By Rich B
November 26 2003

More doom and gloom from Elland Road today with the annoucement that Leeds United may be forced into administration - how worried should the fans be?

The announcement today to the stock market only clarifies one point - negotiations with the creditors have not been concluded within a pre-publicised timescale - When Leeds United published their results a few weeks ago, it was stated that a there would be a cash injection and share offer to raise funds.  With the unresolved negotiations, those two deals are now on ice but not withdrawn.  The way the financial markets are governed means that Leeds had to act sooner rather than later in making the announcement as their plans have now changed.

On a positive note, I doubt Trevor Birch lost too much sleep in making this latest statement - after all, it will not harm his arguments with the creditors - it only serves to justify the need for  the restructuring of the debts.

Leeds United find themselves in the position they are now for three main reasons.  Firstly, the club borrowed a hefty £60m to finance spiralling wage costs, overspending in most area's of the club and new players - with a 25 year repayment period agreed, Leeds stood to pay over £90M in interest- in addition, over £20M of player purchases was funded via a form of Hire Purchase.

The second reason for the debts was the teams failure to perform on the pitch - the loan repayments on high costs of the club was based on a certain degree of income - without the champions league income and a substantial drop in TV revenue, the club struggled to meet it's financial obligations - it was literally spending more than it was earning - this is where to well documented 'we gambled and lost' phrase comes into play - Leeds United were banking on achieving a certain standard year in year out - two seasons without this income means Leeds are £30M+ out of pocket from where they thought they would be when the bad decisions were made.

Crucially, the third reason and the nail in the coffin was the collapse of the international transfer market - Starting in the Italian League, the collapse quickly spread across Europe - A downturn in foreign TV money and the Bosman ruling meant clubs across the globe were losing money and the player fees dropped massively - this was important to the plight of Leeds as the players were the collateral of the club - the stock if you like  - In Bowyer, Keane, Dacourt, Fowler and more lately Kewell, Leeds had a value that could be totted up to almost £50M just a few years ago - Without this, and the drop in value of the current Leeds squad, Leeds were worth less than their debts - and that's where the problems started.

To make matters worse, the team has massively under performed for the past two seasons.  Undoubtedly the three different managers in the same period has not helped and the search is under way for a successor to Peter Reid.  Leeds need stability more than ever now.