[Ben]

So really FMV will never be proven on any football transaction 

[bobbydazzla]

12 minutes ago, Abacus said:

They're only looking at ATP's above market value, not below.

 

Though you might argue that if the true aim was sustainability to stop clubs going bust, why that shouldn't have been the case.

And that just emphasises the doublespeak that is PSR

 

It’s claimed by the PL that PSR stops clubs “doing a Pompey” when in reality PSR is intended to stop anyone gaining enough financial muscle to challenge the cartel

 

And as a result, anti-competitive behaviour by the PL definition of the term means a club becoming financially competitive enough to be able to challenge the cartel 

 

 

Edited October 13, 2024 by bobbydazzla

[Dr.Spaceman]

3 minutes ago, Ben said:

So really FMV will never be proven on any football transaction 

 

It's surely FMV with the market being....other football related financial dealings. It's stupid. You should technically never be allowed to break the transfer record ever again under those rules, unless you've got someone who scores a goal every half an hour over the course of 38 games, given Haaland's fee.

[Ben]

1 minute ago, Dr.Spaceman said:

 

It's surely FMV with the market being....other football related financial dealings. It's stupid. You should technically never be allowed to break the transfer record ever again under those rules, unless you've got someone who scores a goal every half an hour over the course of 38 games, given Haaland's fee.

 

I'm surprised some of the richest people in the world are still interested in a league with zero growth potential.

[Scoot]

3 hours ago, Ronson333 said:

 

 

Stopped reading at...

 

Club took it upon themselves to challenge APT rules and failed

 

As they quite obviously didn't fail. 

[Jonas]

12 hours ago, loki679 said:

All this just to stop us from maybe, possibly winning something for the first time in 50 years

Cure is worse than the disease.

Literally the worst thing that could have happened is ourselves on Villa would be perennial CL contenders and future title contenders.

Its like 8 teams challenging for 4 places and more teams challenging for the title is the last thing they want. It would be anything but bad for the league but they'll sacrifice even there own benefit to keep the usual suspects happy.

 

 

Edited October 13, 2024 by Jonas

[TRon]

15 hours ago, Whitley mag said:

 

 

 

 

 

 

Of course it's not the PL officials who will be footing this bill, it will be all the PL clubs in effect, since they are the ones who fund these legal costs. Rick Masters had to cancel some high profile golf tournament appearance, that is about as much as it will have cost him.

[et tu brute]

3 hours ago, Ben said:

The system seems fair, 20 clubs with an equal share, any votes must have 14 to pass. How the fuck has it come to total capitulation.

It's not though in business terms (like it or not that's what it is now), as you can get clubs banding together to stop other clubs. Which is exactly what is happening. It was always going to come to a head

[NG32]

6 hours ago, Heron said:

Perhaps that was there intention? After the whole Super League debacle...

Interesting thought.

[r0cafella]

Spoiler

www.nytimes.com
Everton, Brighton, Arsenal and the Premier League clubs with the largest shareholder loans
Matt Slater, Philip Buckingham
12 - 15 minutes

From the moment a 175-page tribunal verdict was published last week, there was the inevitable scramble to declare a winner in an opening legal battle between Manchester City and the Premier League.

Both sides attempted to spin the verdict in their favour but in a long list of legal arguments, some more important than others, there was no denying City could claim one significant victory: in successfully arguing that shareholder loans should face the same assessments as any commercial deal, they did enough to ensure that associated party transactions (APT) rules could be declared unlawful.

The Premier League maintains the legal tribunal brought against it by City has served to endorse “the overall objectives, framework and decision-making of the APT system” but defeats suffered along the way have left it facing significant legal and political problems.

So the APT rules now need to be amended, but can the league get a two-thirds majority of clubs to back the repair job, especially when City’s lawyers scrutinise their handiwork?

The Athletic analyses the long-term implications of shareholder loans and the benefits they bring.
What are shareholder loans?

They do exactly what it says on the tin: it is money loaned to a club by their shareholders. They amount to a form of funding, a means for owners to inject cash into the football project without seeking equity in return. Typically these are long-term arrangements, often free of interest payments.

