Guardian 30/5/07
Leeds leave creditors clinging to wreckage
Ken Bates' dealings - including the non-payment of St John Ambulance, and a proposed penny to pound rescue plan - have angered creditors.
Amid the wreckage of Leeds United, in the appalling, familiar list of those left unpaid by another bust football club, sits an organisation which does not even charge for its services, just asks clubs to contribute towards expenses. Nevertheless, there it is again, in the £35m mountain of debts which Ken Bates's Leeds is not paying: St John Ambulance, owed £165.
At what is expected to be an angry creditors' meeting on Friday, the administrator, Richard Fleming of accountants KPMG, is proposing that Leeds be sold to a new company headed by Bates, in return for a payment of only 1p for every pound of debt. That proposal is backed by the three anonymously-owned, offshore companies who claim collectively to be owed £17.78m. If it is passed, St John Ambulance will be given £1.65 and will still be expected to turn up again next season to tend to the Elland Road injured.
Other organisations which will suffer the same fate, contained in a tightly-typed, 25-page list of creditors produced by the administrators, include suppliers of all the basics to a football club: local schools, hospitals and universities, the gas, electricity and water utilities, and Leeds City Council's leisure department, which is owed £124,121.
The speed with which the deal to sell the club was done, and questions about the identity and motives of the offshore companies, have infuriated many people in Leeds, a city now deeply embarrassed by the car-crash plight of its only professional football club. Bates, despite being a belligerent and unabashed chairman, is not even officially a shareholder; Leeds United is owned by the Forward Sports Fund, registered at a Cayman Islands PO box, with a Swiss-based company Chateau Fiduciaire named as its director. Bates's solicitor, Mark Taylor, has described Bates as Forward's "UK representative", the closest Bates comes to ownership of the club.
On May 4, the same day that Leeds were placed in administration, Fleming announced the deal to sell the club for 1p in the £1 to a new company, of which Bates and Taylor are directors, again owned by the Forward Sport Fund. It will have to pay what are known as "football creditors" - players and other clubs owed money - in full if the club is to be allowed to compete in League One next season, but all other debts will be all but wiped out.
Forward, according to club records cited in the administrators' report, paid £4.5m to take over Leeds in January 2005 from the previous owners, a group of local businessmen chaired by the insolvency accountant, Gerald Krasner. Forward now claims it is owed £2.419m, loaned in the failed attempt to keep the ailing club in business.
One of the two other offshore companies, Krato Trust, registered at a PO box in Charlestown, Nevis in the West Indies, claims to be owed £2.5m, having lent the club £2.25m between December 2005 and June 2006. Astor Investment Holdings, registered at a PO box in the British Virgin Islands, with an office in another tax haven, Guernsey, claims to be owed £12,839,309, having loaned the club £11,285,269 between August 2005 and October last year.
Both Krato and Astor Investment have told the administrator they have no connection to Bates, Forward Sports Fund or any other director of Leeds. Fleming told me his firm had made "fairly extensive inquiries" to confirm there was no legal connection between them and said, in fact, the owners of Astor were unknown.
Krato and Astor have stated that they have no connection with Forward or Bates. Nevertheless they have agreed to the proposal to sell the club to Forward for 1p in the pound, even agreeing to reduce the amount they will receive. Astor has agreed to write off half its claim if creditors approve the sale, while Krato has agreed to accept nothing at all.
Asked why the two anonymously-owned offshore entities should agree so dramatically to write off millions of pounds put into Leeds, in return for a sale to a new company in which they state they have no interest, Fleming said: "At the time we agreed it, there were no other offers. Maybe they had football in their hearts and wanted the club to survive."
The proposals need 75% of creditors to agree, so the offshore companies can block any alternative because their debts amount to 45% of the total. However, the transfer of the club is not expected to proceed without a storm. Several creditors have said they intend to challenge the administrator, demanding to know who is behind Astor and Krato to see proof they are not connected to Bates, and ask for solid evidence of the money the offshore trusts claim to have put in. Krasner, the former chairman, has offered to represent creditors free of charge to challenge the sale to Forward for what he describes as: "A derisory offer to creditors, people who have supported Leeds through thick and thin."
After a season in which Leeds were relegated, often watched by a depressed, half-full Elland Road where adult ticket prices averaged about £35, there is not a great popular appetite for Bates retaining control. Rick Duniec, chair of the Leeds United Supporters Trust, says:"Our main concern is to see our club restored to health, and it seems quite a widespread opinion that people want a change to more local ownership."
