Wasps as we know it 'very unlikely' to continue
A deal which sees Wasps continue in its present form is now ‘very unlikely’ according to Coventry sources.
As a result, it now seems extremely doubtful that the 155-year-old club will retain its place in the Gallagher Premiership next season while the worst-case London Welsh scenario which sees it liquidated looms into view.
Hopes that the Wasps Holdings can be sold in its entirety – along with around £90 million of debt – were raised over the weekend when it emerged that Racecourse Association CEO David Armstrong is allegedly leading a private equity backed consortium seeking to buy the stricken business.
Sky News reported that Armstrong and Terminum Capital were considering tabling an offer “worth more than £50 million with another £12 million earmarked for working capital.”
A capital sum of this size would enable Wasps to clear their debts to HMRC and pay off the £35 million (plus interest) owed to bondholders who funded the club’s purchase of the Coventry Building Society Arena in 2015 at an annual cost to Wasps of £2.3 million.
Meanwhile, the working capital would cover interest being paid on both owner Derek Richardson’s £18 million loan and cash owed to the Government-created Professional Sport Survival Fund, which provided Premiership clubs with more than £100 million of funding during Covid. Importantly, it would also support a streamlined operation with reduced trading losses while it restructured over perhaps two or three years.
However, speaking exclusively to RugbyPass, an insolvency expert and a specialist in local politics both separately voiced the same opinion – that a so-called ‘pre-pack’ deal which jettisons large swathes of debt through a receiver is now by far the likeliest outcome with ‘more than one’ party apparently having expressed interest in doing a deal on this basis.
“Why would any interested party pick up all that debt when an alternative exists?” RugbyPass was told. “Only someone desperate for the rugby brand to survive would do that – but at a huge cost.”
If the pre-pack route is followed, HMRC plus potentially bondholders and any number of smaller creditors face significant losses since the new company created has no responsibility for Wasps’ historic debt.
Under this scenario, any RFU and Premiership Rugby interest in invoking the ‘exceptional circumstance’ clause, which Lawrence Dallaglio and several other prominent rugby names have called for, would surely instantly disappear.
After all, how could the sport’s governing bodies be seen to turn a blind eye to seven figure losses being inflicted on local business, rugby fans who invested in Wasps and HMRC just to keep a failed club in the Premiership? A morally bankrupt reputation would surely be forever established.
Pre-pack means Wasps almost certainly lose not only their Premiership status (under the regulation requiring clubs that fail mid-season to be relegated) but also in all probability the shares in Premiership Rugby Ltd (PRL) which their most recent accounts value at £17.6 million.
Despite nominally being the Premiership’s governing body, PRL is in the unusual situation of also being entirely owned by its member clubs. It is therefore in effect governing itself and self-interest is likely to be a not insignificant factor in what happens to both Wasps and Worcester’s ‘P’ shares.
While PRL’s clubs in late 2018 were happy to take £200 million from CVC for a 27 per cent share in English rugby’s top flight, nearly four years later and post-Covid much has changed. Most have long since spent their share of this pie and now receive only 73 per cent of their former dividend. The chance to reclaim two of the 13 ‘P’ shares at no cost by simply invoking a longstanding insolvency clause will therefore be very hard to resist as it cuts the number of mouths to feed.
Sources close to the Coventry Arena business have suggested that this reported interest from Armstrong – who was Wasps CEO between 2014 and 2017 before moving to a Non-Executive Director role for the next four years – could also represent a wider last-gasp effort by the club’s current owner and board to salvage a solvent solution.
This line of thinking suggests that by making Armstrong’s initial enquiry public other potential bidders for the whole of Wasps Holdings may be ‘smoked out’ before time expires and an administrator and/or receiver is appointed.
If no such interest is forthcoming, the return of the man who was the architect of the bond and the driving force behind Wasps’ move into netball – a venture more successful in sporting than commercial terms – is where black-and-gold salvation hopes will all be pinned.
