More Trouble At Leeds

[Paul]

Just as an aside I read today Bradford City are still paying Ashley Ward AND Andy Todd - don't remember Todd being there?

[Blue blood]

Fifty million comes in and they'll still be in debt.

Leeds are neck deep in it. Consider how many good players they've got left. Robinson, Viduka, Smith and Matteo. Let's say they sell all of them for £15 million, they'll still not be clear. And I can't see Wilcox clearing the debt.

Even if they do get out of the mess it'll take them years to get a decent Premiership team togeather.

[The Blunderer]

It hasn't been reported exactly how much money the Gulf states consortium could cough up, but if Leeds have to go into administration, they are likely to do so before the end of the season if about to be relegated.

If the receivers are called in after the end of the season, and they are classified as a Nationwide club, they could start next season on minus 10 points.

If they avoid relegation, the situation would be different, as should top flight clubs go bust, the Premiership are to consider each case individually rather than apply an automatic points deduction.

This is thought partly due to fear over the effects of a successful EC challenge to the Sky T.V. contracts, which financially could tip several Premiership clubs over the edge.

[Glenn]

Just as an aside I read today Bradford City are still paying Ashley Ward AND Andy Todd - don't remember Todd being there?

He wasn't

Club From To Fee League FA Cup League cup Other

Burnley 04-09-2003 04-10-2003 Loan  7 (0) 0 0 (0) 0 1 (0) 0 0 (0) 0

Blackburn 22-05-2002   £ 750000  13 (5) 1 2 (0) 0 4 (0) 0 2 (0) 0

Grimsby 21-02-2002 22-04-2002 Loan  12 (0) 3 0 (0) 0 0 (0) 0 0 (0) 0

Charlton 17-11-1999 22-05-2002 £ 750000  27 (13) 1 6 (1) 0 4 (0) 0 0 (0) 0

Bolton 03-08-1995 17-11-1999 £ 250000  66 (18) 2 1 (0) 0 14 (5) 1 3 (0) 0

Swindon 27-02-1995   Loan  13 (0) 0 0 (0) 0 0 (0) 0 0 (0) 0

Middlesbro 06-03-1992 03-08-1995 Trainee  7 (1) 0 0 (0) 0 1 (1) 0 5 (0) 0

Could be Lee Todd (Bradford bought him from Southampton for 250000).

[Paul]

That' The Independent for you - buy a quality paper and they give you Duff information

[Glenn]

I can do that

Damien Duff  

Real name Damien Duff  

Height 5.10  

Weight 12.00  

Date of birth 02-03-1979  

Place of birth Ballyboden  

Position Midfielder  

Nationality Ireland  

International Caps 39  

International Goals 5  

Current Club

Currently playing for Chelsea  

Signed on  21-07-2003  

Fee £ 17000000  

Squad number 11

Club From To Fee League FA Cup League cup Other

Chelsea 21-07-2003   £ 17000000  10 (3) 2 0 (0) 0 1 (0) 0 4 (2) 1

Blackburn 05-03-1996 21-07-2003 Trainee  157 (28) 27 13 (5) 2 16 (1) 5 4 (0) 1

..... I'll get my coat  

[The Reverend Blue]

Just as an aside I read today Bradford City are still paying Ashley Ward AND Andy Todd - don't remember Todd being there?

It's Andy Tod with one 'D'...

Dunfermline 31-07-2003   Free  9 (0) 0 0 (0) 0 1 (0) 0 0 (0) 0

Dundee Utd 28-01-2003 25-05-2003 Loan  12 (1) 2 0 (0) 0 0 (0) 0 0 (0) 0

Hearts 28-03-2002 13-05-2002 Loan  3 (0) 1 0 (0) 0 0 (0) 0 0 (0) 0

Bradford 15-11-2001 31-07-2003 £ 100000  18 (5) 1 1 (0) 0 0 (0) 0 0 (0) 0

Bradford 20-08-2001 14-11-2001 Loan  11 (1) 4 0 (0) 0 2 (1) 2 0 (0) 0

Stockport 07-10-2000 07-12-2000 Loan  11 (0) 3 0 (0) 0 0 (0) 0 0 (0) 0

Dunfermline 04-11-1993 15-11-2001 Signed  204 (7) 34 10 (1) 0 12 (0) 0 4 (1) 1

Kelty Hearts 01-08-1992 04-11-1993   No appearance data available

[amerbulls]

Lets face it, if leeds get relegated this season, then theyre effectively screwed. Theres no way that theyll be ableto recover from that

[Clive]

It hasn't been reported exactly how much money the Gulf states consortium could cough up, but if Leeds have to go into administration, they are likely to do so before the end of the season if about to be relegated.

