Sport
Revealed: the ex-players and managers still owed £6.85m
By Nick Harris
22 January 2005
The financial mess inherited by Ken Bates at Leeds United is so convoluted that the former Chelsea chairman has not yet been able to buy the majority share of the club he wanted.
New details about Leeds' crisis have been obtained by The Independent, including the particulars of debts and future liabilities to former managers, players, the tax authorities, the outgoing board, institutional bond-holders and the owners of Elland Road.
Sources close to the club have revealed that Bates was prevented from buying more than 50 per cent of Leeds because of technicalities arising from the £60m loan acquired during Peter Ridsdale's chairmanship
Bates had hoped to buy 51 per cent for £10m. His marginally lesser stake will make no practical difference to his control at Leeds - the structure of the deal has guaranteed that - but the reason he was thwarted is illustrative of Leeds' plight.
The loan Ridsdale arranged, from four institutional bondholders, was for £60m. When the Ridsdale dream died, the incoming consortium, led by Gerald Krasner, inherited the debt. He restructured it, paying £12.6m in partial settlement and agreeing a raft of future conditional payments, depending on Leeds' League position between now and the year 2025.
One clause related to the sale by Krasner's group of either Leeds' assets or their own shares. The upshot was that if they had sold more than 50 per cent of Leeds to Bates, a payment would have been triggered, potentially costing millions. Because Bates bought no more than 50 per cent, the clause was not activated. At a pre-set time, thought to be March 2007, the clause will expire and Bates will be able to buy the rest of Leeds.
Other clauses relating to the loan are ongoing. Leeds will pay the bond-holders £5m if they return to the Premiership. A schedule of other "League Performance Amounts" could see them pay £500,000 per year for 17 years thereafter. Those potential liabilities are in addition to Leeds' stated of debts of around £21m.
Bates knew these details well. Indeed, he had them written on a piece of paper as he discussed Leeds' financial situation with Sebastien Sainsbury in The Dorchester hotel a few weeks ago - before their proposed partnership hit the buffers.
Whether Bates knew of all Leeds' creditors until much more recently is doubtful. He eschewed due diligence to rush his deal through, meaning he may not have studied some extraordinary facts.
A recent Leeds balance sheet, drafted in September, showed liabilities of £6.85m to former managers and players, including a staggering £2.1m to Robbie Fowler, who left two years ago, £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 was paid yesterday.
Another startling fact is that last autumn the Leeds board officially valued Elland Road at £29m. They sold it shortly afterwards for less than £10m, and agreed to rent it back over 25 years from the new owner for more than £1m a year.
Bates said yesterday he hopes to repurchase the stadium and the club's training ground, Thorp Arch. They will cost him £17.7m because the owners have healthy profits built into their "buy-back" contracts.
Although Krasner and his board have resigned, they will help with the handover. Krasner said Bates "will require our assistance" to buy back the properties. He denied that he would make any commission for this, but admitted he and his outgoing colleagues would receive a "nominal sum" for selling to Bates. The figure is around £200,000. It is not known what extra payments kick in when Bates' holding rises above 50 per cent.
Krasner has always maintained that he and his fellow consortium members did not exploit Leeds for profit. Indeed, they loaned Leeds almost £5m when they took over last March. Loans included £100,000 from Krasner, £2.4m from Simon Morris, £1.7m from Melvyn Levi and £620,000 from David Richmond, son of the man who took Bradford into administration, Geoffrey, who himself initially acted as an advisor to Krasner.
The directors' loans will remain with the club for four more years. It is thought this is because of issues relating to the triggering of payments to bond-holders rather than the stated philanthropic reasons.
Krasner has declined to confirm the existence of "consultancy agreements" for some board members, drawn up when his group took over.
Informed sources say Levi originally had an agreement for the club to pay him a fee of up to £20,000 per month for consultancy work from last July onwards. The deal had a notice period of 16 months.
Neither the board nor Bates will comment on whether any consultancy agreements remain in place. If not, the board will leave with only their original investments (plus the nominal sum for their shares, plus any future sums for as yet unsold shares, plus any consultancy fees already banked).
Bates has declined to say who, if anyone, is backing him, beyond stating that he has used a Geneva-based company, The Forward Sport Fund, to do the deal.
Fans were divided over Bates' buy-out. "We're looking for stable management and someone who knows the game and he fits the description," Ray Fell, chairman of the official supporters' club, said.
John Boocock, chairman of the independently run Leeds United Supporters' Trust, said: "It's the blackest day. Ken Bates is interested solely in himself."
Bates' inherited debt
Leeds' Big-name footballing creditors
Robbie Fowler £2,106,000
Danny Mills £1,841,000
Nick Barmby £1,055,000
Robbie Keane £400,000
David O'Leary £356,000
Peter Reid £355,000
Stephen McPhail £311,000
Dominic Matteo £181,000
Danny Milosevic £156,000
Brian Kidd £87,000
Other £7,000
TOTAL £6,855,000
as of September 2004
Revealed: the ex-players and managers still owed £6.85m
By Nick Harris
22 January 2005
The financial mess inherited by Ken Bates at Leeds United is so convoluted that the former Chelsea chairman has not yet been able to buy the majority share of the club he wanted.
