Administration looms for debt-ridden Leeds

Premiership's basement club desperate to restructure £81m debt as supporters seek solution through community ownership

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."

PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
Arts and Entertainment
tv
News
Prince Harry is clearing enjoying the Commonwealth Games judging by this photo
people(a real one this time)
News
Gardai wait for the naked man, who had gone for a skinny dip in Belfast Lough
newsTwo skinny dippers threatened with inclusion on sex offenders’ register as naturists criminalised
News
Your picture is everything in the shallow world of online dating
i100
Life and Style
Attractive women on the Internet: not a myth
techOkCupid boasts about Facebook-style experiments on users
Sport
Van Gaal said that his challenge in taking over Bobby Robson's Barcelona team in 1993 has been easier than the task of resurrecting the current United side
football
Caption competition
Caption competition
Latest stories from i100
Have you tried new the Independent Digital Edition apps?

Bleacher Report

Daily Quiz
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

Day In a Page

The children were playing in the street with toy guns. The air strikes were tragically real

The air strikes were tragically real

The children were playing in the street with toy guns
Boozy, ignorant, intolerant, but very polite – The British, as others see us

Britain as others see us

Boozy, ignorant, intolerant, but very polite
Countries that don’t survey their tigers risk losing them altogether

Countries that don’t survey their tigers risk losing them

Jonathon Porritt sounds the alarm
How did our legends really begin?

How did our legends really begin?

Applying the theory of evolution to the world's many mythologies
Watch out: Lambrusco is back on the menu

Lambrusco is back on the menu

Naff Seventies corner-shop staple is this year's Aperol Spritz
A new Russian revolution: Cracks start to appear in Putin’s Kremlin power bloc

A new Russian revolution

Cracks start to appear in Putin’s Kremlin power bloc
Eugene de Kock: Apartheid’s sadistic killer that his country cannot forgive

Apartheid’s sadistic killer that his country cannot forgive

The debate rages in South Africa over whether Eugene de Kock should ever be released from jail
Standing my ground: If sitting is bad for your health, what happens when you stay on your feet for a whole month?

Standing my ground

If sitting is bad for your health, what happens when you stay on your feet for a whole month?
Commonwealth Games 2014: Dai Greene prays for chance to rebuild after injury agony

Greene prays for chance to rebuild after injury agony

Welsh hurdler was World, European and Commonwealth champion, but then the injuries crept in
Israel-Gaza conflict: Secret report helps Israelis to hide facts

Patrick Cockburn: Secret report helps Israel to hide facts

The slickness of Israel's spokesmen is rooted in directions set down by pollster Frank Luntz
The man who dared to go on holiday

The man who dared to go on holiday

New York's mayor has taken a vacation - in a nation that has still to enforce paid leave, it caused quite a stir, reports Rupert Cornwell
Best comedians: How the professionals go about their funny business, from Sarah Millican to Marcus Brigstocke

Best comedians: How the professionals go about their funny business

For all those wanting to know how stand-ups keep standing, here are some of the best moments
The Guest List 2014: Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks

The Guest List 2014

Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks
Jokes on Hollywood: 'With comedy film audiences shrinking, it’s time to move on'

Jokes on Hollywood

With comedy film audiences shrinking, it’s time to move on