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Ken Bates is on the ropes

Ken Bates is on the ropes

Ken Bates is on the ropes

Over the last few weeks, it has become increasingly clear that Ken Bates no longer holds any power at the club that he owns. This is a baffling state of affairs, and one that I seek to explore. Below is an explanation of how Ken Bates has found himself in this position, whereby his ownership is of little more value than the name on the door, and what this has resulted in at Elland Road.

Ken Bates has often spoken of the solvency of Leeds United since his second phase of chairmanship, i.e. the lifting of Administration and his retrieval of power in 2007. The manner in which Ken Bates re-established control of the club, eventually winning over other bids through the insistence of previously unheard of creditors, allowed Bates to put Leeds back on a firm financial footing. The chairman paid mere pennies in the pound, and would not have to pay any more unless Premier League football was achieved prior to 2017. This is of little consequence, as the cost of this additional fee is minimal relative to the windfall that Premier League football provides. (It is, however, interesting as an aside – agreements over who would have to pay this fee will likely have proved an annoyance in negotiations.) Bates then spent several years insisting that not only did he not own Leeds United, but that he was completely unaware of who owned the club. He even managed to purchase the club from these mysterious owners, still not aware of who they were.

It was at this point that Bates began to make decisions that brought Leeds United’s solvency into question. Whilst Leeds had sold players on over the years, for example Fabian Delph, the loss of Beckford at the start of our Championship return seemed understandable. After all, he simply did not agree to a new contract. It was, at that point, not a question of whether Beckford was being sold to fund Bates or anything of the sort – after all, we had rejected deals for him the previous January, losing him for free with the understanding that he’d get us promotion. It is also not worth considering the financial benefit of promotion offsetting the loss of a transfer fee; the manner in which the Football League operates means that the jump in central fund allocation between the two divisions is negligible. Where the Premier League represents a return to eight-figure television payments, the Football League is generally built around a reasonable understanding that funds are evenly split – there is obviously a divisional difference, but promotion does not bring the material gains that the hyped £90 million Championship play-off final does. So Beckford was retained, with the answer to the question of selling being not about the business side of Leeds United, but the benefits to the footballing side.

Why, one might reasonably ask, has there been a shift? Beckford was, over the course of an 18 month period, swiftly followed by Johnson, Kilkenny, Schmeichel, Gradel, Howson and Snodgrass. Of those mentioned, three of them are now playing in the Premier League, and one reportedly single handedly fired a Ligue 1 side to the Europa League in the latter half of 2011/12. Yet none seemed particularly keen to go. Ben Parker will remain a hero at Elland Road for his ruthless reporting of Howson’s transfer. At an event in the Pavilion, Parker revealed that Howson was forced out, a bid accepted and no attempt made by the club to retain him. It has been reported by the brilliant people at the Leeds United Supporter’s Trust that Snodgrass has a buy-back clause built into his contract. The fact that it was built into his contract, not the terms of the transfer, shows that this is a term he insisted on – he did not want to leave Elland Road, even if the club had no belief of ever bringing him back.

Why has this shift occurred? The reality is, ever since the paper transfer of the club into Ken Bates’s hands, astoundingly foolish decisions have been made, the most obvious of which is the building of the East Stand corporate section last summer. It is no coincidence that the supposed £7 million outlay on this development has coincided with our most regular period of player sales. As covered first on this site, Simon Grayson’s budget was horribly slashed last season. Every Leeds fan knows this, but for the last 18 months, football has no longer been the priority at Elland Road.

Why is this all important for the question we ask today, which is how has Ken Bates found himself in the position he’s in, and what does this mean for the takeover? Ken Bates, through incompetence and a stubborn belief that his personal philosophy on football club chairmanship (which also nearly led Chelsea to ruin) is the only right way, managed to place Leeds on a precipice between a takeover and future success, and financial frailty and ruin.

