Might Newport RFC, if set free by severance on 9th May, actually be on the crest of a renaissance?  Amidst all the doom-mongering over the future of rugby in Newport and Gwent, Geraint Powell looks at whether Newport RFC might possibly be on the verge of becoming much stronger in the Premiership if the shackles are finally released? 

 

 

It has perhaps to date been inevitable that the focus in Welsh and Gwent (including the city of Newport) rugby has mostly been on the future of the Newport Gwent Dragons professional regional franchise, with very little written in the media about the future of the historic Newport RFC itself and despite the references to this future in the documentation for the shareholders.

The Newport RFC angle is frequently, if not unreasonably, dismissed in public debate and simplistically reduced as an aside to sudden death on 9th May or alternatively to uncertainty and possibly even a lingering death over an extended period of years.

I am sure that there must be some Newport RFC only fans, with little or no interest in the professional regions game, who ironically regard this silence in the media after 14 years as symptomatic of the entire era – almost exclusively Dragons focussed!

The focus has not been on the likely apocalyptic outcome for Newport RFC if the WRU takeover is rejected by a “no” vote (i.e. less than 75% individual approval) by shareholders. This WRU purchase would include the purchase of the historic, but mostly tired and heavily debt laden, Rodney Parade stadium. If the major funding directors do not change their legacy stance or a new multi-millionaire benefactor does not step forward, insolvency will follow for Newport RFC.

The focus has instead mostly been upon the implications of a “no” vote for the Dragons and the contractual requirement to enter four Welsh regions in the Pro12 and Europe.

As the major funding directors clearly are not going to change their minds in relation to the full recall of their loans in the event of a de facto vote for the destruction of their entire Rodney Parade/Bisley Stand professional rugby legacy, how quickly will Newport RFC and the Dragons each slide into insolvency after a “no” vote? When will the cash run out, if insolvency proceedings are not begun on 10th May to avoid any subsequent wrongful trading allegation against the current board of directors?

Will either the WRU or Newport County FC make a bid for Rodney Parade in the insolvency proceedings, thwarting bids from housing developers who will require planning permission to end sporting use at a designated local strategic sporting use facility?

If only one of the WRU or Newport County FC bid, how cheaply will Rodney Parade be acquired and for how much less than the £3.75 million that the WRU would have paid Newport RFC?  The Receiver will ideally want bids from neither in order to maximise the recovery for creditors through opening up change of use planning permission possibilities but, if one sports user bids and thwarts off any change of use property developers, the Receiver will definitely want the other sporting entity to bid to provide some price competition!

If only Newport County FC decide to buy Rodney Parade, and they should avoid relegation from the football league this Saturday, will they allow any re-formed Newport RFC to use their Rodney Parade stadium or will they make it an exclusively football facility to protect their pitch? A mortgage is likely to be easily obtainable by them as the last sporting use owner, for the mortgagee will be well secured with a very low sporting use purchase price in a distress fire sale and will have the housing developer option in the event of any mortgage default and repossession.

If not, will professional regional rugby relocate elsewhere in Gwent or relocate altogether to North Wales? How many jobs will be lost at Rodney Parade, if the stadium is unwanted by the WRU and Newport County FC and is demolished for change of use housing and flats?

This is all just an extension of the reality since 2003, for everybody focusses on the Dragons and Newport RFC is an afterthought. Nobody will want to publicly admit it, but that probably also applies to the board of directors. If Newport RFC is not quite within “any other business” at the end, it surely can’t be far ahead of it in any board agenda? Professional regional rugby is the priority these days at Rodney Parade, where most of the income, expenditure, investment and risk reside.

Elite non-Test rugby and Newport RFC were separated in 2003. It must undoubtedly be the case that Tony Brown and Martyn Hazell would personally have preferred not to have had that split, for there to have been a Newport Black + Ambers “super” club, but it was the reality and professional rugby at Rodney Parade has of commercial necessity been prioritised over the Newport RFC identity/brand.

But, if there is a “yes” vote, what does this really mean for Newport RFC and might there actually be better times ahead with complete severance of the hard-link to professional regional rugby?

