The Leeds United chairman Ken Bates has blamed the club's former regime for setting them on a path towards financial meltdown after they called in administrators. The move incurred an immediate 10-point penalty which confirms their relegation to League One as the bottom-placed team in the Championship.
"The action taken brings to an end the financial legacy left by others that we have spent millions of pounds trying to settle," Bates said. "The important thing is not to view this as an end, but the beginning of a new era."
The club, whose relegation became a near-certainty after last Saturday's 1-1 draw with Ipswich left them three points from safety with a significantly inferior goal difference, had an incentive to make the move quickly. Had they delayed beyond the final whistle of Sunday's closing game against Derby the points penalty would have been imposed next season, massively undermining their attempt to win immediate promotion back to English football's second tier.
The administrators immediately sold the club back to a newly-formed company called Leeds United Football Club Limited, led by Bates, the chief executive Shaun Harvey and board member Mark Taylor.
The sale, however, must be ratified by the Football League and the club's creditors, who will be asked to "forego a significant element of their debt in order to allow the club to continue trading under new ownership," according to a statement issued by the administrators, KPMG. The creditors will meet to consider the proposal before the end of May.
Before the move the club had debts of approximately £35m and required an immediate cash injection of £10m to continue trading. Her Majesty's Revenue & Customs recently issued a winding-up order meaning the club would have gone into liquidation had they not settled the £5m bill by June 25. "They will be one of the company's major creditors," said Bates of HMRC. "The other parties who will suffer the biggest financial loss are institutions from which the board arranged funding, who collectively will lose in excess of £22m."
The move into administration was taken after assurances were received from the Football League that the points deduction would apply this season. "This means that next season the club will start the campaign in League One with no points deducted," the administrators said.
Richard Fleming, joint administrator and KPMG restructuring partner, said: "This agreement has been reached quickly to maximise the possibility of survival of this major football club, to minimise uncertainty for all the club's stakeholders and supporters and to allow the club to plan ahead for next season. There is now a big decision for the creditors to make at their forthcoming meeting."