New crisis rocks Leeds

Leeds today stand on the brink of administration – but that would not mean the end of the football club.

In a bid to restructure their debts of £78m (€112m), Leeds have recently held lengthy negotiations with two of their major creditors.

Leeds owe almost £60m (€85.9m) to American bondholders, a sum of money they sacrificed against future season-ticket and match-day ticket sales for 25 years from 2001.

Leeds also owe a further £21m (€30.1m) to a Guernsey-based finance company who helped United fund a number of player purchases such as Mark Viduka and Dominic Matteo during the club’s Champions League heyday.

But Leeds’ failure to subsequently qualify for the Champions League in 2001 and 2002 has led to them hitting a financial brick wall and announcing a British record club loss of £50m (€71.7m) last month.

It has prompted frantic discussions with their creditors, which has so far failed to reach a satisfactory conclusion, and resulting in the club this morning confirming to the Stock Exchange that if further talks break down then they “may be forced to seek the protection of an administration order.”

It means hopes of attracting a new boss to Elland Road following the recent sacking of Peter Reid can now be ditched as the club cannot afford someone of the stature of Southampton’s Gordon Strachan.

Dr Bill Gerard, of the Leeds Business School, has long been predicting the threat of administration for Leeds.

He told Sky Sports News: “Basically, the announcement today is saying we have not made the progress we had expected, so all bets are off.

“To turn Leeds United round and get the club back where it should be, you are talking about £100m-plus (€143m).

“Anybody who saw the performance on Saturday (a 2-0 home defeat to Bolton) knows the chickens are all coming home to roost. The heart and soul of the team has been pulled out and it is no surprise the team is struggling at the wrong end of the Premiership.

“That is making everything so much worse in terms of the debt because everybody knows if Leeds are relegated there is no way they will avoid going into administration.

“That’s making everyone, fans and investors, nervous. But this should have all been put to rights in May when Leeds managed to keep themselves in the Premier League. That was the time to restructure the debt.

“I lay the blame, not only with (former chairman) Peter Ridsdale, but also with the chairmanship of John McKenzie who is highly questionable.

“The last six or seven months have been lost months when Leeds needed to make progress with the restructuring.

“But we’ve a roundabout admission today of their ineptitude and inability to achieve anything off the field during that time, leaving them on the brink of administration.”

Gerard, though, believes the club will continue to survive.

He added: “We have to make it clear it is Leeds United plc, the holding company that owns Leeds United Football Club, that is in a financial mess.

“My belief, and it’s a very strong belief, is that there will always be a Leeds United Football Club, but I do not believe Leeds United plc will survive for very much longer.

“We will then see Leeds United Football Club put up for sale by an administrator and hopefully the next set of owners are able to show a degree of financial astuteness and an understanding of football far superior to the owners in the last few years.”

Leeds have also been forced to put on hold plans to accept a £4.4m (€6.3m) cash injection from deputy plc chairman Allan Leighton and A.R.M. Holdings Group Ltd.

It is understood Sheikh Abdul din Mubarak Al-Khalifa, a Leeds fan and oil-rich member of Bahrain’s ruling dynasty, is a leading figure in A.R.M.

A statement from Leeds United plc this morning read: “As announced on 28 October 2003 in our preliminary statement of results, the directors have been negotiating the first phase of a complex debt restructuring of the group’s finances with its principal finance creditors to provide the group with additional working capital and to give it time to implement a more permanent restructuring plan.

“In the preliminary statement we also referred to a commitment through a share issue to inject £4.4m (€6.3m) in cash from Allan Leighton and A.R.M. Holdings Group Ltd.

“Unfortunately, after a long period of constructive discussions, negotiations have failed to reach a satisfactory conclusion in time to issue a circular and obtain shareholder approval before Christmas.

“As a result, it has been decided not to go ahead with the planned subscription for shares and, contrary to the expectation expressed in the preliminary statement, there will be no circular issued to shareholders.

“Nevertheless, the company continues to be in constructive discussions with its principal finance creditors and proposed investors with a view to providing the group with additional working capital and to give it time to implement a more permanent restructuring plan.

“In addition, Allan Leighton has already confirmed that his funds remain available for investment in the group.

“The directors are continuing to take steps to manage cash flows, including the implementation of the cost savings described in the preliminary statement 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 refinancing of the group.

“But, if the negotiations referred to above are unsuccessful, the directors may be forced to seek the protection of an administration order.”