If the receivers are called in after the end of the season, and they are classified as a Nationwide club, they could start next season on minus 10 points.

If they avoid relegation, the situation would be different, as should top flight clubs go bust, the Premiership are to consider each case individually rather than apply an automatic points deduction.

This is thought partly due to fear over the effects of a successful EC challenge to the Sky T.V. contracts, which financially could tip several Premiership clubs over the edge.

Indeed, I read that one figure this Arab consortium will spend is £20m, under 1/2 Leeds' debt. This would be nice for Leeds, but unless the Arab gentlemen can pull some financial wheeze, Leeds will still be up the Gary Glitter. Their only hope is that the win against Charlton instills a grim determination to march up the table, and add a few more drops of petrol into the tank.

Just read what I've typed, and I can imagine Andrew Marr saying that .

[Legion]

While I have no love for LUFC I hate to see any club in the position that they find themselves.  While the bone can be fairly and squarly pointed at their totally inept administration/management over the past few years the fans are going to be the ones that suffer - again.  Any fan of any team, be it Prem or conference would cry blood if this happened to their team.

The whole mess is indicative of the stupid reliance on promised funds which has taken hold of (and bitten in the arse) many clubs since the TV rights money went stellar then faded as quickly.

LUFC may be relegated; more than once over the next couple of years, or they may find a sugar daddy (in a nightie with a sore head possibly).  Whatever the final outcome the days of huge wages, expenditure and the buying of players on tick, promises or the meanderings of a ouija board have got to end.

The FA owe it to the fans of the games, of all teams, creeds or colour to stop these farsical situations from developing.

Leeds made their bed and now they are going to be forced to lie in it,  but think of the fans.  What it were us?

[Paul]

This is a point philipl may be able to help with.

The BBC reported last night that if Leeds go into administration they will not necessarily be freed of the bulk of their debt that results from a form of lease arrangement with two American financial institutions. The report did not go into details but did clearly state the debt to the Americans would still stand AFTER coming out of administration. How can this be possible if administration is to provide protection from creditors? The funds raised from the institutions were used for:

1. Funds released against projected 25 year ticket income

2. Players "leased" to the club. I gather one player was purchased for around £6m but his "mortgage" value is set at £9m - Leeds borrowed this - whatever price the player is sold for the £9m is still owed!

[broadsword]

All administration means is that an accountant is sent in to maximise club assets and stop money pi$$ing out of the door. In return, the interests on the debts is frozen.

Once the company comes out of administration hopefully cash management at the club is much better, and the creditors have a chance of getting their dosh back. No debts are written off, that only happens in a bankruptcy I think.

Having said that, whatever stunt Leicester pulled to get out of the cr@p was a good one, because I don't remember any winding-up orders.

[SAS]

it their own fault. they should have been more careful with their money. i think they will be relegated and then the real trouble starts.

[Nuclearsox]

This is a point philipl may be able to help with.

The BBC reported last night that if Leeds go into administration they will not necessarily be freed of the bulk of their debt that results from a form of lease arrangement with two American financial institutions. The report did not go into details but did clearly state the debt to the Americans would still stand AFTER coming out of administration. How can this be possible if administration is to provide protection from creditors? The funds raised from the institutions were used for:

1. Funds released against projected 25 year ticket income

2. Players "leased" to the club. I gather one player was purchased for around £6m but his "mortgage" value is set at £9m - Leeds borrowed this - whatever price the player is sold for the £9m is still owed!

A BBC radio report last night said that the American companies had had the foresight to make the loans "guaranteed" so £60M of the £80M debt would remain even if they went into and subsequently emerged from administration.

[broadsword]

it their own fault. they should have been more careful with their money. i think they will be relegated and then the real trouble starts.

That's very deep.

[colin]

All administration means is that an accountant is sent in to maximise club assets and stop money pi$$ing out of the door. In return, the interests on the debts is frozen.

Once the company comes out of administration hopefully cash management at the club is much better, and the creditors have a chance of getting their dosh back. No debts are written off, that only happens in a bankruptcy I think.

Having said that, whatever stunt Leicester pulled to get out of the cr@p was a good one, because I don't remember any winding-up orders.