New details about Leeds' crisis have been obtained by The Independent, including the particulars of debts and future liabilities to former managers, players, the tax authorities, the outgoing board, institutional bond-holders and the owners of Elland Road.
Sources close to the club have revealed that Bates was prevented from buying more than 50 per cent of Leeds because of technicalities arising from the £60m loan acquired during Peter Ridsdale's chairmanship
Bates had hoped to buy 51 per cent for £10m. His marginally lesser stake will make no practical difference to his control at Leeds - the structure of the deal has guaranteed that - but the reason he was thwarted is illustrative of Leeds' plight.
The loan Ridsdale arranged, from four institutional bondholders, was for £60m. When the Ridsdale dream died, the incoming consortium, led by Gerald Krasner, inherited the debt. He restructured it, paying £12.6m in partial settlement and agreeing a raft of future conditional payments, depending on Leeds' League position between now and the year 2025.
One clause related to the sale by Krasner's group of either Leeds' assets or their own shares. The upshot was that if they had sold more than 50 per cent of Leeds to Bates, a payment would have been triggered, potentially costing millions. Because Bates bought no more than 50 per cent, the clause was not activated. At a pre-set time, thought to be March 2007, the clause will expire and Bates will be able to buy the rest of Leeds.
Other clauses relating to the loan are ongoing. Leeds will pay the bond-holders £5m if they return to the Premiership. A schedule of other "League Performance Amounts" could see them pay £500,000 per year for 17 years thereafter. Those potential liabilities are in addition to Leeds' stated of debts of around £21m.
Bates knew these details well. Indeed, he had them written on a piece of paper as he discussed Leeds' financial situation with Sebastien Sainsbury in The Dorchester hotel a few weeks ago - before their proposed partnership hit the buffers.
Whether Bates knew of all Leeds' creditors until much more recently is doubtful. He eschewed due diligence to rush his deal through, meaning he may not have studied some extraordinary facts.
A recent Leeds balance sheet, drafted in September, showed liabilities of £6.85m to former managers and players, including a staggering £2.1m to Robbie Fowler, who left two years ago, £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 was paid yesterday.
Another startling fact is that last autumn the Leeds board officially valued Elland Road at £29m. They sold it shortly afterwards for less than £10m, and agreed to rent it back over 25 years from the new owner for more than £1m a year.
Bates said yesterday he hopes to repurchase the stadium and the club's training ground, Thorp Arch. They will cost him £17.7m because the owners have healthy profits built into their "buy-back" contracts.
Although Krasner and his board have resigned, they will help with the handover. Krasner said Bates "will require our assistance" to buy back the properties. He denied that he would make any commission for this, but admitted he and his outgoing colleagues would receive a "nominal sum" for selling to Bates. The figure is around £200,000. It is not known what extra payments kick in when Bates' holding rises above 50 per cent.
Krasner has always maintained that he and his fellow consortium members did not exploit Leeds for profit. Indeed, they loaned Leeds almost £5m when they took over last March. Loans included £100,000 from Krasner, £2.4m from Simon Morris, £1.7m from Melvyn Levi and £620,000 from David Richmond, son of the man who took Bradford into administration, Geoffrey, who himself initially acted as an advisor to Krasner.
The directors' loans will remain with the club for four more years. It is thought this is because of issues relating to the triggering of payments to bond-holders rather than the stated philanthropic reasons.
Krasner has declined to confirm the existence of "consultancy agreements" for some board members, drawn up when his group took over.
Informed sources say Levi originally had an agreement for the club to pay him a fee of up to £20,000 per month for consultancy work from last July onwards. The deal had a notice period of 16 months.
Neither the board nor Bates will comment on whether any consultancy agreements remain in place. If not, the board will leave with only their original investments (plus the nominal sum for their shares, plus any future sums for as yet unsold shares, plus any consultancy fees already banked).
Bates has declined to say who, if anyone, is backing him, beyond stating that he has used a Geneva-based company, The Forward Sport Fund, to do the deal.
Fans were divided over Bates' buy-out. "We're looking for stable management and someone who knows the game and he fits the description," Ray Fell, chairman of the official supporters' club, said.
John Boocock, chairman of the independently run Leeds United Supporters' Trust, said: "It's the blackest day. Ken Bates is interested solely in himself."
Bates' inherited debt
Leeds' Big-name footballing creditors
Robbie Fowler £2,106,000
Danny Mills £1,841,000
Nick Barmby £1,055,000
Robbie Keane £400,000
David O'Leary £356,000
Peter Reid £355,000
Stephen McPhail £311,000
Dominic Matteo £181,000
Danny Milosevic £156,000
Brian Kidd £87,000
Other £7,000
TOTAL £6,855,000
as of September 2004