People understandably get confused over the regular financial position of a Club (as any other Company) and it's Financial Fair Play position.
A Company's owners can convert debt in the form of loans it has made to the Company into equity at any time to help with the liquidity of the Company. Broadly this means the Owner was lending to the Company but has now given that funding away, they have no longer got the power to recall those funds.
Similarly any loan provider to a business can choose to write the loan off at any time, without having converted any element of it to equity.
The conversion of debt (loans) to equity (shares/reserves) is moot if the owner is already a whole owner of the Company (like Gibson O'Neill is of MFC, or Bet 365 is of Stoke). They are effectively issuing more shares in a company they already wholly own.
There is legally absolutely nothing wrong with doing this. Coates family own Bet 365 and this £160m debt conversion/cancellation is literally small beer to Denise and the family. As an individual she paid more than three times this herself in one year as personal Income Tax.
Stoke are owned by a Group with a money printing capability in Bet 365. Their wealth dwarfs that of Gibson O'Neill.
This is where FFP comes in, where there are limits to what can be lost as a Club AND what can be injected in and allowed for in the FFP calculation.
The Owners CAN inject £40m in to the Club in the form of debt conversion to equity (Steve has done it three times with MFC), BUT from a FFP perspective they can only count £8m of it in any one season, or £24m across a 3 year rolling period. (PL is £90m across the same period)
The further £120m the Club have had written off in loans, is a lifesaving reset for Stoke, but irrelevant to current FFP, as no further funding has been injected.
It was also permitted for SCFC to sell their stadium to their owners and count the nett profit from sale over Book Value as profit that was FFP permissable. Provided the valuation was market value. I can not remotely see how that rickety stadium on a Commercial warehouse estate at the top of Stoke's windiest hill can be worth over £80m.
HOWEVER my main concerns relate to Stoke's FFP actions and position to June 2020, when they had combined 3 year Profit Before Tax losses of well over £130m and £88m loss in 2020 alone. This was due to impairment and amortisation practises that artificially created such a huge loss in that year which has never been considered/penalised. It effectively pulled forward ALL their future amortisation liabilities into that one year (the opposite of what Derby were doing). Bet 365 could afford to cover this loss to keep them a Going Concern, but FFP was completely ignored by the EFL.
With the Stadium sale and Debt to Equity actions Bet 365/Stoke have recently taken, they will even out their huge loss of 2018, 2019 and 2020 (relevant for FFP 3 years to 2021) and will be squeaky clean from a FFP position going forwards.
This does not remotely make alright the fact that for the 3 years to June 2020 Stoke are the most cynical abusers of FFP the Championship has EVER seen and The EFL are an utter disgrace in simply turning a blind eye to it.
Timing is everything. Had Stoke done what they had done in 2019-20 with Stadium sale and debt conversion, then no complaints, but they didn't and MUST be punished.