Leeds in limbo after sheikh fails to deliver £35m

Leeds United's Bahraini saviour-in-waiting yesterday missed two more self-imposed deadlines to prove he is serious about a takeover, extending the agony of fans waiting for positive news about their club's future.

At 9am, Sheikh Abdulrahman bin Mubarak Al-Khalifa had been expected to produce a letter from his bankers showing he had £35m to invest. Nothing materialised. His coterie then promised the document would be delivered by 2pm. Nothing arrived.

As the Stock Exchange closed for business last night, and reports surfaced about the sheikh's apparent obsession with anonymously logging on to Leeds fans' internet chatrooms, his masterplan still had no more substance than a cyber fantasy.

"There's no doubt that the sheikh is a well-meaning guy and a genuine long-time Leeds fan," a source close to the club said last night. "There's also no doubt that he wants to help. In fact, he'd be an ideal saviour and welcomed with open arms if he could come up with the goods. But this isn't the first time he's supposedly been on the verge of a rescue. It's been meant to happen on several occasions and hasn't. The money just hasn't arrived, nor has any proof that it exists. Let's hope it does, but no one's holding their breath."

The sheikh reportedly hopes to persuade Leeds' creditors to accept £20m to cancel almost £100m of debts and then spend £15m on transfers. "How does that add up?" a Leeds source asked. "Why on earth would creditors be happy to settle for only £20m knowing there's another £15m there as well?"

A source in Bahrain added: "He hasn't got that kind of money anyway. He was only ever a front man and we have no evidence that any other companies [in his consortium] are still interested."

Leeds, who made record losses of £49.5m last year and owe around £82m to their main creditors, have until Monday to come up with a solution to their financial worries or face administration. There are only two ways that will be avoided. One is a takeover by a rich benefactor or consortium, possibly the sheikh if he eventually proves he has not been bluffing. Aside from his mystery group, there may yet be interest from Allan Leighton, Leeds plc's former deputy chairman, who resigned so he could put together a rescue package.

Most likely is that the Leeds chief executive, Trevor Birch, will negotiate an extension to the current "standstill agreement" with the club's creditors, giving Birch between a week and 12 days to find a solution, or a buyer.

Leeds owe £60m to three bondholders - the British firm M&G and two American companies, MetLife and Teachers - from a deal brokered in 2001. They also owe some £20m to the player leasing firm, Registered European Football Finance Ltd.

The biggest problem facing Birch is the uncertainty over Leeds' status next season. With relegation a possibility, no rational buyer would want to commit Premiership-magnitude funding to a club which might be First Division strugglers by August. Relegation would also mean a drop in income of £20m per year or more.

Leeds have just about enough money to stay afloat until the end of the month. Beyond that, at least one major sale - Mark Viduka, Alan Smith or Paul Robinson - might be needed to keep the club ticking over. Staff might also need to take wage cuts of 30 per cent or more for the club to continue trading. That option has already been discussed with the players.

It is possible that Leeds might survive through cutbacks until their Premiership status next season is known, with a takeover only happening when prospective owners know which division Leeds will be in.

The club's directors confirmed to the Stock Exchange yesterday that they are in "continuing, constructive discussions with a number of parties regarding proposals to purchase the company's business and assets or to inject funds".

The statement added: "However, none of these interested parties' proposals contemplates an offer for the company's shares. In addition they confirm that, to date, the company has not received any satisfactory evidence from Sheikh Al-Khalifa that funds exist to fulfil any proposal ... under discussion between him and the company."