This is the situation at Elland Road. The loan taken to cover the building of the East Stand development has been offset against Season Ticket income for the next two seasons. The Square Ball covered this months ago. However, whilst this shows we have significant debts that cannot be easily serviced with standard income, leading to the selling of Season Ticket income, it also leads to another issue at the club – cash flow. Season Ticket income is dealt with in an odd manner. The club is not allowed to spend each portion of money until the good has been delivered to the fan – i.e. the match that each 23rd of a season ticket pays for. Whilst it gives the club guaranteed income over the course of a season, the money from a season ticket cannot be spent as a lump sum. Therefore it is incredibly beneficial to cash flow if retained. It provides a guaranteed payment every month that can be factored into budgets, giving leeway against any sudden costs. The selling of this income to the tune of £5 million to fund the East Stand means that at Leeds, there is no guaranteed monthly income. Should Leeds suffer a shock to the financial system, there is every chance that we will not be able to afford it. The safety net is gone, and yet we still have debts to service.

Alone, this would place Leeds United in a precarious financial position. Whilst player sales can cover this and even give Leeds a positive financial outlook at the end of a season, any other debts would make things difficult. Ken probably realised earlier this summer that the debt put him in a mildly untenable position. This issue of financial ruin can be combined with the fact that no one particularly likes him. Yes, there is a subset of fans who accept him, but as the summer has shown, this is easily eroded. There is a final reason Ken might wish to leave, that will have come into his thinking, that I do not wish to expand upon. It is a reason nonetheless.

So along came a takeover attempt. The Yorkshire Evening post has suggested that this has been agreed several times, as have LUST. Bates remains obstinate in his signing off of the documents, which has led to the Pen4Ken movement.

However, the signing off has to occur. The original issue of debt arising from the East Stand development (and the Pavilion) aside, the club has since been loaded with further debts that Ken is not in a position to fend off. There was an agreed fee that would be paid if due diligence occurred successfully yet the deal collapsed, which is why Bates has come crawling back to the negotiation table. Furthermore, the new owners funded Aiden White’s new contract, which the club would not have been able to afford otherwise – similarly, we cannot afford to pay back their involvement in this deal should the takeover collapse entirely. A similar agreement was in place, I have heard from sources, for Lee Peltier’s transfer – Warnock himself said he was surprised that we were able to afford him.

Should the takeover collapse therefore, the future does not look rosy. Administration is a very realistic possibility. Ken cannot afford for this to happen – in the event of administration, Bates would receive no money for the sale of the club, and the potential new owners would likely be able to snatch the club for a significantly lower price than if Bates sold to them directly. This is assuming debtors related to Bates (i.e. Astor) do not come crawling from the woodwork.

This has all led to the current situation at Elland Road. Bates needs to sell but is obstinate in his refusal to. Shaun Harvey, Chief Executive and previously bemoaned by Leeds fans, has taken the club aside and united it against its owner in a bizarre twist of events. “The club”, as alluded to by Gary Cooper, chairman of LUST, is now entirely separate in action from “Ken Bates”. There was no defense of Ken Bates on Yorkshire Radio last night when a caller named Steve managed to air grievances on the phone-in, merely the suggestion that Yorkshire Radio itself was not biased. An interview with Bates remained on LUTV for very little time – broadcast once in the ground well before kick-off against Wolves, with few in attendance, this was likely to appease Bates. Shaun Harvey appeared at an evening organised by LUST and the FSF, an incredibly unlikely event months ago. Harvey seems to have Cooper onside, at least with the mutually beneficial goal of ousting Bates, as, after all, Harvey understands that the only way Leeds United can continue (given debts and all) is with new owners who have the financial muscle to rectify the mistakes Bates has made over the last few years. Bates himself would never accept these are mistakes. He is a stubborn old man who believes his method of property development is the way forward for football clubs. He thinks he can still turn it around, that is why he does not sign.

He will have to though. The Bates regime cannot last much longer. He cannot afford it. It is sign or bust for Ken Bates, and signing will bring him untold riches. The Club itself is united against him, and Bates has no allies. He even went as far as attempting to get the Supporter’s Club on his side in the programme notes last night, which shows how far he has fallen. He is so weak that he needs help from those he has previously criticised repeatedly. There are no assets left to sell. He is all alone, trapped in an ivory tower as those below him ignore his demands.

