Bournemouth case emphaizes complexity of Premier League rules

Bournemouth managed to avoid breaching the Premier League’s profitability and sustainability rules (PSR) after having a £71.4million shareholder loan write-off approved by the league.   The tone of the following article might imply that I have some grudge against Bournemouth: far from it, I find them an interesting side to watch on television.   But I do get puzzled by the complexity and application of Premier League rules and whether they create as level a playing field as is practicable.

The south-coast club lost £77.2m pre-tax in the 2022-24 PSR cycle, which included the £71.4m loan write-off.  This means that if the Premier League had blocked the write-off from counting towards PSR, Bournemouth would have breached the financial regulations, with pre-tax losses at £148.6m over a three-year cycle against a limit of £83m.

Bournemouth’s PSR loss would have been lower than their pre-tax one, but the allowable expenditure the club could claim would not have brought them even close to their £83m limit. The Premier League has previously punished Everton and Nottingham Forest with points deductions for breaching PSR.

The £71.4m was written off in December 2022, when Maxim Demin sold the club to American businessman Bill Foley’s Black Knight Football Club group.  Ordinarily, shareholder loan write-offs, which the £71.4m between Demin and Bournemouth constituted before his sale of the club, are not counted when PSR compliance is calculated. The reason it was allowed to be written off from a PSR perspective here, and Bournemouth are not the only top-flight side to take advantage of this scenario, is because it is linked to the takeover transaction.

In that regard, it was deemed different to Demin not selling and writing off the £71.4m loan. It was ruled upon as an arms-length deal from a fair market value standpoint and a natural, albeit helpful, consequence for Bournemouth. The additional financial headroom created by the loan getting written off and counting towards their PSR calculation enabled Bournemouth to spend on players such as Dean Huijsen, Tyler Adams and Evanilson.

There are examples of Premier League clubs being sold with outstanding shareholder loans where this hasn’t happened.

Multiple sources, speaking on condition of anonymity to protect their positions, told The Athletic that the Premier League allowed Bournemouth to retain the loan write-off in their PSR calculation because it represented an arm’s length transaction (as part of the club sale) and so passed the league’s fair market value assessment protocol.

The transaction was deemed separate from an existing shareholder writing off a loan — a transaction the Premier League would ordinarily have clubs exclude from their PSR calculations — because it came about via a change of ownership. It appears one of the key points was that Demin writing off the loan after selling the club meant the transaction wasn’t officially a shareholder or related-party one, and represented, in effect, third-party income for PSR purposes. It is a timing distinction that could raise eyebrows across the top flight.

The Athletic has learnt this is not the first time a Premier League club have benefited from a change in ownership this way. It appears that if outgoing owners are happy for outstanding loans to be written off to the club’s profit and loss statement, the Premier League is happy for the club in question to enjoy the benefit of that write-off — no matter how significant that benefit may prove to be.

Given the transaction has been deemed exceptional by virtue of it coming about through a change in ownership, there seems limited scope for others to repeat this move. Only upon a sale would a club be able to benefit from a shareholder loan write-off, at least from a PSR perspective.

While PSR is, by definition, about encouraging sustainability in clubs, there has long been an underlying aim of stopping them gaining an unfair sporting advantage through breaching financial rules. Indeed, the premise of a PSR breach generating a sporting advantage formed a key plank of the Premier League’s legal battle with Everton last season, with the league — successfully — arguing their overspending had helped them on the pitch.

Across the 2022-23 and 2023-24 seasons, Bournemouth spent £271.1m on new players and recouped just £5.1m in player sales, a net spend of £266m. That was the fifth-highest net transfer spend in English football over those two years.

But Bournemouth broke no rules. Indeed, the Premier League was happy with the treatment applied in this instance.