Leeds, a city which has been thriving economically, still has no major venue capable of hosting concerts and Elland Road has long seemed an obvious site for development, especially if it had a thriving modern football club at its heart. United's debt-laden collapse since the team reached the 2001 Champions League semi-final is infamous enough, but the detail of the last three years, chronicled in the administrator's report, still makes shocking reading.
Krasner and his consortium took over in March 2004, with £95.5m of the debts taken on by the former chairman, Peter Ridsdale, and his board written off. Krasner's consortium sold Paul Robinson, Alan Smith, James Milner, Mark Viduka, Elland Road, the Thorpe Arch training ground and, for £5m, an option to develop Elland Road, but still could not stem the club's losses.
In January 2005, with the Inland Revenue pressing for payment of £1.2m, the consortium sold the club to the Forward Sports Fund. Bates became the chairman and the offshore companies put their millions in, yet despite reaching the play-off final in 2006, selling Rob Hulse and Matthew Kilgallon, and receiving £4m compensation from Chelsea for two youth players, Tom Taiwo and Michael Woods, Leeds continued to haemorrhage money. The administrator's report does not make clear why that happened. Creditors piled up and last month HM Revenue and Customs issued a winding-up petition. Leeds owe almost £7m in unpaid tax and VAT.
It will be a surprise if the taxman accepts 1p in the pound, and with ordinary creditors likely to challenge too, the club's destiny appears to lie with the decision on Friday of two opaque funds, registered in the West Indies and BVI.
St John Ambulance, though, is unlikely to involve itself in any rows. The charity has tended not to make a fuss and avoided public statements, as it has been left unpaid, time and again, by football in its boom time.
Money owed
£631,595
Wages still owed to several former players including Michael Ricketts, Paul Butler, Eirik Bakke, Steve Stone and Jermaine Wright
£216,667
Money still owed to Danny Mills, who last played a competitive match for Leeds in May 2003
£3,839
Owed to New Burley Window Cleaners
£46,604
Owed to Leeds Metropolitan University
£2,900
Owed to Boo's Disco of Bramhope in Leeds for the hiring of mobile discos
£8,997
Owed to the West Yorkshire Ambulance Service
Leeds leave creditors clinging to wreckage
Ken Bates' dealings - including the non-payment of St John Ambulance, and a proposed penny to pound rescue plan - have angered creditors.
Amid the wreckage of Leeds United, in the appalling, familiar list of those left unpaid by another bust football club, sits an organisation which does not even charge for its services, just asks clubs to contribute towards expenses. Nevertheless, there it is again, in the £35m mountain of debts which Ken Bates's Leeds is not paying: St John Ambulance, owed £165.
At what is expected to be an angry creditors' meeting on Friday, the administrator, Richard Fleming of accountants KPMG, is proposing that Leeds be sold to a new company headed by Bates, in return for a payment of only 1p for every pound of debt. That proposal is backed by the three anonymously-owned, offshore companies who claim collectively to be owed £17.78m. If it is passed, St John Ambulance will be given £1.65 and will still be expected to turn up again next season to tend to the Elland Road injured.
Other organisations which will suffer the same fate, contained in a tightly-typed, 25-page list of creditors produced by the administrators, include suppliers of all the basics to a football club: local schools, hospitals and universities, the gas, electricity and water utilities, and Leeds City Council's leisure department, which is owed £124,121.
The speed with which the deal to sell the club was done, and questions about the identity and motives of the offshore companies, have infuriated many people in Leeds, a city now deeply embarrassed by the car-crash plight of its only professional football club. Bates, despite being a belligerent and unabashed chairman, is not even officially a shareholder; Leeds United is owned by the Forward Sports Fund, registered at a Cayman Islands PO box, with a Swiss-based company Chateau Fiduciaire named as its director. Bates's solicitor, Mark Taylor, has described Bates as Forward's "UK representative", the closest Bates comes to ownership of the club.
On May 4, the same day that Leeds were placed in administration, Fleming announced the deal to sell the club for 1p in the £1 to a new company, of which Bates and Taylor are directors, again owned by the Forward Sport Fund. It will have to pay what are known as "football creditors" - players and other clubs owed money - in full if the club is to be allowed to compete in League One next season, but all other debts will be all but wiped out.
