Leeds United takeover: Still more questions raised than answers - Hay
By Phil Hay
The injection of cash into Leeds United by GFH Capital was never a secret.
As far back as July, shortly after the company secured the exclusive right to negotiate a takeover, associates of GFH Capital let it be known that funding would be offered to the club in the interim.
How much and to what end are facts known only to GFH Capital and Leeds but at the time it was suggested that the firm’s money supported the overhaul of the playing squad at Elland Road; allowing, for instance, the £200,000 signing of Luke Varney from Portsmouth while United were on their pre-season tour of Devon and Cornwall.
There were other claims too, specifically that the improved contracts accepted by Aidan White and Ross McCormack owed something to GFH Capital’s investment. Neither the firm nor Leeds will discuss specifics but GFH Capital’s intention, it says, was to “help with the running of the club and the signing of players.” To that end, the money came at a time when United needed it.
Documents lodged with Companies House this month now show that at least £2million has been paid to Leeds City Holdings Limited – the parent company of Leeds United – by GFH Capital since initial talks about a buy-out of Leeds intensified in June.
A payment of exactly £2million for a “mortgage of shares” in the Championship club was declared to Companies House on October 5, some months after Leeds actually received the money.
The document gives GFH Capital security over that investment and “any further amount made available” by it. It also notes that Leeds City Holdings requires the written consent of GFH Capital to “sell, assign, transfer, part with possession of or otherwise dispose of all or any other part of the charged property.”
In other words, the shares mortgaged by GFH Capital – and the document states that the mortgage covers “all ordinary shares in the share capital of Leeds United Football Club Limited” – cannot be sold to a third party without the firm’s permission or, presumably, a repayment of the loan.
The mention of “any further amount made available” is relevant on the basis of what sources at GFH Capital are saying about the company’s total investment. A contact spoken to by the YEP claimed the figure of £2million was around a third of the money given to Leeds by GFH Capital during contract negotiations, implying that the actual amount is closer to £6million. “This is essentially GFH Capital starting bankroll Leeds United,” he said.
Leeds declined to comment when contacted by the YEP, citing the confidentiality clause which technically still applies to the commercial details of the planned takeover, but other sources involved in the deal dispute the suggestion that GFH Capital’s investment in United is significantly higher than £2million.
The Dubai-based private equity firm has received some sceptical coverage regarding its financial position and that of its parent company, Bahraini investment bank Gulf Finance House.
Since it stepped into the open and informed Bahrain’s Stock Exchange about GFH Capital’s bid to buy Leeds, Gulf Finance House has faced a wave of scrutiny. By association, and as a wholly-owned subsidiary of Gulf Finance House, so too has GFH Capital.
Earlier this week, Reuters reported that a joint bid involving GFH Capital to purchase Turkish bank Adabank for more than £40million had been blocked by financial regulators in Turkey. According to Reuters, the deal was opposed due to concerns about GFH Capital’s financial strength.
GFH Capital says fears about its position are unfounded and those working for the company say it has “deep pockets”, though there is a steadfast refusal on the part of the Dubai-based firm, its parent company and those who regulate Gulf Finance House to explain how those pockets have been or will be filled.
More than three weeks ago, the YEP contacted the Central Bank of Bahrain (CBB) – the regulatory body for the country’s financial organisations – to seek answers to several questions about the proposed takeover of Leeds by one of Gulf Finance House’s subsidiaries: what CBB knew about the bid, whether it had been asked to approve it, whether Gulf Finance House or GFH Capital had the money to complete a £52million purchase and whether the CBB was aware of precisely how the deal would be financed.
In reply, Khalid Hamad, the CBB’s executive director of banking supervision, said this week: “The Central Bank performs a statutory regulatory function only and is not at liberty to answer questions about the private investment intentions/decisions/operational affairs of any of its regulated institutions.”
GFH Capital, meanwhile, takes the view that confirmation of its seven-figure investment in Leeds is confirmation of how serious it is about the deal to acquire a 100 per cent stake in the club.
The YEP’s source said: “The company has always maintained that when it takes control of the club, major investment will be made in the football side of the business. This takeover is about football at the end of the day.
“The £2million payment is only part of what’s been transferred to Leeds United to help with the running of the club and the signing of players.
“It’s around a third of the money GFH Capital has paid. It demonstrates that GFH Capital’s commitment to this deal is very strong.”
Moreover, the source added, it indicates that “the company has the funds available to complete a cash purchase” of Leeds.
GFH Capital is unwavering in its rhetoric but the claim that a payment of £2million is proof of the funds needed to seal a £52million buy-out – or, for that matter, finance the club’s operations in the long term – will been seen by many as debatable.
It remains the case that the depths of GFH Capital’s pockets can only be judged on the fate of its bid.