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Leeds Utd calls in administrators Leeds Utd calls in administrators
(20 minutes later)
Former Premiership football club Leeds United has called in administrators. Former Premiership football club Leeds United has called in the administrators and said the club will be sold to a group headed by chairman Ken Bates.
It will mean United are docked 10 league points, but it is not clear if that would happen this season or next. The move means United will be docked 10 league points immediately, ensuring relegation to League One next season.
The news comes just hours after the Leeds United Supporters Trust told the club it was in a position to make a serious proposal to buy the club. A new firm headed by Mr Bates, already a major shareholder, will buy the club pending approval by its creditors.
Leeds has been struggling with its finances in recent years and relegation from the Championship will certainly eat into earnings for the coming year. Leeds has struggled financially in recent years and was facing a winding up order from HM Revenue and Customs.
In recent years the club has sold its Elland Road home ground and its Thorp Arch training ground to cover previous cash shortfalls. Debt issue
The fact that contracts for a number of high-price players run out this summer also means that the club will run short of valuable assets later this year. Administrators KPMG said the club had debts of £35m and could have been forced into liquidation next month if it had not made this move.
Uncertainty By going into administration, the debts held by a number of leading creditors - including Mr Bates - will be effectively wiped out.
By entering administration the club can be held together while plans are put in place to restructure or sell it. But the sale must be approved by all the club's creditors next month and also be greenlighted by the Football League.
Experts predict that by making such a move, the club would be able to get rid of some of its debts. The news of the sale comes just hours after the Leeds United Supporters Trust told the club it was in a position to make a serious proposal to buy the club.
Leeds would then be a more attractive investment and takeover target because any new owner would not have to take on its entire debt burden. In recent years the club has sold its Elland Road home ground and its Thorp Arch training ground to cover previous cash shortfalls, caused by expensive player contracts and its relegation from the Premiership.
Under League rules, introduced in 2003, teams are deducted 10 points if they enter administration. Wrexham was the last club to befall such a fate in the 2004/5 season. By entering administration, the club's finances can be reorganised and some of its debts eliminated. However, football related debts - money owned to former players and managers - will transfer to the new owners.
By taking the decision to go into administration during the current season, Leeds could have 10 points deducted now while the team is still in the Championship, rather than when it started next season in League One. Under League rules introduced in 2003, teams are deducted 10 points if they enter administration.
Should the penalty be held over, it would mean that the club started next season with a points tally of minus 10, a deduction that could seriously damage its prospects and could leave it in trouble for the rest of the 2007/8 season. Rotherham was the most recent club to suffer such a fate last year.
By taking the decision to go into administration during the current season, Leeds will have 10 points deducted while it is still in the Championship, rather than - as was likely in any case - when it started next season in League One.
Should the penalty have been held over, it would have meant that the club started next season with a points tally of minus 10.
Such a deduction could have seriously damaged its prospects and left it in trouble for the rest of the 2007/8 season.
Leeds' chairman Ken Bates has been working hard to attract new investment to the club, but has so far had little success.Leeds' chairman Ken Bates has been working hard to attract new investment to the club, but has so far had little success.
As well as the supporter's club, Leeds defender Gary Kelly has also been linked to a possible Irish takeover bid for the club.As well as the supporter's club, Leeds defender Gary Kelly has also been linked to a possible Irish takeover bid for the club.