Bates must sign and he will. The only question now is when.

Follow Amitai Winehouse on Twitter (@awinehouse1).

The End is in Sight

The End is in Sight

The End is in Sight

Admit it, the last few weeks have been torturous. Every false-dawn. Every moment at which the dark night that is a Bates-filled future has risen once more over the horizon of next season. Every laboured metaphor that has been used in this article thus far. Just when everyone thought that things might be, finally, getting better, that the sun was once again breaking out over the still hotel-less Beeston, it seems as though that future may once again be darkened.

Yet is it? Over the last few weeks, several times I have been incredibly tempted to write something up to symbolize my increasing distaste at the panicky, reactionary, and occasionally stupid impressions my fellow Leeds United fans have been giving off on various social media websites. There’s an overprinted poster that has become incredibly common in most university rooms over the last few years, and it would be apt in this situation. Things take time. Calm down. Retain a semblance of sensibility. Yes, I understand the majority of you want him gone. He’s going. It is as simple as.

I am going to stick my neck out here, because after a mainly positive reaction to the last article, I was accused of wishful thinking with regards to the end of the Bates regime in some quarters. There has been events since that point that have continued to prop up my firm belief that there is no possible way for Ken Bates to remain in charge past the end of this summer.

Little has terrified people more than the potential for a collapsed takeover leading Warnock to walk out on the club. We’ve seen the financial constraints that he would have to operate under should Bates not leave, leading to, for example, the end of the deal for Joel Ward. This would simply not be acceptable to a manager seeking an eight and final promotion in his long career.

Here’s where a sticking point comes up. I don’t believe Warnock is threatening to leave because of any Bates imposed transfer budget or wage cap. According to sources, (and as I always say, I hate how falsely in the know this makes me sound) a takeover has been brewing for a significantly longer period than has been in the public eye. I first started hearing from said sources with regards to this much earlier in the season. Warnock was probably happy to come in and work for Leeds with the knowledge that by the summer, all of the formalities would have been completed and he’d have been able to get to work with a new budget to play with.

The problem, I imagine, is something on Ken’s end. He has a significantly complicated way of structuring his businesses, and to unravel them would probably take immense amounts of time. Not only this, but his demands will be great. Any potential purchaser will probably be forced into paying a premium above the actual value of the club, and this will surely need to be negotiated down.

With these barriers in the way, isn’t it possible that it could all collapse? Obviously. We could receive a press release in a week or so telling us that no investment is forthcoming, the Leeds United Supporter’s Trust were to blame and that we should all “go forth and multiply”. I don’t really see it panning out that way.

Why? As I said earlier, this is a process that has been going on for a significant length of time. I genuinely believe that by this point, with the press having caught wind of it and potential buyers seemingly having toured Elland Road and Thorp Arch, we are mere days away from some sort of movement.

On the other hand, if it does all collapse, Ken Bates is, quite frankly, absolutely fucked. Neil Warnock, ‘the saviour’, will walk. He won’t operate under Ken’s budgetary constraints. That is one segment of our continually brainwashed fan base that will see through the blindfold to the bigger picture.

Then there are the players. Yesterday’s statement from LUST should herald a massive turning point. The players are not greedy. Leeds United is a club that most people would run through brick walls to play for, especially when you are not necessarily Premier League quality, but only a step below. Sadly, Ken Bates has, in the eyes of these players, plated these brick walls with titanium, added electrical wiring either side of them and built moats around them. And these moats are filled with genetically modified sharks that are also devilishly devious and carry plates of Nando’s chicken to entice the players in.

But I digress. Ken Bates’s regime is becoming increasingly untenable. People have accepted the idea of a takeover now. People are expecting the end. Confidence is integral to any regime. The important thing now is that the fan base unites under a single banner in order to ensure that, in the event of any misfortune, we can pressure and push until the end comes.

In East Germany during the cold war, members of the State Security, the Stasi, were notorious. The stigma attached with being a former member of the Stasi remains great to this day. They informed. They lied. They propagated the falsehoods that the regime sought to espouse. Ken Bates isn’t even paying you. You’re not doing this for any ideological purpose. Don’t listen to his lies alone. Open your mind. Relax. Float down the stream. Read the facts. Inform yourself. Make a more calculated decision.

