Only an hour away from smugly congratulating himself on making a potential killing should he have chosen to cash in a Leeds United suddenly debt free and sail off into the Monaco sunset, HMS Ken Bates has just been torpedoed by HM Revenue & Customs. While its not yet certain whether Bates has suffered terminal damage and is sinking, it is clear that he's dead in the water at present and those waters are rising rapidly. However Bates has proved in the past that rats can swim, and doubtless will be twisting and turning with all his might in the coming days to keep afloat.
Bates is mightly unpopular throughout much of football, and there will be plenty who have no axe to grind against Leeds United itself who would be more than happy to see the back of him. One of his worries will be how much is going to emerge. Although nothing concrete has yet been established, administrators KPMG have raised a lot of suspicion as to whether they were too close to Bates' interests and failed to act in an impartial way. There is speculation that in order to forestall the HMRC legal challenge, with the resulting washing of potentially dirty linen in open court, the administrators themselves may seek a way to withdraw the current CVA, and open up the sale of the club, allowing other bidders, previously ignored, a chance to buy the club. A least one of the five other bids put forward before last month's vote remains on the table. The Redbus Group last night confirmed its continued interest.
This would then raise the spectre of Astor Investment Holdings, the off-shore company who hold over 25% of the debt, and thus can block any deal - which needs 75% acceptance. It was this company, controlled by anonymous personnel, which stated it would vote down any offer other than one from Bates, thus allowing him to offer the minimum one penny in the pound as there was no alternative allowed to come to the table. The administrators claimed they had diligently searched for any connection between AIH and Bates, and that none existed. Bates made a sworn affidavit there was no connection. Oddly, despite all this diligence, creditors found a connection simply by looking in the published accounts of Leeds United. The Bates camp then hastily asserted that this connection was now in the past. (Ciderspace, 2nd June.)
It is understood that the role of AIH, and questionmarks over whether the company had any connection with Mr Bates, will form part of HMRC's legal challenge. If such connections did emerge then matters would get very interesting. First, if AIH continued to block other parties from taking over and saving Leeds United then it would be Bates who would be responsible for destroying the club. Secondly he would be open to charges of conspiracy to defraud.
Another aspect HMRC intend to challenge is the late emergence of a £480,000 debt to a radio station, as it happens set up by Bates last year, which hadn't appeared on the original list of creditors. It was this debt to Yorkshire Radio which took the creditors vote just past the 75% mark.
Another option for Bates, who suddenly found on Monday he could raise his offer to creditors by eight times, would be to raise the offer further to a point where HMRC were prepared to accept and withdraw their case. The best offer any other group was putting forward is worth around twenty pence in the pound. If Bates was to come up with that sort of sum it's possible HMRC might accept out of court, as their first obligation is to get the best settlement possible for the taxpayer. However each increase eats away Bates' potential profits when cashing in the club at a later stage.
Mr Justice Patten will hold a directions hearing at the High Court in Leeds on Friday morning. The case is likely to be adjourned for a later date.
After Bates having said yesterday, prior to the lodging of a legal challenge........
The implications are that the club would close down. It would mean liquidation. Leeds United would cease to exist, and the loss of 500 jobs would be a further drain on government resources.
......... there has now been a complete change of tune :
The club remain confident of a positive outcome and that it will be able to start the 2007-08 season.
The Football League has refused to comment on the situation, but do have wide ranging powers that at one end could see them assisting the club so that it can start the season, and at the other extreme refuse to pass the "share" each member club owns in the League to the new company, in effect terminating Leeds United's membership. The Football League was one of the creditors who voted against the 1p-in-the-pound offer from Bates last month.
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