And clubs are certainly fond of them. Fourteen of the 20 Premier League teams in the 2022-23 season had shareholder loans recorded in their most recent set of accounts and City’s legal team were only too happy to highlight the extent of their use during this case. It was cited that £1.5billion ($1.96bn) out of £4bn total borrowings across the division — 37 per cent — were through shareholder loans.

“The main motivation (behind shareholder loans) is that it’s an easier mechanism for an owner getting their money back,” says Chris Weatherspoon, an accountant and financial analyst at the football website Game State. “If they put in equity, that’s them effectively giving up any right to a return, short of paying out dividends, which hardly any club does or even can do, as most are in a position of accumulated deficits, or making their money back when they sell up.

“It’s also more tax efficient. Interest costs on debt — if owners charge them — are tax-deductible for clubs, so reduce the club’s tax burden; dividend payments aren’t.

“Another point is that if there’s a need to plug a cash-flow gap quickly, lending money is easier than working through the mechanism of issuing shares.”

The Premier League, until this point, had excluded shareholder loans from APT rules, saying they would “encourage investment” in clubs. It also reminded us this week that 19 of the 20 members, City included, had been responsible for voting through the existing APT rules in 2021, with only Newcastle United abstaining.

Read more: Manchester City vs the Premier League

    Man City and PL both claim victories after APT ruling
    The APT verdict (briefly) explained
    APT verdict hasn’t changed anyone’s mind

Why did City raise them as an issue?

City came hard at the Premier League when launching their legal challenge in June, saying the APT rules in place were “discriminatory and distortive”. They also called their existence “unlawful” and set about picking holes in a set of regulations designed to prevent clubs earning increased revenue through inflated commercial deals.

Everything, in theory, had to reflect fair market value (FMV). Only, shareholder loans have never done that. No bank would lend hundreds of millions interest-free, so why should a club benefit from such an arrangement through its owners? It was, City argued, the very definition of an associated party transaction and “at odds with the whole rationale of PSR (the league’s profit and sustainability rules)”.

“The exclusion of shareholder loans from the APT rules distorts competition in permitting one form of subsidy, namely a non-commercial loan but not another, namely a non-commercial sponsorship agreement,” City were cited as saying in the verdict.

And, most importantly, City’s argument over shareholder loans was accepted by the independent panel. That will force a change to the Premier League’s rules, with shareholder loans integrated into the broader APT regulations.

Any money loaned to a club by their owners will need to reflect FMV and see interest rates charged in line with commercial loans. The changes will bring the Premier League in line with UEFA, European football’s governing body, which applies FMV to shareholder loans in its financial fair play (FFP) calculations.
Which clubs have received most money from shareholder loans?

Three clubs lead the way by some distance: Everton, Brighton & Hove Albion and Arsenal. Collectively, those three had £1.08billion of debt owed in shareholder loans recorded in their 2022-23 accounts.

Everton’s profligacy during the reign of Farhad Moshiri sees them top the list with £451million borrowed in interest-free loans from the Iran-born businessman, a sum expected to be written off when The Friedkin Group completes its looming takeover of the club.

After Everton and Brighton, it is Arsenal who have borrowed most from their owners (Photo: Getty Images)

Brighton come next with £373million owed to Tony Bloom, their long-standing owner, in another interest-free arrangement. That outstanding sum had been trimmed thanks to a £33m repayment during the 2022-23 season but had previously increased every year since 2013.

Arsenal’s shareholder borrowings are much more recent. A refinancing of existing debt in 2020 saw them draw down a loan from parent company Kroenke Sports & Entertainment and, as of the 2022-23 accounts, that sum now stands at £259million. The precise rates of interest on that shareholder loan have not been disclosed, but Arsenal’s last two sets of accounts showed interest paid on total debts (including £10.2m worth of debentures) to be £4.3m. That is less than half the interest Arsenal had previously paid when holding external debt.

Chelsea (£146million), Liverpool (£137m) Leicester City (£132m) and Bournemouth (£115m) are also north of £100m in shareholder loans but Leicester’s figure has been markedly reduced after £194m of loans to King Power International Co Limited, the club’s parent company, got capitalised into equity in February last year.

That is an approach others could adopt. Existing loans can be converted into shares, wiping out the borrowing and placing a club beyond the coming scrutiny.

