Leeds United's spectacular financial meltdown seems set to end in administration. The club was forced to admit that possibility yesterday after failing to reach an agreement with its two major creditors, who are owed £81m between them. Leeds want breathing space to restructure their debts and make smaller repayments over a longer period.
If a last-gasp deal cannot be agreed and the administrators are called in, which insiders expect could happen within weeks rather than days, Leeds' recent fire sale of players will seem small beer indeed. Alan Smith, Paul Robinson and Mark Viduka, the club's three most valuable remaining players, would be the first to be sold during January's transfer window, probably followed by any other squad members who could attract buyers.
The state-of-the-art Thorpe Arch training centre near Wetherby, the club's major property asset, could also go under the hammer. With a meagre playing squad and the prospect of relegation looming, fans' groups would vie with speculative investors in a battle for future control of the club.
Leeds' plans for a share issue to raise new funds have been shelved until the club's fate becomes clearer. A promised injection of £4.4m from the club's plc deputy chairman, Allan Leighton - who is also chairman of the Post Office - has been put on indefinite hold.
The position of Leeds' Bahraini saviour-in-waiting, Sheikh Mubarak al-Khalifa, remains uncertain. It had been anticipated that the Sheikh, who is reputedly a Leeds fan of 20 years' standing, would be funding half or more of Leighton's cash injection to help stabilise the club in the short term. His plan apparently involved a much larger amount later, en route to a takeover of the club. But it is understood that he was taken aback when Leeds announced to the Stock Exchange that administration was not out of the question.
Leeds are thought to be waiting to see if he can bail them out while he is considering whether to continue with his plan. The extent of his personal wealth is not known but he is not an Abramovich-style benefactor. With Leeds' future in the balance, any move to install Southampton's Gordon Strachan as a successor to Peter Reid is on hold.
"It's a bad situation, there's no denying that," a Leeds spokesman said. "But it's not Armageddon. Yet." The spokesman added that talks with the major creditors are ongoing, despite the lack of progress. Leeds owe £60m to American bondholders for a loan - effectively a 25-year mortgage - arranged by the former chairman, Peter Ridsdale, in September 2001 to finance his dream of building a European superpower at Elland Road. Another £21m is owed to a Guernsey-based finance company that helped to fund the purchase of players in the "dream" years.
Yesterday's announcement could be interpreted as Leeds playing hardball with their creditors, hoping the threat of administration will ease the path to debt restructuring. Another view, held by some fans, is that the club's financial woes have simply become unbearable and the time is right for a change in leadership.
"The board should resign," said John Boocock, the chairman of Leeds United Supporters' Trust. "Allan Leighton is as responsible for this mess as much as anyone else and should go immediately. He should stick to delivering bloody letters or whatever it is he does."
Boocock is planning a meeting with fans' groups in Leeds. His long-term hope is that Leeds might become a community-owned club run by the supporters' trust.
It was less than a month ago that Leeds disclosed net debts of £78m and record annual losses of almost £50m. Despite those figures, the chairman, Professor John McKenzie, claimed the club had "begun to slowly turn the corner" and filled his notes in the annual report with optimistic messages at odds with the scale of his problems.
Yesterday's statement to the Stock Exchange suggested those messages were little more than tissue in the face of a tsunami.
"Unfortunately, after a long period of constructive discussions, negotiations [with the major creditors] have failed to reach a satisfactory conclusion," the statement said. "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.
The statement added: "The directors remain of the view that, if [the creditors'] negotiations are concluded successfully, [the current finances] 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."