Arsenal braced for £324m PSR blow after what Man City have just done

Manchester City and Arsenal are on the front lines of the internecine conflict that has gripped high Premier League politics in recent years.

Arsenal and Man City have very different ownership models. Stan Kroenke is one of the American owners who have swept into the Premier League in their dozens since the mid-2000s, causing anxieties among fans about their team being ripped from its community roots or losing its soul.

United States investment in football finance isn’t a monolith, mind. Each owner has their own unique motivations, ambitions and business model. Some want to create value, some want to extract it. Some are spend-thrift, others live a champagne lifestyle in the transfer market.

For every Stan Kroenke, there is a Todd Boehly; for every John Textor, a John Henry. Anxieties about American ownership as a homogenous blob ready to form a caucus at Premier League shareholder meetings – where 14 votes are needed to alter league-wide policy – are therefore misplaced.

But America is 21st-century capitalism’s Mount Olympus and it is natural – and, in many ways, valid – that critics of global capital’s influence on football have dressed the bogeyman in stars and stripes.

From next season, as many as 12 Premier League clubs could be majority US-owned, depending on who wins the Championship play-offs. The Middle East’s representation in English football is tiny by comparison. However, they have an outsized influence on the game as a whole.

Arsenal have had a rivalry with Man City behind the scenes since the Abu Dhabi-backed takeover of the latter in 2008. The Gunners have always felt that state-financed clubs are simply too influential compared to privately-owned teams, who haven’t got a direct line to the most powerful people in the West and can’t pull the levers of the global trade system. The Kroenke Sports & Entertainment (KSE) empire is extraordinarily wealthy, but it doesn’t have 111 billion barrels worth of crude oil reserves.

Arsenal had many of their best players poached by City during the early years of Sheikh Mansour’s ownership. In Newcastle United, the Gunners now have another state-backed rival, though the Profit and Sustainability Rules (PSR) system has kept them somewhat at bay.

However, amid Manchester City’s fight against over 100 financial misconduct charges, the Premier League’s dominant force of the last decade is challenging the system – and Arsenal are in their crosshairs.

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Manchester City demand details of Stan Kroenke loan to Arsenal

As a counteroffensive to the league’s charges against them, Man City challenged the Premier League’s rules on Associated Party Transactions (APT) in the arbitration courts last year.

The APT rules dictate that commercial agreements between clubs and owner-linked entities should be screened for fair market value, so clubs cannot strike artificially inflated sponsorships to circumvent PSR.

City were successful in part one of the case, forcing the Premier League to rewrite their rules. Clubs voted to approve the revised rules, but City are now challenging the legality and application of those rules.

Their biggest victory in part one of the case was that the tribunal agreed with City that interest-free loans from shareholders are effectively a form of subsidy and therefore should be subject to the same scrutiny as commercial deals with owner-linked companies. Now, shareholder loans have a fair market value interest rate applied to them for the purposes of PSR.

However, City want the rules applied retrospectively too. That would be a major problem for Arsenal, who have made more use of shareholder loans than almost anyone else in the division.

Kroenke has lent the Arsenal £324m, with most of that coming since 2020, when he took over a loan from a private lender taken out to cover costs during the pandemic.

In the latest development, City have requested the details of the shareholder loans between Kroenke and Arsenal as well as a handful of other clubs for use in part two of the hearing.

The latest tribunal is set to start in October.

If the new APT rules are applied retrospectively, thar could theoretically leave Arsenal in breach of PSR. They lost over £225m between 2020 and 2022

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Arsenal’s PSR situation ahead of summer transfer window

While Arsenal have suffered heavy losses in recent years, PSR-allowable add-backs have got them within the threshold under both UEFA and the Premier League’s systems.

In 2023-24, when Mikel Arteta’s side returned to the lucrative Champions League, the loss stood at a very modest £18m. With PSR add-backs factored in, that likely means that it was a net positive result as far as Profit and Sustainability Rules are concerned.

In 2024-25, they will almost certainly post a profit for the first time in several years, giving them more headroom to spend this summer if they choose to do so.

The problem with the APT case is that there isn’t a precedent for charging clubs for breaching PSR retroactively. But for the current monitoring period, Arsenal have plenty of breathing space in the transfer market.

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