It will not be a concern to half a dozen sides, including City, Tottenham Hotspur, Newcastle and Manchester United, who held no shareholder loans when filing their most recent set of accounts.

go-deeper

GO DEEPER

What are the implications of Man City’s APT case for Newcastle?

“How the Premier League address the shareholder loan issue will be very interesting, and I would advise them to be very cautious about what they do next,” says Jack Williams, a competition law barrister at Monckton Chambers.

“Their current rules have just been found to break competition law, so they must be careful not to create a new problem. The judgment has also given clubs the right to seek injunctive relief to prevent rules they might not like from coming in. But, on the other hand, the tribunal also relied on public law principles of due process and that rules out the retrospective application.

“So the league is in a difficult position. They need to create a level playing field, not one that is tilted.”
What could happen now?

Now there’s a question. The Premier League maintains this is just a bump in the road, no cause for alarm. Its belief is that the imminent change to its APT rules will not lead to retrospective assessment of PSR calculations, meaning no club will end up in hot water over their use of shareholder loans.

If only it were that simple.

“The exemption of shareholder loans was Manchester City’s big win on competition law and the potential impact is very significant indeed,” explains Stevie Loughrey, a partner at sports legal firm Onside Law. “The Premier League will need to amend its rules to expressly include shareholder loans. It remains to be seen whether this is to be from December 2021 (when APT rules were introduced) or just going forward.

“If the APT rules are invalid and we revert to the RPT (related party transaction) rules, then it would seem shareholder loans do need to be factored in from December 2021. All Premier League board decisions made since December 2021 on APTs may need to be revisited.

“Further, you can see that clubs such as Everton and Nottingham Forest may contend they have been subjected to punishments under an unlawful regime and seek compensation for that.”

Simon Leaf, a partner and sports law specialist at Mishcon de Reya, shares those misgivings.

“On the one hand, whilst the Premier League may try to carry on with the existing rules and rely on what is commonly known in the legal world as the ‘blue pencil test’, where essentially they would argue that the rules should be read so that they are automatically reinterpreted in a lawful way, it would appear that Manchester City would challenge this strongly,” says Leaf.

“City would, no doubt, try to argue that until formal changes to the rules are voted on and agreed by the other Premier League clubs, the APT rules are unlawful and therefore cannot be enforced.

“In my view, City may even try to suggest that the APT rules can only now work if the shareholder loan calculation applies retrospectively — which again, is likely to be problematic for the Premier League because several clubs are likely to oppose this, and may even try to challenge such a rule change themselves.”

(Justin Setterfield/Getty Images)

Consider this a can of worms opened.

For all that the Premier League insists there is a simple fix, a mere tweak to the rules, City believe all APT rules have been declared null and void by this tribunal.

And though the league may choose to avoid assessing shareholder loans retrospectively, as the likes of Everton will be hoping, it would leave it open to compensation claims from every club who have had a sponsorship deal revised downwards in the past three years.

The rabbit hole we are looking down, however, does not end there.

What if RPTs, which is what the Premier League previously called APTs, were also handled incorrectly, when assessments were only made once a club had declared them in their audited accounts? City might well be seeking an answer to that question as they attempt to defend themselves over more than 100 different finance-related charges.

That can be an argument for another day in court, but the implications for retrospective assessments are worthy of inspection.

Much would depend on when any shareholder loans were taken out. The FMV for borrowing £200million in 2021 would be very different to striking the same arrangement this year, with Bank of England interest rates climbing from 0.1 per cent to the current rate of five per cent during that period.

Tottenham, as an example, reported in their most recent accounts that 90 per cent of their £851million of borrowing, largely for the construction of their new stadium finished in 2019, was at fixed rates that averaged 2.79 per cent.

The shareholder loans taken out by Everton and Brighton came over several years, largely predating the sharp climb in interest rates since 2021, but in enjoying interest-free borrowing they would both be liable to a significant reassessment of PSR. Everton, even if judged by historic lending rates of three per cent, would need to add £12million a year to their already-strained PSR calculations.

Brighton would require similar alterations, but their participation in the Europa League last season would suggest they have little cause to worry. UEFA, unlike the Premier League, applies FMV to shareholder loans when assessing FFP positions and would have calculated Brighton’s £373million of debt to Bloom accordingly.

That would also suggest Arsenal, who do pay a low level of interest on their borrowing from Kroenke, and Liverpool would be compliant regardless of any reassessments.

