Everton could suffer further PSR penalty after what has emerged from Man City's Premier League case
Today at 03:16 PM
Everton and Man City are united by their dislike of the Premier League’s executive branch – but the Toffees may have inadvertently landed themselves in hot water in their efforts to support City.
It is almost exactly a year ago to the day that Everton were docked 10 points by the Premier League for breaching Profit and Sustainability Rules (PSR) in 2021-22.
Everton’s response was a blistering statement, writing that they were “shocked and disappointed” by the Premier League commission’s ruling.
That penalty was later reduced to six points, with another breach relating to their losses in the PSR assessment window up to 2022-23 leading to a further two-point deduction.
Perhaps the most telling line of the now-infamous statement is: “[we will] also monitor with great interest the decisions made in any other cases concerning the Premier League’s Profit and Sustainability Rules.”
Nottingham Forest are the only other club to date to have been sanctioned under PSR, with Leicester City escaping on a technicality earlier this year.
Man City’s landmark ‘115’ case is a little different in that it encompasses a different range of alleged offences over a number of seasons, from 2009 to 2018.
But the ongoing hearing into the 115 charges, which Man City continue to deny in the strongest possible terms, has been the catalyst for what is routinely characterised as civil war at Premier League HQ.
Among City’s acts of retaliation has been their legal challenge to the Premier League’s Associated Party Transaction (APT) rules, which govern clubs’ commercial deals with owner-related companies.
Everton, whose relationship with the Premier League’s legislature is strained, supported City in that case.
But there is a possibility that stance could backfire massively, according to the latest analysis from a former Man City adviser and legal expert.
Shareholder loans issue could see Everton breach PSR again
It has flown somewhat under the radar that Everton are still facing a further PSR-related financial blow due to a compensation claim from Burnley pertaining to the Toffees’ breach in 2021-22.
Burnley were one of the clubs relegated that season and filed a compensation claim via the arbitration process alongside several other teams that totalled a reported £300m.
It has been reported this week that Burnley are the only one of the clubs who are continuing to pursue Everton, who they argued got an unfair sporting advantage from their spending that kept them up.
Everton also face a third PSR hearing at an unspecified date relating to whether interest payments on loans they took out to fund the Bramley Moore Dock stadium are exempt from PSR.
What’s more, the APT case has unearthed another issue that could see Everton face yet another PSR hearing, this time for 2023-24.
On X, Stefan Borson wrote that if changes to the way that the PSR system views soft loans (i.e., interest-free loans from shareholders) are applied retroactively, it could theoretically be bad news for Everton.
An emergency meeting on Friday will see Premier League clubs vote on amendments to the APT rules, including whether soft loans should be treated as a subsidy.
Everton have £451m worth of soft loans, the type of loans that will likely be charged a commercial interest rate for the purposes of PSR if the vote passes.
‘City’s position on shareholder loans appears to be that historic loans should count for PSR calculations with no adjustment. This is potentially problematic for clubs including Everton that may have been tight for the periods ending Summer ’24,’ wrote Borson.
‘If they did count some clubs will definitely fail PSR for 23/24.;
However, the talkSPORT regular also caveated that ‘it seems very unlikely to me that 23/24 PSR tests would be required to count a market interest rate for shareholder loans for the 3 years ending Summer ’24’ and ‘under the PL rules it seems to me that historic periods are now closed for any club not already charged.’
Concluding, Borson wrote: ‘City, will presumably say that those clubs can always argue their case in mitigation.’
Will Dan Friedkin’s takeover solve Everton’s PSR woes?
The £451m of soft loans will likely be written off or converted to equity when Dan Friedkin’s takeover of Everton is complete – probably some time around the new year.
However, if soft loan interest is applied for PSR purposes retroactively, the change of ownership from Farhad Moshiri to friedkin will not exempt Everton from punishment.
That could be another fine or points deduction.
However, as Borson says, that seems unlikely and, even if so, the Toffees could fight their corner in mitigation.
However, it would add another layer of complexity and cost, with Everton already fighting on two fronts in terms of the Burnley compensation claim and the already-confirmed hearing over their 2021-22 breach.
