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Leeds Utd calls in administrators Leeds Utd call in administrators
(20 minutes later)
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. Leeds United football club have called in the administrators and said the business will be sold to a group headed by chairman Ken Bates.
The move means United will be docked 10 league points immediately, ensuring relegation to League One next season.The move means United will be docked 10 league points immediately, ensuring relegation to League One next season.
A new firm headed by Mr Bates, already a major shareholder, will buy the club pending approval by its creditors.A new firm headed by Mr Bates, already a major shareholder, will buy the club pending approval by its creditors.
Leeds has struggled financially in recent years and was facing a winding up order from HM Revenue and Customs. Leeds have struggled financially in recent years and was facing a winding up order from HM Revenue and Customs.
Debt issueDebt issue
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. Administrators KPMG said the Championship club had debts of £35m - owing HMRC £6m - and could have been forced into liquidation next month if it had not made this move.
This agreement has been reached quickly to maximise the possibility of survival Richard Fleming, KPMG Leeds relegation fate sealed
By going into administration, the debts held by a number of leading creditors - including Mr Bates - will be effectively wiped out.By going into administration, the debts held by a number of leading creditors - including Mr Bates - will be effectively wiped out.
But the sale must be approved by all the club's creditors next month and also be greenlighted by the Football League. But the sale must be approved by a majority of the club's creditors, including HMRC, next month, and must also be greenlighted by the Football League.
"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 shareholders and supporters and to allow the Club to plan ahead for next season," said KPMG's Richard Fleming.
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.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.
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. 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 in the early years of the decade and its relegation from the Premiership.
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 entering administration, its finances can be reorganised and some debts eliminated.
However, football related debts - money owned to players, former managers and other clubs - will transfer to the new owners.
Points penalty
Under League rules introduced in 2003, teams are deducted 10 points if they enter administration.Under League rules introduced in 2003, teams are deducted 10 points if they enter administration.
Rotherham was the most recent club to suffer such a fate last year. Rotherham was the most recent Football League club to suffer such a fate at the start of this season.
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. By going into administration before the final game of the season on Sunday, Leeds will have 10 points deducted while it is still in the Championship rather than - as could have been the 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 of promotion.
Such a deduction could have seriously damaged its prospects and left it in trouble for the rest of the 2007/8 season. Mr Bates and chief executive Shaun Harvey - also a key figure in the firm set to buy Leeds - had been working hard to attract new investment but without 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 supporters club, Leeds defender Gary Kelly had 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.