Desperate Times At Leeds - 04/05/03

The club is considering refinancing in order to cut its debts of almost £80m. Options under consideration include a rights issue and a debt-for-equity swap, though a bond issue has been ruled out. New chairman Professor John McKenzie is already getting a grip on the situation and has now identified £5 million of cost savings that will be reflected in second-half results. Non-executive directors have agreed to give up their fees while senior managers have agreed to a fifteen per cent cut in their salaries. A number of middle level managers have been made redundant. It has been revealed that under the Ridsdale regime about thirty per cent of a staff of 260 (including part-timers) drove company cars.

Chairman Ridsdale's declared ambition was to make Leeds the No.2 club in the country after Manchester United. The club gambled on staying in the Champions League at a cost of £30 million. At the end of January, the club's shares were worth 4p in London, valuing the company at £15 million.

The club has spent £93.4m on bringing in new players since 1998. Over roughly the same period player sales have amounted to £64m, leaving a net deficit over four years of nearly £30m. All this was funded by a £60m mortgage guaranteed against future season ticket sales. This mortgage cost £890,000 in arrangement fees and even the money to pay those fees was borrowed. 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. When capital repayments start in September 2004, they will amount to £7m a year. There has even been speculation that recent player sales were necessary to stave off administration. But as the transfer market has collapsed, the sums realised fall short of previous expectations. The hope that long-term debt could be financed by player sales has proved to be a false one. The club is increasingly being run to meet the needs of the City financial institutions that bankrolled it than for the fans. Will anyone be prepared to take responsibility for this state of affairs? It seems that the new chairman might.