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The Tangled Financial Web at Leeds United
Ken Bates has inherited a tangled financial web at Leeds, although such situations are not new to him. There are still liabilities of £6.86m to former staff, including no less than £2.1m to Fowler, £1.8m to Danny Mills, £1m to Nick Barmby, plus outstanding six-figure sums to David O'Leary and Peter Reid. The tax authorities were owed £6.86m, of which £1.2m has now been paid. The complexities of Leeds' situation have meant that Bates has not been able to buy the majority share of the club he wanted because of issues arising from the £60m loan acquired during the chairmanship of Peter Ridsdale. He had hoped for 51 per cent, but was only able to acquire 50 per cent. This will make no practical difference to his control, but illustrates the problems at the club. The loan Ridsdale arranged from four institutional bondholders was for £60m. When his dream died, the incoming Krasner consortium inherited the debt. They restructured it, paying £12.6m in partial settlement and agreeing a raft of future conditional payments, depending on Leeds' league position between now and 2025. There was a clause relating to any sale of Leeds so that if they had sold more than 50 per cent to Bates, a payment would have been triggered, probably amounting to millions. It is thought that in March 2007 the clause will expire and Bates will then be able to buy the rest of the club. Leeds will have to pay the bondholders £5m if they return to the Premiership and could be liable for half a million a year for seventeen years thereafter. Those potential liabilities are in addition to Leeds' stated debts of around £21m.
Bates Takes Over At Leeds
Having been rebuffed in his attempts to take control of Sheffield Wednesday, former Chelsea chairman Ken Bates has taken control of Leeds. Boardroom control has gone to a Swiss company fronted by the 73-year old. The deal is believed to have cost the new investors around £10m. Shareholders in the Geneva-based Forward Sports Fund were not disclosed. All members of the Leeds board except ex-player Peter Lorimer have resigned. Mr Bates, who did not attend Saturday's game at Stoke City, said that Leeds was 'a great club that has fallen on hard times.' His first task was to secure its financial future. Leeds would aim to buy back its Elland Road stadium and Thorp Arch training ground which were sold last year to keep the club afloat. That will cost £17.7m because the owners have healthy profits built into their 'buy-back' contracts. Bates also floated the idea of fans 'controlling the pitch' at Elland Road to end any threat of property development. The head of the outgoing consortium, local accountant Peter Krasner, said that debt had been reduced from £103m to less than £25m under his board. Outgoing directors have agreed to leave their loans of more than £4m in the club for four years. The deal came a day after Leeds had to assure office staff that it would have the cash to pay their January wages. The deal also avoided any prospect of the club's being put into administration which would have led to a ten point penalty and the threat of relegation from the Coca Cola Championship. Bates' bucaneering style has its admirers and critics, with the latter probably in the majority. Reaction from Leeds fans to the arrival of England's 'Mr Football' has been divided. Ray Fell, the chair of the official supporters' club, commented, 'We're looking for stable management and someone who knows the game and he fits the description'. John Bocock of the independently run Leeds United Supporters' Trust said, 'It's the blackest day. Ken Bates is solely interested in himself. I would never shake hands with him because I'd be worried I wouldn't get all my fingers back.' Given the desperate plight of the club, most supporters probably welcome any development that would allow it to prosper on the pitch. It should be noted that the Financial Services Authority is continuing to investigate shareholdings in Chelsea Village, the club's former parent company, before its takeover by Mr Abramovich.
Is Bates A 'Fit And Proper' Person?
The Leeds United Supporters Trust is to ask League chairman Sir Brian Mawhinney whether Ken Bates is a 'fit and proper person' to run a league club. It is unlikely that Bates would not pass the League's new rules. The criteria introduced last summet are intended to keep out bankrupts and directors who have a track record of taking clubs into administration. Bates, now based in Monaco, is neither, although Chelsea were only days away from administration with £80m in unserviceable debts when their Russian knight in shining armour arrived. However, Bates' brusque and autocratic style, or doubts about whether his main interest is in keeping himself in the limelight, are not considerations as far as the League is concerned. It is believed that Bates intends to create a 'Chelsea Village' at Elland Road. The 'Chelsea Village' concept did not work well in the vicinity of the Kings Road. It has been something of a continuing financial problem with low occupancy rates in the hotel and restaurants. The Leeds ground is in something of an urban wasteland, even if it does have good motorway access. Perhaps it would be appropriate for a Bates Motel brand. One consequence of the Leeds deal may be an out-of-court settlement of the claim brought by Bates against Chelsea for alleged breach of contract.
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