The 20 Premier League clubs will meet on 22 November in London to vote on a range of tweaks and changes relating to Profit and Sustainability Rules (PSR).
This follows Manchester City’s associated party transactions (APT) case against the Premier League, in which part of the current financial regulations were ruled unlawful, although most of City’s arguments were rejected.
For these rule changes to take effect, more than six clubs cannot vote against them.
So, who wins and who loses if they are passed?
Man City and Newcastle
Changing one letter in a single word will be one of the most significant changes on the table and could be worth hundreds of millions of pounds.
If it is agreed that ‘would’ becomes ‘could’ in the rulebook, it will allow clubs negotiating sponsorship and other deals with themselves far more leeway in what represents ‘fair’ value.
Before Manchester City’s APT case against the Premier League, clubs had to prove that a deal between companies under the same ownership would represent fair market value, but the softening to could gives far more scope for interpretation.
The obvious beneficiaries of this are City and Newcastle United, who generate considerable income from deals with companies that are controlled by their respective owners.
“Any club in negotiations with any kind of associated party would welcome it,” football finance expert Kieran Maguire tells i. “The softening of the wording from ‘would’ to ‘could’ is significant.”
Man Utd, Tottenham, West Ham and Southampton
Perhaps even more significantly, City’s APT case also highlighted that the interest from interest-free loans from club owners to clubs not being included in their PSR loss calculations was unlawful.
Under the proposed rule changes, an imaginary interest fee will have to be included as part of the £105m allowable losses over a three-year period.
This could have a huge knock-on effect for clubs (explained below), yet for those who have not relied on this their house is, effectively, already in order.
Beyond Manchester City and Newcastle, who have not loaned money from owners, Manchester United, Tottenham, West Ham and Southampton are the only other Premier League clubs that have no outstanding debt owed to owners.
Wondering why Manchester United are included in that despite the club’s sizeable debts? The Glazers borrowed the money from banks – they didn’t lend it themselves – so interest is accrued and therefore it is already factored into their PSR calculations.
Chelsea
Chelsea find themselves in a middle ground here.
The club has a significant £146m loan from its owners, Todd Boehly and Clearlake Capital.
Charged at five percent, if that is the percentage chosen by the Premier League, the interest would be £7.3m. That’s more than 20 per cent of the £35m-per-season losses permitted under the PSR rules.
However, Chelsea could benefit from the change in language around associated party transactions.
The club has been doing some clever accounting to help comply with PSR rules, selling clubs assets to companies within the same ownership.
The change in language should enable them to value the transactions on the higher end of the scale.
“Chelsea are selling the women’s team and property assets to themselves,” Maguire says. “They will benefit from the change in language.”
Arenal and Liverpool
The owners of Arsenal and Liverpool are also both in for over £100m in loans to their respective clubs.
Stan Kroenke has loaned Arsenal £259m, while Fenway Sports Group have loaned Liverpool £137m.
Nonetheless, it transpires that Uefa already includes a made-up figure for interest on loans from owners in its own spending limit rules, so any clubs playing in Uefa competitions will already be factoring this interest, which will be added to the Premier League’s PSR regulations if the new proposals are voted in, to a certain extent.
“For those clubs competing in Uefa competitions where the PSR limit is already lower than it is in the Premier League I really can’t see any difference,” Maguire says.
Brentford
Brentford, one of the clubs so praised in recent years for the way they have been run by owner Matthew Benham, could find themselves whacked by the further-reaching consequences of the rule changes.
One of the simplest ways of removing interest payments overnight is for owners to convert their loans into shares. Rather than the club owing them money, they will own more of the club.
Benham has loaned Brentford £61m. But Brentford are seeking external investment, which will come in exchange for a stake in the club.
“If Matthew converts loans into more shares, if he’s trying to sell 15 per cent of the club and he’s effectively forced by the Premier League to convert loans into shares, that might result in potential investors walking away,” Maguire explains.
“I don’t see how Matthew or the football club benefits. I do have some reservations as to the rules. There are unforeseen consequences.”
And this will affect any club when an owner attempts to sell.
“If I was trying to sell a club and telling prospective owners the only way you can put money into a football club is through shares as opposed to loans, because if you put in loans you’re going to be penalised – this isn’t real interest, it’s an artificial one purely for PSR purposes – I would be pretty upset as a prospective owner – there’s nothing wrong with borrowing money.
“Usually borrowing from an owner makes sense.”
Fulham
Shahid Khan, the Fulham owner, has already been in the habit of converting loans into shares and, possibly realising the way the winds were blowing, converted £75m of his lending into shares on October 31, according to Companies House.
“He’s gone down that route on a regular basis,” Maguire says. “He’s got history on that.”
It means Fulham now only owe him £5m, which is relatively minor.
Brighton and Everton
On paper (or an Excel spreadsheet), Everton and Brighton will take the heaviest blow from having to include imaginary interest from ownership loans in PSR calculations.
Tony Bloom, the Brighton owner, is in for £373m while Farhad Moshiri, the Everton owner, is owed a staggering £451m by his club.
Yet each club possesses a unique set of circumstances which eases the situation.
Brighton have traded players so successfully in recent years, and have been run so shrewdly, that they are not close to PSR limits, buying Bloom plenty of time to decide what to do.
Moises Caicedo to Chelsea for £115m, Alexis Mac Allister to Liverpool for £55m and Marc Cucurella to Chelsea for £60m are only some of the signings that have put them in an enviable position.
“He could convert those loans into shares, going forwards,” Maguire says. “But Brighton are so far away from the limit in terms of PSR I don’t think they will be impacted. The player sales are so amazing that more than covers everything.”
Everton, meanwhile, will be due a quick fix to their borrowing problem: Moshiri is selling the club and once that goes through the loan will be wiped out.
“When Moshiri leaves, his loans will be written off, that’s part of the deal.”
Leicester City and Bournemouth
Leicester and Bournemouth have both loaned over £100m from their respective owners. It places them in an awkward but not unsustainable position.
And it depends how the new rules develop. Leicester’s owners, for example, have given interest-free loans to fund training facilities, which are usually exempt from PSR calculations.
Will the interest on those loans now contribute to PSR spending?
“We have to be really careful here, because one of the unintended consequences is that owners might say they’re not prepared to invest in new facilities because the club is going to end up with an imaginary interest charge,” Maguire says.
Aston Villa, Crystal Palace, Nottingham Forest and Wolves
There are a clutch of clubs that have some loans from owners, but they are not really big enough to cause too much concern.
Aston Villa, Palace, Forest and Wolves have all been lent between £10m and £65m.
Maguire says: “I wouldn’t be worried about it. Even if you’re charging five percent interest on a £50m loan, that gives you £2.5m.
“You get £3.5m if you finish 13th instead of 14th in the Premier League.”
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