Ridsdale's grand dreams bankrupted by debts on balance sheet

On 26 September 2001, Leeds United considerably extended their debts by issuing £60m in 25-year "loan notes" – effectively taking out a £60m mortgage, guaranteed against future season-ticket sales. The money was borrowed at a fixed annual interest rate of 7.695 per cent. The first repayment of interest on the loan was more than £4m. Capital repayments will not start until September 2004. The annual repayments will then be around £7m. But that's for the future.

The minutiae in the loan agreement speaks volumes about the current financial crisis at Elland Road. The club, with chairman Peter Ridsdale as gambler-in-chief, paid £890,000 in fees to arrange the loan. It borrowed money even to pay those fees. Ridsdale, incidentally, has been paid £1m by the club in the past two years. A million here, a million there, so the debts have risen. But the loan was only necessary in the first place because of spending – by David O'Leary, with Ridsdale's backing – on players and wages.

By the end of the 1999-00 season, O'Leary, who had taken over from George Graham in late 1998, had bought 11 players costing around £34.4m, having sold players for around £19m. His purchases included Danny Mills, Michael Bridges and Olivier Dacourt. It seemed a good deal because Leeds finished third and gained access to the Champions' League.

During the season that saw the run to the Champions' League semi-final in 2001, O'Leary signed five more players, including Mark Viduka, Rio Ferdinand and Robbie Keane, for a total outlay of £36m. He sold nine players for £9m. The deficit of £27m was made worse by a huge rise in the wage bill. The damage was already being done. Failure to qualify for the following season's Champions' League, in 2001-02 (and again the next year), only compounded the situation. No Champions' League meant a reduction in annual income of around £15m per year. O'Leary paid with his job.

Since O'Leary took over at Elland Road, Leeds have spent around £90m on players. Revenue from sales, before yesterday's offloading of Jonathan Woodgate to Newcastle, had been around £68m. Even this does not tell the whole story. That £68m in receipts might not actually materialise. In the cases of Ferdinand and Robbie Fowler, for example, the full fee is contingent on the players' success. To be fair, that was also the case with Fowler's move from Liverpool to Elland Road and Keane's from Internazionale.

The increase in the club's wage bill in the last few years has also been crippling. In the year to June 2002, the wage bill was £53.6m, up £10m on the previous year. These figures come from Leeds' annual report of 2002. The same report showed that the club made a loss of £34m in the previous year. The club's net debts, on 30 June 2002, had risen to £77.9m, and that was after the sale of Ferdinand (£30m) and Keane (£7m).

No wonder Ridsdale sold Ferdinand to Manchester United. He was desperate for the cash, which made all the proclamations about Ferdinand's lack of loyalty shallow indeed. Keane's departure was another necessary sale. It helped curb the debts and also removed around £1m from the wage bill. Lee Bowyer's departure was also primarily a question of cutting the wage bill. Ditto Fowler, whose stay at Elland Road will see a net deficit of at least £5m in transfer fees, plus his wages for 14 months. Woodgate's departure will also cut the wage bill and the £9m fee will allow further stabilisation of the balance sheet.

How quickly things change. "Our aim is to become the clear No 2 club in the country behind Manchester United," Adam Pearson, then the Leeds commercial director, said in December 1999 as Leeds sat atop the Premiership. "The football is central to everything and Peter Ridsdale has had the bottle to push on rather than consolidate." Pearson is now running Hull City.

One last quote. "Of all the great clubs I have worked with in football, none have had the infrastructure, commitment and potential of Leeds United. The team has all the necessary qualities to become the country's best for years to come." So said Terry Venables, in inch-high letters that filled a whole page in the Leeds 2002 Annual Report.

Leeds players sold since July 2002

Rio Ferdinand

Signed from West Ham for £18m, Nov 2000; sold to Manchester United for £30m, July 2002

Robbie Keane

Signed from Internazionale for £12m, May 2001; sold to Tottenham for £7m, August 2002

Lee Bowyer

Signed from Charlton Athletic, £2.8m, July 1996; sold to West Ham for £100,000, Jan 2003

Olivier Dacourt

Signed for £7.2m from Lens, May 2000; currently on loan to Roma with a view to £4m permanent deal in summer

Robbie Fowler

Signed from Liverpool for £11m, November 2001; sold to Manchester City for £6m, Jan 2003

Jonathan Woodgate

Joined club as trainee; sold to Newcastle United for £9m, Jan 2003

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