Explained: How Bournemouth avoided a PSR breach and what it means for other clubs

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 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, something it would normally do, 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.

When Mike Ashley sold Newcastle United to a consortium headed by the state Public Investment Fund of Saudi Arabia in October 2021, the club owed him £106.9m.

That debt was extinguished by Ashley getting repaid £17.5m and the remaining £89.4m being assigned to the new owners, who promptly converted the debt to shares. Newcastle had to rush to sell two players and plug a £50m-plus PSR deficit in June of last year.

But by Demin appearing to be content with writing off £71.4m during the sale to Foley, Bournemouth have been able to take full advantage in the transfer market and avoid a potential points deduction.

What was the transaction in question?

On December 12 2022, all shares in AFC Bournemouth Ltd were sold by A.FC.B. Enterprises Ltd, helmed by Maxim Demin, to Turquoise Bidco Ltd (since renamed to Black Knight Football Club UK Ltd), a company ultimately headed by Foley, who replaced Demin as Bournemouth’s chairman. Demin sold the club for £98.5m cash, with a further £19.4m potentially due in the future. At the time of the sale, the club owed Demin’s company £161.2m.

The sum due to Demin was extinguished in two ways. When Turquoise Bidco bought the club, it provided Bournemouth with a shareholder loan of £89.8m, which the club duly used to repay A.FC.B. Enterprises. The remaining £71.4m due to Demin was fully discharged — or written off — meaning Bournemouth no longer owed their former chairman a penny. Crucially, it also meant the £71.4m write-off was recorded as ‘exceptional other operating income’ in Bournemouth’s 2022-23 accounts.

The write-off shifted Bournemouth from a chunky loss to a club-record profit of £44.5m that season. Without it, they would have booked a £26.9m pre-tax loss, to go with a £55.5m loss in 2021-22, the season they were promoted back to the Premier League following relegation in 2020.

Would Bournemouth have struggled with PSR otherwise?

It wouldn’t have just been a struggle — Bournemouth would have breached their PSR loss limit in at least one of the past two seasons without being able to include this transaction in their calculation.

In 2022-23, clubs were assessed over a four-year PSR cycle to mitigate against losses incurred from the Covid-19 pandemic, with the 2019-20 and 2020-21 seasons taken as an average. Had the £71.4m ‘exceptional other operating income’ been removed from their calculation, Bournemouth’s pre-tax loss for that cycle would have been £104m, against a PSR loss limit of £72m. Bournemouth would have been tight to the limit, but pandemic-related deductions may well have seen them avoid a breach in 2022-23.

However, it is much more clear that Bournemouth would have breached PSR in 2023-24 without the benefit of a £71.4m loan write-off. With that excluded, their pre-tax loss across the three-year PSR cycle to the end of last season would have been £148.6m, against a PSR loss limit of £83m — Bournemouth spent 2021-22 in the Championship, so were only allowed to lose £13m that season, alongside £35m in each of the past two when they were back in the top flight.

That meant Bournemouth would have needed to find £65.6m in allowable expenditure — the Premier League’s PSR regime allows clubs to deduct expenditure on women’s football, youth development and community development, as well as depreciation, amortisation and impairment of fixed assets other than player registrations — across the past three seasons to comply.

That would have been tough to do.

Bournemouth’s depreciation and amortisation costs on non-player fixed assets in the past three seasons totalled just £5.3m, while their academy was only promoted from Category 3 to Category 2 in July 2023. As a point of reference, Ipswich Town also run a Category 2 academy and included £3.8m in youth development add-backs in their 2023-24 PSR calculation.

While Bournemouth’s spend on community development and their women’s team is unknown, what is clear is it totalled nowhere near the £50m-plus that would have been required to bring losses under their PSR limit.

Foley is the current owner of Bournemouth (Adrian Dennis/AFP via Getty Images)

Why did the Premier League allow them to include it in their PSR calculation?

Multiple sources, speaking on condition of anonymity to protect their positions, said 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 accounting policy applied to the transaction isn’t in question here, but its inclusion in Bournemouth’s PSR calculation is. Before Demin sold his shares, Bournemouth had previously been required to book ‘implied interest’ on their interest-free shareholder loans. That implied interest, visible in the club’s accounts, cost the club around £20m in the period from 2014 to 2022 and was kept in the club’s PSR calculations during that time.

Given those costs were retained with their PSR profit or loss, Bournemouth were able to argue they should also be able to include the ‘income’ from the loan write-off.

How this tallies with the idea the loan was no longer from a related party is unclear but given it was cleared by the Premier League, Bournemouth must have been able to show the treatment was consistent with existing rules.

Has this happened before?

Yes, although it is unclear when.

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.

The news will likely come as a surprise to many, even as the scope for shareholder loan write-offs under PSR apparently remains limited. It has long been assumed that no such loan write-offs are allowed to be included in clubs’ PSR calculations.

Could this have a wider impact? It’s difficult to see how other clubs wouldn’t view the matter with, at the very least, some scepticism.

Through being allowed to include the loan write-off in their PSR calculation, Bournemouth not only avoided a PSR breach but were able to spend significantly in the transfer market — over £130m on new players for two years running. The club’s wage bill increased by 36 per cent in 2023-24, too.

It is unclear why a change of ownership makes a difference to rules designed to, at least in part, prevent clubs enjoying an unfair sporting advantage. Bournemouth ultimately benefited simply by the quirk of being bought out midway through the 2022-23 season; without Foley’s takeover being completed, the club would have breached rules that year.

This comes at a time when the league has been adamant there is no need for the independent football regulator that the UK government has committed to setting up and also when the existing financial rules are already under the spotlight, both from the latest legal tussle with Manchester City and via the news Chelsea were able to include a £200m intra-group sale of their women’s team in their own PSR calculations.

Bournemouth have made significant signings over the past few seasons (Dan Istitene/Getty Images)

Would other Premier League clubs have an argument to make about their own PSR calculations going forward?

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.

Not that it means it couldn’t happen. There are currently several clubs in possession of shareholder loans, some of them significant. If one of those shareholders were to sell their stake and write off said loan, that club would be able to record it, effectively, as income in both their statutory accounts and their PSR calculation.

Purely as a hypothetical, imagine Tony Bloom were to sell his stake in Brighton for £500m, including the debt currently owed to him. At the end of June 2024, Brighton owed him £299.7m. From a PSR perspective, there would be nothing stopping a buyer from paying Bloom £500m and him writing off that £299.7m debt, rather than it being repaid by the new owner, with Brighton’s bottom line benefiting from £299.7m in extra ‘income’ (although such a transaction would have a significant negative impact on Bloom’s personal tax bill).

There is also a broader point to consider here.

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.

Though the club’s net spend has tumbled this season following the sale of England striker Dominic Solanke to Tottenham last summer, it’s hard to argue they haven’t gained a sporting advantage via the loan write-off.

Without it, they would not have been able to invest so heavily in new players — and indeed would have breached PSR and had to deal with the attendant troubles that brings.

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

(Top photo: Dan Istitene/Getty Images)

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