According to the insolvency expert, although five bidders are reportedly already engaged, unless Wasps are purchased on a solvent basis ahead of next week’s deadline, an administrator will be appointed – and this is where most of those bidders are focused.
This administrator is then responsible for making a decision on how the creditors are best served – either by the company continuing to trade with a skeleton staff in the hope that a deal may quickly follow or by it ceasing trading and being placed in receivership.
Should Wasps appoint a receiver it is anticipated that a number of other event management companies will follow the NEC Group in expressing an interest in buying the Arena, which houses a substantial exhibition hall plus a hotel and a range of other facilities attractively located next to the M6, but not the rugby club.
Local knowledge suggests that although the venue has failed to generate profit either before or since it was purchased by Wasps, it is also yet to be operated by a specialist. The previous incumbent was a joint venture operation co-owned by Coventry City Council and a local charity – and it is considered that plenty of potential remains for an event management company able to purchase the former Ricoh Arena from the receiver through an attractively-structured pre-pack deal.
The long-term lease (understood to be of ten years duration) which exists between Wasps Holdings and Coventry City could potentially transfer to any new owner of the Arena as part of such a deal.
Few of those commenting on Wasps’ situation have noted that the club’s recently-built Henley-in-Arden based training facility is not owned by Wasps Holdings and is therefore not an asset which will realise any worth. In a recent deal club owner Derek Richardson sold his part of this development to Chris Holland – who is also a Wasps director. The site was previously owned by Stratford District Council.
In the insolvency expert’s ‘most probable’ pre-pack scenario Wasps therefore lose their stadium and ‘P’ shares and are relegated to the Championship for 2022/23. To start that campaign they will need someone to buy the brand, put together a competitive semi-pro squad plus management and support team and find them somewhere suitable to play in addition to satisfying any additional RFU criteria.
Alternatively, is another name about to be added to those of London Welsh, Richmond, West Hartlepool and Orrell as giants who went to the bottom rungs of English rugby’s league ladder? Time will tell.
Comments on RugbyPass
Lets compare apples with apples. Lyon sent weak team the week before, but nobody raised an eyebrow. Give the South African teams a few years to build their depth, then you will be moaning that the teams are too strong.
41 Go to commentsDid footballs agents also perform the scout role at some time? I’m surprised more high profile players haven’t taken up the occupation, great way to remain in the game and use all that experience without really requiring a lot of specific expertise?
1 Go to commentsSuper rugby is struggling but that has little to do with sabbaticals. 1. Too many teams from Aust and NZ - should be 3 and 4 respectively, add in 2 from Japan, 1 possibly 2 from Argentina. 2. Inconsistent and poor refereeing, admittedly not restricted to Super rugby. Only one team was reffed at the breakdown in Reds v H’Landers match. Scrum penalty awarded in Canes v Drua when No 8 had the ball in the open with little defence nearby - ideal opportunity to play advantage. Coming back to Reds match - same scrum situation but ref played advantage - Landers made 10 yards and were penalised at the breakdown when the ref should have returned to scrum penalty. 3. Marketing is weak and losing ground to AFL and NRL. Playing 2 days compared with 4. 4. Scheduling is unattractive to family attendance. Have any franchises heard of Sundays 2pm?
10 Go to commentsAbsolutely..all they need is a chance in yhe playoffs and I bet all the other teams will be nervous…THEY KNOW HOW TO WIN IM THE PLAYOFFS..
2 Go to commentsI really hope he comes back and helps out with some coaching.
1 Go to commentsI think we are all just hoping that the Olympic 7s doesn’t suffer the same sad fate as the last RWC with the officials ruining the spectacle.
