Leicester City Football Club: The legendary rise that almost never happened


Leicester City celebrate their Premier League triumph

Everyone in the UK, and the world of football, knows about the historic moment this spring when Leicester City was crowned champions of the English Premier League, despite being ranked at the start of the season as 5,000-1 outsiders. This triumph completed the fastest rise to the top of the English game since Ipswich Town in 1962. To the dismay of the bookies, it also resulted in the largest ever payout in British sporting history, with total winnings of £25 million.

The headline-grabbing success of Leicester City is all the more remarkable when you consider that the team clinched the Premier League title with two games to play and went on to finish the 2015-16 season on 81 points, 10 points clear of second-placed Arsenal. And when we take into account the financials, the story becomes even more superlative: the squad costs one-seventh that of Manchester City’s, its wage bill of £57 million is around one quarter that of Manchester United’s and fewer players were used over the season than any other team. Leicester City dumbfounded just about every football pundit in the business (except perhaps ex-England striker and former Leicester City player Gary Lineker). If there ever was a time to say in football that money can’t buy success, then this must be it.

But it’s not just the sporting facts that make this story remarkable. Leicester City also has a dark past, which we experienced up close. On October 21, 2002, it nearly went out of business altogether when administrators were appointed due to the club’s insolvency.

So what happened, and how did Leicester City survive administration and go on to become the stuff of football legend?

A new dawn

October 2002 was the month of administration, the month when people at the club lost their jobs and, as Neville Foulger wrote in Keeping the Faith, “the very existence of the football club hung by the most slender of threads”. Yet, he adds, “viewed in retrospect, it was also the month that heralded a new dawn and returned the club to its supporters and the people of Leicestershire”.

The club had a terrible start to the 2001-02 season. Former Under-21 England coach Peter Taylor was sacked and replaced by Dave Bassett, who lasted six months and was replaced by Micky Adams − just before relegation from the Premier League was announced. The club moved to 32,500-seater Walkers Stadium – which had cost £37 million – at the start of the 2002-03 season. 

Leicester had over £30 million of debt, a huge wage bill and lower-than-expected transfer fee receipts. By early October, the deepening financial crisis had forced the club’s share price to be suspended on the London Stock Exchange and frantic behind-the-scenes efforts to reschedule debts and agree a rescue deal with major creditors had collapsed. Even the acceptance of wage deferrals by the players failed to stop the club’s descent. On October 21, it went into administration.

But on the day that Leicester City plc Chairman Greg Clarke made the announcement, it was also announced that New Fox, a consortium fronted by Lineker, had been formed to raise the money to buy the club out of administration. Joining Lineker in the consortium was Leicester City Football Club Chairman Martin George, David Ross, the Chief Operating Officer of the Carphone Warehouse and Jon Holmes of SFX.

Out of administration

After four months of administration and a successful company voluntary arrangement, the announcement came on February 13, 2003 that the club had new owners and was out of administration. New Fox revealed it had signed a deal to take control of the club from the administrators and the former Leicester City plc was consigned to history. It was a great day, one we remember very well − since we were there.

I led a team at DLA Piper acting for the club’s administrators (led by Nick Dargan at Deloitte). We had been leading an intensive effort by the club for months to avoid administration involving the club’s secured lenders in the UK and the US. But the loss of income from the collapse of ITV Digital and the fact that the parachute payment was secured, coupled with an accelerated capital repayment on the newly constructed Walkers Stadium and crippling amounts owed on player financing deals, meant it was inevitable. 

HMRC had obtained a significant monetary judgment and there was acrimonious litigation with a former Chelsea player which led to a winding up petition being presented. The club therefore was drowning in financial problems, with no prospect of a solvent rescue in sight. 

On appointment of the administrators, it became quickly apparent that the best outcome would be achieved by a going concern sale. The business was stabilized with the support of the secured lenders and the Professional Footballers’ Association, whereby the players’ salaries were deferred to reduce pressure on cash flow and create a breathing space to the end of December 2002. 

This enabled us to work alongside the administrators in negotiating with two separate consortia of interested parties and, on December 14, 2002, it was announced that the club would be proceeding with the Lineker Consortium. There then followed an intensive period of negotiation, which had the support of the Football League, to agree the terms of a sale of the club. 

To achieve a deal, we needed to agree a conditional sale agreement and put this to creditors for approval in the context of a company voluntary arrangement (CVA). In addition, we negotiated a sale of Walkers Stadium to a US entity and a sale and leaseback with complex put-and-call option purchase arrangements to enable New Fox to meet its playing fixtures and acquire the stadium in due course. The net proceeds from these transactions fell to be distributed under the terms of the CVA and there were upside benefits built into the deal for creditors in the event that the club gained promotion. In essence, the club’s rescue was complete, with DLA Piper at the forefront of all the action with the administrators.

Following the club’s successful exit from administration, Adams resigned as manager in October 2004 and Craig Levein was appointed. This proved to be a very unsuccessful period for the club on the pitch and Levein was sacked 15 months later. In February 2007, ex-Portsmouth Chairman Milan Mandaric took over the club. The club dropped out of the top two levels of English football, but this low point turned out to be the start of the club’s dazzling rise to the peak of the English football league system. Leicester City returned to the championship at the first attempt and finished as champions of League One. 

Return to the Premier League

In August 2010, Mandaric sold the club to a Thai-led consortium, Asian Football Investments fronted by King Power Group’s, Vichai Srivaddhanaprabha; Mandaric later went on to take over Sheffield Wednesday. In 2014, Leicester City clinched promotion to the Premier League with a 2-1 win over Sheffield Wednesday, and were crowned 2013-14 Champions of the Football League. They managed to survive their first season in the Premier League despite having been bottom of the table at the end of 2014. They won seven games out of their last nine to secure a return to the Premier League in 2015-16, making them only the third team in Premier League history to survive having been bottom the previous Christmas. 

Of course, in 2015-16, Claudio Ranieri, the former Chelsea manager, was appointed to replace Nigel Pearson (who had replaced Sven-Goran Eriksson). Under Ranieri, the club had an exceptional start to the season and this continued, making sporting heroes out of Vardy and Mahrez, a deadly combination up front. In winning the Premier League, Leicester City became the first-time winners of England’s top flight since Nottingham Forest under Brian Clough. Now, the European Champions League beckons − and if you want to chance a tenner on a European win, you’d better hurry: the odds are shortening by the day.

So what has all this success brought Leicester City, apart from global media coverage and unending accolades about hard work, determination and professional management? Well, it was announced in late April this year that the club’s mascot, Filbert the Fox, had signed his own boot deal with Puma − a first-ever for a football mascot! That would not have been possible were it not for the fact that everyone now wants a piece of the action at the King Power Stadium. Congratulations, Leicester City, and I’m delighted DLA Piper was part of its journey to stardom.

Back to Global Insight Issue 17