I'm sure that if I get this wrong someone will put us all straight:

Invividuals go  bankrupt, limited companies go:

(a) Into administration, sometimes voluntary, where an accountant is appointed, via the courts, to try and get the finances straughtened out. During this time the company should be protected from creditors

or

( Into receivership, usually at the behest of the bank which has decided to make the best of a bad job and squeeze the maximum return out of a loss making company

or  

© into liquidation, where an insolvency practicioner takes over, sells all the assets for cash and distributes the lot to the creditors pro rata to what they are owed. Hence "15p in the pound" The insolvency practicioner always gets paid first.

Creditors are either secured (banks and the tax man) who get priority in the carve up, or unsecured (every one else). It sounds like the USA institutions have got themselves "secured" status. Or something.

[philipl]

This is a point philipl may be able to help with.

The BBC reported last night that if Leeds go into administration they will not necessarily be freed of the bulk of their debt that results from a form of lease arrangement with two American financial institutions. The report did not go into details but did clearly state the debt to the Americans would still stand AFTER coming out of administration. How can this be possible if administration is to provide protection from creditors? The funds raised from the institutions were used for:

1. Funds released against projected 25 year ticket income

2. Players "leased" to the club. I gather one player was purchased for around £6m but his "mortgage" value is set at £9m - Leeds borrowed this - whatever price the player is sold for the £9m is still owed!

Just dashing out to a meeting so will answer later but the replies which follow are good ones.

[thenodrog]

The report did not go into details but did clearly state the debt to the Americans would still stand AFTER coming out of administration. How can this be possible if administration is to provide protection from creditors?

Surely its also used to protect creditors from businesses run as carelessly as LUFC.

Administration does not and should not cancel out debt.

[philipl]

When the terms of the loans and mortgages Leeds entered into became widely known, I would think any Leeds fan with half a brain (having forfeited the other half in being a Leeds fan in the first place) would want to top him or herself. A Leeds supporting billionaire would have surfaced by now and no self-respecting high net worth business-oriented individual would want to go anywhere near this mess.

The American fund providers have secured a fixed and floating lien over all the club's assets and got some additional little bonuses in terms of first call on all revenue for the next 25 years just for good measure.

If Leeds go into administration, it is tantamount to the existing management saying they can no longer cope and handing over the club to an accountant to manage the business solely in the interests of the creditors. If they do this, it does prevent the existing directors from being charged with illegal trading if they exit whilst creditors or Company House inspectors can see they avoided incurring any new liabilities with no realistic expectation of them being honoured as they fall due. The fact that interest payments have been waived for a month means that Leeds must be perilously close to this point and in any business other than a football club, would probably have gone beyond the point the Directors can legitimately remain in charge. I have no doubt that Alan Leighton is genuinely willing to put £2.2m into the club and that he is genuine when he says he wants the freedom to organise a buy-out from outside but your average cynical city person would neither say nor write what they really think about his resignation from the board to day.

In any "arrangement" (administration, liquidation or receivership), the Crown takes precedence over disposal of assets for taxation bills outstanding. When the taxes are paid (usually a per centage discount is negotiated but the Crown will certainly play hardball in such public circumstances with so many highly paid employees and self-evident bad management to blame), the American funds will be left to call all the shots with the security terms they imposed over the club's current and future business.

No sale or settlement by either the current directors or a replacement administrator can be achieved without their say-so. With the 25 year charge over all income from future ticket sales, that is a pretty hefty controlling interest which any potential purchaser from the administrator would need to negotiate with.

It is quite possible that Leeds would not come out of administration for a very long time as no purchaser would want to carry that albatross and the Americans would be mad not to extract full value from the amazing deal Ridsdale gave them. Whilst in administration, the administrator would have a legal obligation to funnel the first (and currently all) spare cash back across the Atlantic.

Lets face it, the mortgage holders over the players and all other creditors except the Americans are now in as sticky and hopeless a position as the Leeds fans and are likely to be negotiated away by the administrator to close to zero value.

The problem the fans have is that they are too numerous and too loyal for the good of the football-future of the club under the likeliest scenario the American lenders are looking at.  A very significant cash surplus could be generated by a club with the equivalent of Burnley's cost base footling away in Divs 1/2 with 25,000 average crowds (Sheff Weds are pulling 20,000+ going nowhere in Div 2). This is undoubtedly the safest way of ensuring the Americans get their investment cash plus interest returned over the next 25 years. After being suckered by Ridsdale's promise of perpetual Champions' League success, who could blame them for now selecting an option with no dependency on performance of the football team?

