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Unless a suitably wealthy purchaser can be found, Leeds United will be the first Premiership club to go into administration. The main creditors include providers of £60m of senior secured notes and Gerling General Insurance, the credit insurer of Registered European Football Finance which leases some members of the Leeds United team. When one hears phrases like 'leases some members of the team' being bandied about I am inclined to think that my late colleague Susan Strange was right when she talked about the rise of 'Casino Capitalism'.
Professor John McKenzie stepped down as plc chairman before the annual general meeting. He was described as 'damaged goods' by Bill Gerrard who pointed out that his salary has been paid up until September 2004. In general, academics should keep away from running football clubs (and I have received an approach and quickly disqualified myself). The exception to this rule is the late Professor Sir Roland Smith, the academic who transformed Manchester United's fortunes. But he had exceptional business skills and John McKenzie is no Roland Smith. However, Leeds acting chairman and chief executive Trevor Birch, who played a key role in engineering the Russian rescue of Chelsea, defended McKenzie: 'John came in, steadied the club and steered it through turbulent waters. The reality is the ship is still afloat. It may well have been sunk if John had not implemented pretty difficult decisions in terms of taking cuts out of the business.' Birch, who is himself earning £500,000 a year (but without a contract) admitted that shareholders had a right to be angry and has promised to consider an independent inquiry into the running of the club over the last five years. The Financial Times cheekily suggested that two key questions might be why did Leeds receive only £2.5m for the transfer of Harry Kewell to Liverpool and what happened to the previous chairman's golfish?
The mystery over the future of the club deepened when Professor John McKenzie sold half a million shares at 5p (he was still left with 3.5m shares or 1 per cent of the club). The shares subsequently fell 11.6 per cent to 4.75p with the market interpreting the sale as a sign that a bid for the club was now less likely. However, after further falls, they recovered to 4.3 per cent after speculation that Allan Leighton had secured backing for a rescue bid from retail entrepreneur Philip Green.
The current crisis erupted when Leeds told the Stock Exchange that they might have reached the end of the road and may have to seek the protection of administration. This would be a preliminary step to protect the club from creditors seeking to wind them up. The club, bottom of the Premiership at the time of the announcement, were hoping to announce a restructuring of their £80m debts following negotiations with their major creditors. As a consequence of their failure to reach agreement with their creditors, they had to postpone plans to accept a £4.4m cash-for-shares injection from deputy plc chairman Allan Leighton, also chairman of Royal Mail, and Sheikh Abdul din Mubarak-Al-Khalifa. The difficulties they faced also prevented them from making a move for Southampton manager Gordon Strachan.
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