Shareholder loans, though, will never be quite the same again.

(Top photo: Getty Images)

 

[Nucasol]

1 hour ago, r0cafella said:

“The Premier League will need to amend its rules to expressly include shareholder loans. It remains to be seen whether this is to be from December 2021 (when APT rules were introduced) or just going forward.

“If the APT rules are invalid and we revert to the RPT (related party transaction) rules, then it would seem shareholder loans do need to be factored in from December 2021. All Premier League board decisions made since December 2021 on APTs may need to be revisited.

“Further, you can see that clubs such as Everton and Nottingham Forest may contend they have been subjected to punishments under an unlawful regime and seek compensation for that.”

Simon Leaf, a partner and sports law specialist at Mishcon de Reya, shares those misgivings.

“On the one hand, whilst the Premier League may try to carry on with the existing rules and rely on what is commonly known in the legal world as the ‘blue pencil test’, where essentially they would argue that the rules should be read so that they are automatically reinterpreted in a lawful way, it would appear that Manchester City would challenge this strongly,” says Leaf.

“City would, no doubt, try to argue that until formal changes to the rules are voted on and agreed by the other Premier League clubs, the APT rules are unlawful and therefore cannot be enforced.

“In my view, City may even try to suggest that the APT rules can only now work if the shareholder loan calculation applies retrospectively — which again, is likely to be problematic for the Premier League because several clubs are likely to oppose this, and may even try to challenge such a rule change themselves.”

 

Genuinely can’t see how they navigate the ship through this. City will push from December 2021 for application of the shareholder loan rules, the PL can’t do it retrospectively, so expect another legal can of worms to be opened. Despite what they’ve said, the PL have absolutely fucked themselves with this one. It’s perfect chaos pitting the two PL factions against each other.

[r0cafella]

11 minutes ago, Nucasol said:

 

Genuinely can’t see how they navigate the ship through this. City will push from December 2021 for application of the shareholder loan rules, the PL can’t do it retrospectively, so expect another legal can of worms to be opened. Despite what they’ve said, the PL have absolutely fucked themselves with this one. It’s perfect chaos pitting the two PL factions against each other.

The way to navigate it is quite clear and straightfotware however it's unlikely they choose that path. They simply have to get back to all being in agreement of whatever rules they want to publish. So basically horse trade with one another until you find something palatable to all members.

[Jackie Broon]

32 minutes ago, r0cafella said:

The way to navigate it is quite clear and straightfotware however it's unlikely they choose that path. They simply have to get back to all being in agreement of whatever rules they want to publish. So basically horse trade with one another until you find something palatable to all members.

 

Unless they completely wipe the PSR slate clean for everyone I don't see how they can avoid doing it retrospectively, PSR is retrospective over the previous 3 years. If they don't take into account FMV interest on shareholder loans retrospectively over that period the clubs with them would have an unfair and unlawful advantage for the next three years.

 

But then if they do that they'll run into a situation similar to the Leicester case. So I think they will probably have to start again with a clean slate for everyone.

 

 

Edited October 14, 2024 by Jackie Broon

[FloydianMag]

 

 

 

Edited October 14, 2024 by FloydianMag

[FloydianMag]

 

[KetsbaiaIsBald]

44 minutes ago, FloydianMag said:

 

 

That is a really interesting point.  

[Nucasol]

59 minutes ago, Jackie Broon said:

But then if they do that they'll run into a situation similar to the Leicester case. So I think they will probably have to start again with a clean slate for everyone.

Agreed but still the mechanics on fair value deals, permissible losses etc are still there to be crashed through with two sides that are diametrically opposed. Smacks of trying to solve for the Middle East’s problems. Logical approach but never going to happen.

[Heron]

From what I can see there is only one way this can feasibly pan out (which I'll come to across the post) and it won't be significant enough to cause large waves across the league (by footballing means I.e. helping us kick on).

 

First though - there is only one way that, us really kicking on (financially) could happen: through APTs/RPTs being opened up until the new rulings are agreed on and implemented. How FMV is calculated would then have to be with consideration of other sports and subsequently the amount being spent by the Saudi's on other sports. Which is kind of a beauty is in the eye of the beholder situation and also which I severely doubt would factor in their decision making given they already appear to be in cahoots with certain league members and so any respective commercial deals would be with consideration to the size and history of a club versus existing deals for the existing "elite".