Perhaps the administrator would attempt to argue duress or incompetence when the American deal was structured but I could not see a Court agreeing to setting aside the loan terms on such grounds.

In short, Leeds are stuck.

The other options of calling in a receiver or going for a voluntary liquidation have to be seriously considered from the standpoint of Company Law and the position of the Directors.

Effectively, both these options close Leeds down (in the absence of any serious likelihood that the business as current constituted has no prospect of viability) and whilst a company less in the public eye can negotiate a phoenix with the liquidator doing a deal through a purchase agreement to buy the company back from the liquidator, I believe the Premiership would have no option but to cancel Leeds' registration in the event of a voluntary liquidation and certainly in the event of receivership (receivers are primarilly appointed to break the business up).

I have no doubt that were Leeds a conventional business, it would either be in liquidation or receivership by now- it is clearly insolvent, has a massively negative balance sheet, and possesses virtually no unencumbered assets.

The lawyers advising Leeds will only be allowing the directors to continue in business because there are significant intangible assets which might attract a buyer to pay significantly more than the balance sheet is worth.

Membership of the Premiership is a very valuable right but not valued on the balance sheet because it is both transitory and cannot be accurately assessed from an accounting standpoint in the same way as the Leeds United brand image has a saleable value (but less than it should be because of publicity Pete fooling around with the badge) but is also excluded from the formal balance sheet. Even taking those benefits into consideration (and Premiership membership is a rapidly wasting asset when you are languishing in 20th position), the board meeting minutes will be enormously reliant on descriptions of negotiations with potential investors or purchasers to give the lawyers and directors the necessary fig leaves to cover their backsides and remain arguably within the law.

However, as I have already pointed out, the American lenders have Leeds United by every part of the anatomy Vinnie Jones could reach. Nobody with Leeds affiliations has come forwards to rescue Leeds and I just cannot see any sane outside investor spending £60M+ to sort out Ridsdale's debt inheritance to buy a club with no assets and no prospect of avoiding relegation. This thing is so complex and expensive, I think it is highly unlikely a deal could be done before the January transfer window is closed. Irrespective of whether the club has directors or an administrator by the time the window opens, Leeds will be selling players again in January.

The Americans have no interest in doing any deal to rescue Leeds' premiership position as they will have done their sums and can see their cash coming back from a Nationwide outfit.

The same amount of money (£60m) would probably buy Doug Ellis out of Aston Villa, give the investor control over Villa Park and a sizeable chunk of better than OK Birmingham real estate which is owned by Villa AND leave spare cash to give O'Leary more of a transfer pot than Ellis allowed.

Why buy into Leeds if you are an arab oil sheikh? Abramovich didn't even look at it when he went shopping.

One final observation. I remember being very suspicious a number of years ago when the City whizz kid who helped set up the Ridsdale take over of Leeds walked out of Elland Road to take over Hull City. He was right!

[thenodrog]

Hmmm.....Lots of food for thought there.  Good post Philip.

[Paul]

Excellent, thanks philip.

[92er]

From the daily press it sounds as though the first choice will be for the Arab Leeds supporter to sort out the club. The second choice would be for Leighton. Either way it seems to me that Leeds will probably survive, improve and the fear is they might get above us.

[philipl]

Leeds have been given breathing space by the Americans until 18 January.

Significant choice of date. It allows the existing board time to try to sell sufficient players and do deals with the player mortgagors and gives an administrator almost two weeks to sell off the first team squad before the window closes if the existing board fails.

As for rescue packages, Leighton's consortium currently consists of him on his own and £2.2m- literally incredible for a man so well placed to step down from the board and not have all the funding ready.

The contradictory messages coming out of Dubai probably mean that somebody has the dream of owning a Prem club but neither has the technical know-how nor the gritted determination to follow-through to make it happen.

So, prof MacKenzie's comments on today's events has convinced 92er to anticipate a possible Leeds revival which I find a very untealistic proposition.

My gut feel is that the Americans are backing themselves to come out on top of the spoils from an administration in which all other creditors receive a pittance and are also excluded from participation in any upside generated by a new owner of Leeds.

[colin]

What other football board can offer such knowledge?

Thanks Philip.

[Blue blood]

Does anyone know how loaded this Arab Leeds fan is? Is £60 million a lot for him? If not Leeds could be out of the mess pretty soon.

As for not being a good investment, other(!) than the £60 million debt, Leeds is a good investment. Good ground, fan base, youth structure, some good players etc.

It all depends really how much this guy would be willing to shell out £60 million for nothing.