Unite. Pressure. Ensure the future of our club. Marching on Together.

Follow Amitai Winehouse on Twitter @awinehouse1

The Curious Logic of Ken Bates

42. To the average hitchhiker, this is the answer. To Leeds United fans, it may turn out to be the same. Mere days after Leeds United announced the sale of captain Jonny Howson, Ken Bates used his slot in the programme notes to reveal part of the logic behind the club’s finances. Bates, facing up to accusations that he has been in charge of a regime that has underspent at Elland Road, announced that this year, Simon Grayson was permitted to overspend on his budget by an entire £2 million, therefore leading to him suggesting that logically, he was most certainly backing the manager. This led to a total spending of £11.5 million on the playing side of Leeds United.

Enough, you might suggest, at a cursory glance. The issue comes, however, when the rest of Leeds United’s murky finances are considered. At the club, turnover in 09/10 was £27 million, which, given the lack of financial success of the various ventures Bates has attempted to institute around the club (Yorkshire Radio, Howard’s Restaurant, the Hotel in the future), was essentially exclusively the responsibility of fans purchasing the division’s most expensive tickets, merchandise and the country’s most expensive programme. To these fans, the most important aspect of Leeds United is success on the pitch.

This is where that number becomes important. Of that £27 million of hard earned money ploughed into the club by the fans, a mere 42% is spent on altering what occurs on the pitch. The rest disappears into the previously mentioned various ventures, and £5 million falls into a column called ‘other’. Obviously at a club such as Leeds, with the history of unsustainably ‘living the dream’, it could be considered reasonable to curbing spending on the playing side of matters.

However, the logic simply doesn’t work. In League One and League Two, as announced at the beginning of this season, a wage cap of 60% of turnover is set to be instituted. This is what the Football League regards a sustainable level of wage to turnover, and is worthy of praise. Bates himself backs the new system. Leeds United, however, spend 42% not just on wages, but the acquisition of players as well. At the most extreme end of the hypothetical scale, therefore, Leeds United can only possibly at most spend 18% less than the conservative estimate for a sustainable football club. When the minimal transfer outlay of the club is also included, it becomes obvious that Leeds are spending well below their potential on players.

This leads to what Leeds fans are becoming increasingly riled about, the departure on an annual basis of the club’s best players. Jonny Howson was, until a few days ago, the club’s 23-year old homegrown captain. In the years prior to this one, Leeds have already allowed players such as Max Gradel, Bradley Johnson and Jermaine Beckford to leave the club due to ongoing contractual disputes. In Bradley Johnson’s case, there were suggestions he left in order to allow improvements to the club’s squad, but given his current position in a team 9th in the Premier League, this does not seem logical.

The outcome that most Leeds fans fear is the continued drain of talent away from the club, without improvements taking place in the squad. Rumours already abound that Robert Snodgrass has ended negotiations as the club refuse to give him parity with the best-paid players, despite the fact that often Leeds only look a threat when he is involved. Aiden White, a young left back who came through the academy, looks on the verge of leaving as his contract slowly runs out, and wages offered apparently don’t come close to reaching the level expected by a first-team player at a Championship club.

Ken Bates will continually attempt to use his bizarre set of logic to bamboozle sets of Leeds fans into his fold, but the reality is that by anyone else’s measures, Leeds United fans are having 58% of their funds diverted away from anything they care about, into a mysterious black hole that is to the interest of only one, bearded, man.

(NB: The figures refer to two different seasons. Bates’s estimates regarding turnover last season are around £30m, and whilst they may fall this season, it is unlikely they will drop below the League One turnover levels used in the article).

Follow me on twitter (@awinehouse1).

Are you interested in further issues in the footballing world caused by problematic owners? Read James Thornton’s article on the shares issue surrounding events at Huddersfield Town. For the newest article by Amitai Winehouse, read his thoughts the leaders of ‘Team England’.