Concerns have been raised about the funding model for GFH Capital's proposed acquisition of Leeds United. The Bahrain-based equity investor, whose parent bank Gulf Finance House has posted a series of troubled annual reports, has declined to explain how it intends to finance a takeover of the Championship club.
GFH "had accumulated losses of $300.69million contractual obligations...and its current contractual obligations exceeded its liquid assets", according to a May 14 letter from the group's auditors, KPMG. While GFH Capital, a 100 per cent subsidiary, is a separate legal entity with its own funds and balance sheet, there are fears it is planning to purchase Leeds with debt that could be subsequently shifted to the club's balance sheet - an approach used in several high-profile foreign takeovers including Manchester United and Liverpool.
Leeds chairman and majority shareholder Ken Bates has been involved in discussions with the Middle East group since early 2012. GFH were granted exclusivity to pursue a takeover in June, and subsequently agreed a price for Bates' shares. A dispute over completion, however, has rumbled on since late-July with multiple legal teams unable to negotiate a solution.
On Friday, GFH Capital followed up its parent's forced statement to the Bahrain Bourse, with a press release in which it discussed its plans for "sustained investment" in Leeds United without making specific commitments on funding, investment or the acquisition of Elland Road, the club's leased stadium.
The statement said that GFH Capital's "intentions, if successful in its acquisition, is to move the club back to the Premier League as quickly as possible and help to build a sustainable future for the club".
Its chief operating officer, David Haigh, who has been lined up to replace Bates as chairman if the takeover succeeds, added that: "From a business perspective, ownership of an English football club, notably Leeds United, is a great opportunity if the right strategies are in place to benefit from the significant revenues available from renewed broadcasting rights."
A representative of GFH Capital declined to comment on the company's funding model on Saturday night. He confirmed that it was acting as a buyer, not a broker, in the potential transaction.