Leeds use stadium as loan collateral

Leeds United's Elland Road ground will pass to the ownership of the property developer Jack Petchey if the club default on the terms of a substantial loan made by Petchey to the consortium that assumed control of the club 10 days ago.

The Leeds chairman Gerald Krasner confirmed yesterday that the consortium had put up the ground as collateral to secure the loan from Petchey, the former Watford chairman who has recently increased his stake in Aston Villa to 16.5% of the club. Petchey's loan, made via an undisclosed company, formed the majority of the £20m with which the consortium paid creditors some of the money that was owed by Leeds.

The future of Elland Road has been at the heart of supporters' concern following the consortium's takeover. Krasner has pledged that as long as he is chairman Leeds will play at the ground but he has not ruled out other options, including selling the ground and then leasing it back. By offering the ground as security there is a risk, however remote, that the club could lose control of its principal asset.

"There are a number of options open to us, one of which is a sale and lease back. If we did do that it would be on a minimum 25-year lease so that Leeds' football was secure here, but that is not our No1 option. There is mortgaging, there are all sorts of options we are exploring, as we have to remove completely the prospect of Leeds ever getting back into this position," said Krasner.

No details of the Petchey loan have been made public because of a confidentiality agreement between the two parties but Krasner stressed that it was not a personal investment by the property developer.

"Mr Petchey has assisted in providing through a vehicle financial assistance and part-funding," he said. "Mr Petchey has not put one penny of personal money into this. He is not an investor, he is not a shareholder, he is not a director, he is getting interest on his money.

"I have had to do numerous deals with various people in order to save this football club and each one of them has made it clear to me in writing that in order to do what we've agreed the details are confidential and not for disclosure to any third party."

A spokesman for Petchey (Holdings) Ltd said: "It is company policy not to comment to the media."

Watford fans do not remember Petchey with affection as, when he left the club in 1994, he called in £3.5m of loans. This was not Petchey's first foray into football, however, since he also served on West Ham's board from 1979, leaving before his involvement in Watford. Using a classic corporate-raider strategy, and through his Trefick and Richmount offshore investment vehicles, Petchey, 78, invests heavily in the equity of companies with undervalued property assets. He can then use his stake as a platform for a subsequent takeover bid or to influence outside interest.

Having left school at 14 to become an office boy in a firm of legal stationers, Petchey received a £39 demob payment after the second world war. This he invested in a taxi business, where he made a substantial return on his sale of the firm's real estate. It was in the car trade in the 1960s that Petchey's first brush with controversy occurred, when the church protested at his use of scantily clad models in advertisements.

Such experiences have persuaded Petchey to keep a low profile and he never gives interviews and rarely makes public pronouncements.

Krasner yesterday defended the involvement at Elland Road of another controversial football figure, Geoffrey Richmond. The former Bradford chairman is acting as an adviser and has an office at Elland Road. He could also be involved in identifying a new manager should Eddie Gray be sacked at the end of the season.

"Geoffrey Richmond has 15 years' experience in football. He asked would we like to benefit from that experience. His advice saved the consortium over a million pounds. He has not been paid a penny for this and he has offered us his services on request for ongoing advice on football matters and that is a position he'll have until the end of the season."

Krasner said he has not spoken to Gordon Strachan, widely tipped for a return to Elland Road, though he has been impressed by his work at Southampton.