Forward, according to club records cited in the administrators' report, paid £4.5m to take over Leeds in January 2005 from the previous owners, a group of local businessmen chaired by the insolvency accountant, Gerald Krasner. Forward now claims it is owed £2.419m, loaned in the failed attempt to keep the ailing club in business.
One of the two other offshore companies, Krato Trust, registered at a PO box in Charlestown, Nevis in the West Indies, claims to be owed £2.5m, having lent the club £2.25m between December 2005 and June 2006. Astor Investment Holdings, registered at a PO box in the British Virgin Islands, with an office in another tax haven, Guernsey, claims to be owed £12,839,309, having loaned the club £11,285,269 between August 2005 and October last year.
Both Krato and Astor Investment have told the administrator they have no connection to Bates, Forward Sports Fund or any other director of Leeds. Fleming told me his firm had made "fairly extensive inquiries" to confirm there was no legal connection between them and said, in fact, the owners of Astor were unknown.
Krato and Astor have stated that they have no connection with Forward or Bates. Nevertheless they have agreed to the proposal to sell the club to Forward for 1p in the pound, even agreeing to reduce the amount they will receive. Astor has agreed to write off half its claim if creditors approve the sale, while Krato has agreed to accept nothing at all.
Asked why the two anonymously-owned offshore entities should agree so dramatically to write off millions of pounds put into Leeds, in return for a sale to a new company in which they state they have no interest, Fleming said: "At the time we agreed it, there were no other offers. Maybe they had football in their hearts and wanted the club to survive."
The proposals need 75% of creditors to agree, so the offshore companies can block any alternative because their debts amount to 45% of the total. However, the transfer of the club is not expected to proceed without a storm. Several creditors have said they intend to challenge the administrator, demanding to know who is behind Astor and Krato to see proof they are not connected to Bates, and ask for solid evidence of the money the offshore trusts claim to have put in. Krasner, the former chairman, has offered to represent creditors free of charge to challenge the sale to Forward for what he describes as: "A derisory offer to creditors, people who have supported Leeds through thick and thin."
After a season in which Leeds were relegated, often watched by a depressed, half-full Elland Road where adult ticket prices averaged about £35, there is not a great popular appetite for Bates retaining control. Rick Duniec, chair of the Leeds United Supporters Trust, says:"Our main concern is to see our club restored to health, and it seems quite a widespread opinion that people want a change to more local ownership."
Leeds, a city which has been thriving economically, still has no major venue capable of hosting concerts and Elland Road has long seemed an obvious site for development, especially if it had a thriving modern football club at its heart. United's debt-laden collapse since the team reached the 2001 Champions League semi-final is infamous enough, but the detail of the last three years, chronicled in the administrator's report, still makes shocking reading.
Krasner and his consortium took over in March 2004, with £95.5m of the debts taken on by the former chairman, Peter Ridsdale, and his board written off. Krasner's consortium sold Paul Robinson, Alan Smith, James Milner, Mark Viduka, Elland Road, the Thorpe Arch training ground and, for £5m, an option to develop Elland Road, but still could not stem the club's losses.
In January 2005, with the Inland Revenue pressing for payment of £1.2m, the consortium sold the club to the Forward Sports Fund. Bates became the chairman and the offshore companies put their millions in, yet despite reaching the play-off final in 2006, selling Rob Hulse and Matthew Kilgallon, and receiving £4m compensation from Chelsea for two youth players, Tom Taiwo and Michael Woods, Leeds continued to haemorrhage money. The administrator's report does not make clear why that happened. Creditors piled up and last month HM Revenue and Customs issued a winding-up petition. Leeds owe almost £7m in unpaid tax and VAT.
It will be a surprise if the taxman accepts 1p in the pound, and with ordinary creditors likely to challenge too, the club's destiny appears to lie with the decision on Friday of two opaque funds, registered in the West Indies and BVI.
St John Ambulance, though, is unlikely to involve itself in any rows. The charity has tended not to make a fuss and avoided public statements, as it has been left unpaid, time and again, by football in its boom time.
Money owed
£631,595
Wages still owed to several former players including Michael Ricketts, Paul Butler, Eirik Bakke, Steve Stone and Jermaine Wright
£216,667
Money still owed to Danny Mills, who last played a competitive match for Leeds in May 2003
£3,839
Owed to New Burley Window Cleaners
£46,604
Owed to Leeds Metropolitan University
£2,900
Owed to Boo's Disco of Bramhope in Leeds for the hiring of mobile discos
£8,997
Owed to the West Yorkshire Ambulance Service