DLA aids Leeds FC with Chapter 11-style deal

In a high-risk deal resembling a US Chapter 11 administration, DLA has steered Leeds United Football Club away from a potentially fatal administration and through the management-led restructure that resulted in the sale of the club earlier this month.

DLA secured the work for the club following its advice on the sale of Leicester City FC and the administration of Ipswich Town FC.

Under the deal, the main creditors – three bondholders and Gerling, the insurer to Registered European Football Finance (REFF) which owned some Leeds players, including Australian striker Mark Viduka – are reported to have accepted around 20 pence in the pound on debts totalling £82m. The club’s shareholders will get nothing.

The club’s parent company and Stock Exchange vehicle Leeds United plc and its subsidiary Leeds United Holdings were put into administration to allow the sale of the club to the consortium Adulant Force for a reported £20m.

Leeds United continued to trade while insolvent throughout the restructure with the support of the main creditors. “We were sailing close to the wind at times,” DLA partner Richard Obank admitted.

Debtor-in-possession restructurings are a central feature of the US corporate landscape under Chapter 11, but are still a rarity in the UK. And as with Chapter 11, Leeds United paid the professional fees for its own restructure.

US firm Bingham McCutchen, led by partner Barry Russell, advised the bondholding creditor Prudential and US noteholders, Teachers and Met Life. Reynolds Porter Chamberlain acted for insurers Gerling, while Linklaters advised REFF.

Gerling and REFF had bitter experience of football administrations, having been creditors in the Bradford City collapse. It was the result of those administrations, says Obank, that made them so wary of placing the club into administration, a move that “would have depleted value completely”.

Leeds firm Walker Morris advised the purchasing consortium, which includes David Richmond, the son of the former chairman of Bradford City. Walker Morris is the traditional adviser to the Richmond family and also advised on the Bradford City administration.

Former London cabbie turned property developer Jack Petchey provided the bulk of the finance to the consortium. He was advised by Mortlake & Co, Essex.