Leeds United takeover still on despite buyers' worrying accounts
Guardian 13/11/12
Auditors question 'ability to continue as a going concern'
'No doubt GFHC can go ahead with the deal,' says spokesman
David Conn
The Middle East private equity firm bidding to buy Leeds United has released accounts which state it does not have the cash to meet its current commitments and which cast doubt over its ability to survive as a going concern.
The Bahrain-based Gulf Finance House (GFH), whose subsidiary Gulf Finance House Capital (GFHC), based in Dubai, is in exclusive takeover negotiations with Leeds' owner, Ken Bates, is selling assets to repay money which it owes, its accounts state.
GFH's auditors, KPMG Fakhro in Bahrain, warn that the GFH group's ability to meet its financial obligations depends on selling assets in time.
"These factors indicate the existence of material uncertainties which may cast significant doubt about the group's ability to continue as a going concern," the accounts state.
The GFH accounts, which include the finances of GFHC and all the firm's subsidiaries for the nine months to 30 September, do show the group making a profit of $7.5m (£4.7m), achieved principally by settling some financial liabilities.
However, KPMG Fakhro stated in its extended warning that: "The [GFH] group had accumulated losses of $293.76m and … its current contractual obligations exceeded its liquid assets.
"As a result the ability of the Group to meet its obligations when due depends on its ability to achieve a timely disposal of assets."
A spokesman for GFHC pointed out that, despite the difficulties described by the accounts, they showed $37m cash in GFH's bank. The group's assets amounted to $833m and, although this does not mean GFH has adequate cash now, some of those assets are being considered for sale. The spokesman said: "There is no doubt that GFHC can go ahead with this deal to buy Leeds United."
GFHC is thought to be contemplating paying £44m for Leeds, who slipped to 18th in the Championship on Saturday following a 6-1 home defeat by Watford. Such a sum is certain to deliver a substantial personal profit to Bates, who owns 72.85% of the club via a company, Outro, registered in the offshore tax haven of Nevis in the West Indies. Bates himself is resident in Monaco as an exile from paying UK capital gains tax.
GFHC has already paid £2m into Leeds and is promising up to £8m further to invest in the January transfer window if the deal goes through. Its period of exclusive negotiation ends this Thursday, 15 November, but a GFHC source said the firm then has a "lock in" period within which it can conclude the deal.
In the accounts the auditors state that GFH has had to renegotiate several tranches of its borrowings and issued shares to raise capital.
"To further address the liquidity issues, the management has put in place an asset sale and liquidity plan to … support its operations and repayment of the Group's obligations," the accounts state.
While KPMG Fakhro included its stern warning that GFH's need to sell assets amounted to "material uncertainties" that it considered may cast doubt on the group's "ability to continue as a going concern", the accounts say the GFH directors were "satisfied" with their plans to deal with the financial challenges.
The GFHC source said the takeover talks are at an advanced stage and the firm has proved to Bates that the money is there to conclude the deal. That was confirmed by Leeds in a statement on 26 October, when Bates said the takeover discussions were "in a good place".
Last week the Leeds United Supporters' Trust issued a statement expressing concern about GFHC's bid and questioning if it had sufficient money available. The trust said there are "other parties" with "the resources necessary", which are interested in buying Leeds.
Auditors question 'ability to continue as a going concern'
'No doubt GFHC can go ahead with the deal,' says spokesman
David Conn
The Middle East private equity firm bidding to buy Leeds United has released accounts which state it does not have the cash to meet its current commitments and which cast doubt over its ability to survive as a going concern.
The Bahrain-based Gulf Finance House (GFH), whose subsidiary Gulf Finance House Capital (GFHC), based in Dubai, is in exclusive takeover negotiations with Leeds' owner, Ken Bates, is selling assets to repay money which it owes, its accounts state.
GFH's auditors, KPMG Fakhro in Bahrain, warn that the GFH group's ability to meet its financial obligations depends on selling assets in time.
"These factors indicate the existence of material uncertainties which may cast significant doubt about the group's ability to continue as a going concern," the accounts state.
The GFH accounts, which include the finances of GFHC and all the firm's subsidiaries for the nine months to 30 September, do show the group making a profit of $7.5m (£4.7m), achieved principally by settling some financial liabilities.
However, KPMG Fakhro stated in its extended warning that: "The [GFH] group had accumulated losses of $293.76m and … its current contractual obligations exceeded its liquid assets.
"As a result the ability of the Group to meet its obligations when due depends on its ability to achieve a timely disposal of assets."
A spokesman for GFHC pointed out that, despite the difficulties described by the accounts, they showed $37m cash in GFH's bank. The group's assets amounted to $833m and, although this does not mean GFH has adequate cash now, some of those assets are being considered for sale. The spokesman said: "There is no doubt that GFHC can go ahead with this deal to buy Leeds United."
GFHC is thought to be contemplating paying £44m for Leeds, who slipped to 18th in the Championship on Saturday following a 6-1 home defeat by Watford. Such a sum is certain to deliver a substantial personal profit to Bates, who owns 72.85% of the club via a company, Outro, registered in the offshore tax haven of Nevis in the West Indies. Bates himself is resident in Monaco as an exile from paying UK capital gains tax.
GFHC has already paid £2m into Leeds and is promising up to £8m further to invest in the January transfer window if the deal goes through. Its period of exclusive negotiation ends this Thursday, 15 November, but a GFHC source said the firm then has a "lock in" period within which it can conclude the deal.
In the accounts the auditors state that GFH has had to renegotiate several tranches of its borrowings and issued shares to raise capital.
"To further address the liquidity issues, the management has put in place an asset sale and liquidity plan to … support its operations and repayment of the Group's obligations," the accounts state.
While KPMG Fakhro included its stern warning that GFH's need to sell assets amounted to "material uncertainties" that it considered may cast doubt on the group's "ability to continue as a going concern", the accounts say the GFH directors were "satisfied" with their plans to deal with the financial challenges.
The GFHC source said the takeover talks are at an advanced stage and the firm has proved to Bates that the money is there to conclude the deal. That was confirmed by Leeds in a statement on 26 October, when Bates said the takeover discussions were "in a good place".
Last week the Leeds United Supporters' Trust issued a statement expressing concern about GFHC's bid and questioning if it had sufficient money available. The trust said there are "other parties" with "the resources necessary", which are interested in buying Leeds.