Administration looks increasingly likely for battered Leeds

FOOTBALL LEAGUE bosses may decide to close a loophole which could allow Leeds to escape a mandatory 10-point penalty for going into administration with £78m debts.

Under Nationwide League rules, a club entering administration while in the Premiership who are subsequently relegated in the same season could avoid the points deduction. As managerless Leeds prop up the table with he drop to the First Division looming large, only a cynic would suggest they might go into administration before the end of the season to avoid the threat of sanction.

The Premier League have their own rules to deal with administration and insolvency; the deduction of points is not yet an agreed penalty.

Leeds' problems stem from an inability to re-structure their debts with two major creditors.

They owe almost £60m to American investors, mortgaged for a 25-year period in 2001 against future season and match-day ticket sales.

Leeds owe a further £21m to a Guernsey-based finance company who helped fund during the club's Champions League heyday.

But under current Stock Exchange rules, an agreement was required in time to be posted out to shareholders, a month ahead of the club's annual general meeting which has to be held by the end of the year.

Leeds remain in negotiations with their creditors and hope a deal can be struck but have warned of the consequences if that fails. A club statement read: 'The directors are continuing to take steps to manage cash flows, including the implementation of the cost savings and management of working capital.

'The directors remain of the view that if all of these negotiations are concluded successfully they will provide adequate funding for at least three months in which to conclude arrangements designed to achieve a more permanent re-financing 'But if the negotiations referred to are unsuccessful the directors may be forced to seek the protection of an administration order.'

Leeds have been forced to put on hold plans to accept a £4.4m cash injection from deputy plc chairman Allan Leighton and a company by the name of ARM Holdings Group Ltd understood to be run by Sheikh Abdul din Mubarak Al-Khalifa, a Leeds fan and oil-rich member of Bahrain's ruling dynasty.

While the statement confirms Leighton's funds 'remain available for investment in the group', there is no mention of the Sheikh's money.

But with Leeds on the brink of administration, the Sheikh or other potential investors like long-time fan and internet multi-millionaire Peter Wilkinson would be wise to hold on and buy the club at a fraction of the price in a few months' time.

Dr Bill Gerard, a professor of sport management and finance at Leeds University Business School, is hoping the Sheikh comes forward.

He said: "If somebody is prepared to put their money where their mouth is and help Leeds then he would be loved, just as Chelsea fans love [Roman] Abramovich.

"We would love our Sheikh if he exists. But I suppose he is thinking 'Why invest now because Leeds will be a better buy if they go into administration?'"

Leeds' hopes of attracting a new manager to Elland Road following the recent sacking of Peter Reid can now be ditched, because it is obvious the club cannot afford the likes of Southampton's Gordon Strachan or anyone of a similar standing.

Leeds are already paying close to £7m in severance payments to former bosses David O'Leary, Terry Venables and Reid.

Eddie Gray, current caretaker manager , appears to be the man in situ for the foreseeable future although he will be wondering just what kind of squad he will have left come the end of the January transfer window.

Despite chairman Professor John McKenzie's assertion that striker Alan Smith will not be sold, the future of a player worth at least £5m must now be in question.