1 Go to commentsPersonally, I’ve lost the will to even be bothered about the RFU, the structure, the participants. It’s all a sham. I now simply enjoy getting a group of friends together to go and watch a few games a year in different locations (including Europe, the championship, etc). I feel extremely sorry for the real fans of these clubs who are constantly ignored by the RFU and other administrators. I feel especially sorry for the fans of clubs in the Championship who have had considerable central funding stripped away and are then expected to just take whatever the RFU put to them. Its all a sham, especially if the failed clubs are allowed to return.
9 Go to commentsI’m guessing Carl Hayman would have preferred to have stayed in NZ with benefit of hindsight. Up north there is the expectation to play twice as many games with far less ‘player management’ protocols that Paul is now criticising. Less playing through concussions means longer, healthier, careers. Carter used as the eg here by Paul, his sabbatical allowed him to play until age 37. OK its not an exact science but there is far more expectations on players who sign for Top 14 or Engl Prem clubs to get value for the huge salaries. NZR get alot wrong but keeping their best players in NZ rugby is not one of them. SA clubs are virtually devoid of their top players now, no thanks. They cant threaten the big teams in the Champions Cup, the squads have little depth. Cant see Canes/Chiefs struggling. Super has been great this year, fantastic high skill matches. Drua a fantastic addition and Jaguares will add another quality team eventually. Aus teams performing strongly and no doubt will benefit with the incentive of a Lions tour and a home RWC. Let Jordie enjoy his time with Leinster, it will allow the opportunity for another player to emerge at Canes in his absence.
10 Go to commentsLove that man, his way to despise angry little men is so funny ! 😂
4 Go to comments“South African franchises would be powerhouses if we had all our overseas based players back in situ. We would have the same unbeatable aura the Toulouses, Leinsters or Saracens of this world have had over the last decade or so.” Proof that Jake white does not understand the economics of the game in SA. Players earning abroad are not going to simply come back and represent the bulls. But they might if they have a springbok contract.
22 Go to commentsA lot of fans just joined in for the fun of it! We all admire O'Gara and what he has done for La Rochelle
4 Go to commentsThe RFU will find a way to mess this up as usual. My bet is there will be no promotion into the the Premiership, only relegation into National League One. Hopefully they won’t parachute failed clubs into the league at the expense of clubs who have battled for promotion.
9 Go to commentsWell that’s the contracts for RG and Jordie bought and paid for. Now, what are the chances we can persuade Antoine to hop over with all the extra dosh we’ll have from living at the Aviva & Croke next season…??? 🤑🤑🤑
35 Go to commentsWow, that’s incredible. Great for rugby.
35 Go to commentsYou probably read that parling is going to coach the wallaby lineout but if not before now you have.
14 Go to commentsIf someone like Leo Cullen was in O’Gara’s place I don’t hear Boo-ing. It’s not just that La Rochelle has hurt Leinster and O’Gara is their Irish boss. It’s the needle that he brings and the pantomime activity before the game around pretending that Munster were supporting LaRochelle just because O’Gara is from Cork. That’s dividing Irish provinces just to get an advantage for his French Team. He can F*ck right off with that. BOOOOO! (but not while someone is lying injured)
4 Go to commentsDid the highlanders party too hard before the game? They were the pits.
1 Go to commentsWhat a player! Not long until he’s in the England side, surely?
5 Go to commentsHe seems to have the same aura as Marcus Smith - by which I mean he’s consistently judged as if he’s several years younger than he actually is. Mngomezulu has played 24 times for the Stormers. When Pollard was his age he had played 24 times for South Africa! He has more time to develop, but he has also had time to do some developing already, and he hasn’t demonstrated nearly as much talent in that time as one would expect. If he is a generational talent, then it must be a pretty poor generation.
6 Go to commentsThe greatest Springbok coach of all time is entirely on the money. Rassie and Jacques have given the south african public a great few years, but the success of the springbok selection policy will need to be judged in light of what comes next. The poor condition that the provincial system is currently in doesn’t bode well for the next few years of international rugby, and the insane 2026 schedule that the Boks have lined up could also really harm both provincial and international consistency.
22 Go to comments