 

Which brings me to (as I understand) the most likely solution: If clubs cannot be punished retrospectively for actions they've taken with regards to shareholder loans. Then the only way to fairly balance the playing field (for those operating without this financial input) is to constrain them now, based on the application of any historical, financial shortfallings. To do so, they may need to (even temporarily) extend the PSR rulings to take them beyond 3 years in order to calculate the respective interest that should have been applied from 2021 onwards and have them applied to the next footballing seasons' PSR calculations. For (theoretical) example, if Brighton loaned £100m in 2021 and the rate was 0.1% then £100k would be added, if they had another loan of £100m in 2022 at 1% and had only paid back £50m from the previous year then they'd factor in £1.5m, etc. etc.

 

But as you can see, unless the borrowing took a significant incline when the rates did to nearer 5-10% this is very unlikely to have any impact - with the salary of just one periphery player being cut would probably resolve that issue.

 

The league, its members and football fans, generally, probably do not wish to entirely lose the whole APT/RPT restrictions on the whole, and presumably would rather refine them so to keep the competitivity of the game, and commercially, this would also mean that the "product" retains its entertainment value. Taking bias, Man City and Newcastle in particular would argue why other clubs have been allowed to spend their respective fortunes to establish dominance but they are restricted from doing so - Newcastle United in particular.

 

So ultimately, financially and from a subsequent footballing point of view - the only way the likes of Newcastle can now "catch up" is within investment in club infrastructure and somehow convincing mid-top end players to come here over the next decade with ambitions capped at potentially playing with no European football at the bottom end and Champions League football and a potential cup run at the top end, whilst infrastructure catches up. Good luck selling that to ambitious youngsters.

 

And thus the status quo is maintained unless APT/RPT is blown open, even, albeit for a brief period and even if it was, the issue just moves to the next club after Newcastle or indeed to us, after Man City.

 

That brings me to the Premier League: One thing they cannot now escape is a legal battle versus any of the leagues incumbents from the last 3 seasons (26 teams if I have calculated correctly).

 

In the first instance, clubs such as Man City and Newcastle may seek compensation of APTs/RPTs to bring them back in line with where they would have been financially, given that elements of the APT/FMV rulings have been deemed unlawful. This would enable Newcastle to catch up in particular with extended transfer capabilities in upcoming transfer windows. It would also allow Man City to further assert dominance over those they're directly competing with.

 

They're the easiest and obvious clubs.

 

You then have a real quagmire (giggidy) of clubs who would have either had increased, or decreased revenue based on league standing which could extend from just 1 or 2 million for mediocre/mid-table sides to tens of millions where relegation is considered.

 

Said clubs cannot be reprimanded historically, so the only way to balance the playing field is to award compensation to those who should rightfully receive it.

 

Now how this is paid, I simply have no clue. In simplest of terms - the Premier League would have to. However, their investment is presumably through commercial deals and a degree of paying into the league to be one of the (said) members. Other clubs won't want to pay additional to cover said costs, therefore it would have to be through their own (PL) commercial deals and revenue. Will businesses be willing to pay extra to field that cost to clubs? Presumably not.

 

So the Premier League's growth as a product is completely stunted, unless quality is continued to be added through clubs being able to afford the best players etc. And so there's a chicken and egg element.

 

All the while - the league has lost all credibility and trust from what I suspect is the majority of its members. Which for me, means that a combination of the two basically destroys and burns the Premier League to the ground, with the immediate removal of Masters the first desperate attempt to appease its members.

 

The demise of the Premier League then leads to the "big 6" having more fluidity to join a Super League (presumably) without any existing league structure in place for England's "elite" 20 sides. Unless the FA immediately step in to create the equivalent as a governing body, which then leaves it down to fans and law to prevent such a "super league" (with Europe's elite) from being devised.

 

So in summary, (if you're still awake and my understanding of it all is all correct) we need to ask ourselves (as Newcastle fans) if we want the league to be more competitive or we want to blow it out the water? Maybe the latter for a short while before new rules are implemented? But one thing is for absolute certain English football needs rebuilding.

 

 

Edited October 14, 2024 by Heron