During the initial takeover process, there were increasing questions about GFH’s ability to fund the purchase of Leeds United. Obviously, anyone interested in Leeds United has seen the end result – that GFH did manage to fund the purchase of Leeds and that they own a 100% stake in the club. However, this does not mean that everything is hunky dory at GFH, which has become increasingly clear with the release of their accounts over the past few days, and a series of articles analysing them. One, by Exotix Credit Research, is of particular note (the full PDF is hosted here).

Here are some highlights (or lowlights, depending on how you wish to look at it):

• Their now infamous reevaluation of the value of Leeds United (adding over $10m to the value paid to Ken Bates for the club) is called into question. The supposed “bargain purchase” is seen as “subjective” by Exotix, who are incredibly baffled at how GFH came to the conclusion. They highlight the lack of assets at Leeds, such as the club not owning its training ground or stadium. With a lack of independent valuation mentioned, Exotix call into question whether it was a fair reevaluation.
• In another moment symbolic of the discrepancies in their valuations of assets, GFH hold 47% of Khaleeji Commercial Bank, listing it as worth $163m, which was the cost to GFH of purchasing it. It is, however, based on share prices, worth only $52m these days. The discrepancy is huge, with the 68% differential in value bringing an impairment charge on behalf of Exotix at the feet of GFH.
• GFH’s restructured debts (which are inevitable, given in 2010 they lost $348m, which was following several years of losses as a result of the global economic collapse) will begin to amortise in 2014. This will require finding around $30m per annum to pay these off – something Exotix see as a “challenging” endeavour for GFH, given the nature of their books currently.
• GFH has suffered significant cash flow problems over the last few years, and continue to do so today.
• Most damningly of all, and to sum up the problems facing GFH, Exotix feel as though GFH’s reports of profits over the last year are simply the result of “financial engineering (i.e. fancy accounting)”.

Follow Amitai Winehouse on Twitter (@awinehouse1).

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