Obviously the attention has focussed on the “loss” of Rodney Parade, but in reality Newport RFC has had no equity in that stadium for some years. The first mortgagee, Handelsbanken, is owed about £750,000, and the second group -Tony Brown, Martyn Hazell and Will Godfrey – are owed about £4.4 million. There is an additional unsecured funding director debt of about £1.2 million.

It’s a bit of a false debate. It would make no equity difference to Newport RFC itself, given the way the group is structured, if all the loans were unsecured. Liabilities exceed assets, even with a depreciating book asset value for the Rodney Parade stadium that is well above market value.

The WRU transaction itself is a payment of £3.75 million, of which about £1.5 million will remain after various debt obligations of the group towards Handelsbanken, the WRU, Professional Rugby Wales and trade creditors are discharged. This balance will be divided between a (ring-fenced) £600,000 to Newport RFC and up to £900,000 will be repaid to the two major benefactor creditors owed around £5.4 million. This £900,000 figure will be reduced if the amount for trade creditors proves to be more than envisaged. They frequently do, in these situations.

In summary, the major benefactor creditors will write-off or capitalise about 84% of the loans due to them if the Dragons and Rodney Parade are sold to the WRU. Also, their pre-transaction 79% ownership of Newport RFC will increase to 84% ownership through the transaction. Obviously, if nearly 20 years work and their professional legacy is ruined, they will recover what they can from the insolvency process.

Provided that the Dragons region remains at Rodney Parade, Newport RFC will remain there without cost except for staging expenses for the first 10 years. It is hard to think of any WRU strategy for rebuilding the Dragons that would desire conflict with the residual Newport RFC feeder club.

So, what are the various positives?

Firstly, with the severance of the hard link with the rugby region, Newport RFC can finally again focus nearly exclusively upon itself. It will no longer have to suppress its own identity, for fear of further harming the professional region’s affinity reach. Subject only to player pathway obligations through the accompanying WRU funding, the focus of Newport RFC can be mostly on winning Tier 1 of the WRU Premiership. Other Gwent clubs, such as Ebbw Vale RFC, Cross Keys RFC and Bedwas RFC have had success in recent years with this independent club model whereas those clubs hard-linked to rugby regions have mostly struggled to be competitive at this level.

Secondly, Newport RFC can re-evaluate itself and renew. In particular, the search for the next generation of owners can finally begin and at a lower entry level than when previously tied to the far more expensive multi-million pound professional game. This will considerably widen the pool of potential investors and owners. Traditional rivals Pontypool RFC were themselves staring at oblivion in 2012, but they have been completely resuscitated by Peter and Ben Jeffreys and this season knocked out on their travels two other region hard-wired semi-pro clubs in the WRU National Cup.

Thirdly, Newport RFC has an opportunity to renew and to re-invigorate its management structure. It has one of the better, if not the best, organised supporters clubs in Welsh club rugby. There are committed individuals who could be co-opted on to a management committee or even on to a full board of Newport RFC. A fresh start, severed from professional rugby.

Fourthly, provided only that the professional region flourishes without all the tribalism that has engulfed it since 2003, Newport RFC will still be well placed to plug into Rodney Parade as an income stream. The commercial opportunities are numerous. To arrange double header rugby matches with the professional region if fixture lists can finally be strategically set-up in Welsh rugby e.g. Newport RFC v Ebbw Vale RFC followed by a S4C Pro12 match. Rodney Parade has non-match day corporate facilities, to be purchased at one (competitive) price and then sold to Newport RFC’s customers at another. A clear commercial objective should be to closely align with the WRU, to become a useful tenant that adds value to the region and the stadium.

The projection in the tentative draft template for the future Newport RFC business model is for an annual (without further action) projected loss of about £80,000-100,000 on current expenditure and residual non-professional income streams, albeit with a £600,000 starting nest egg in the bank.

That is not, by any stretch of the imagination, an unbridgeable gap that would of necessity require expenditure cuts and/or dipping into the “nest egg”. As well as the need for commercial focus, the Principality Premiership is not a league that has currently maximised its commercial value and that includes from the number of fixtures to actual scheduling to sponsorship to broadcasters.

If Newport RFC can survive the 9th May and embrace the different challenges and opportunities ahead whilst internally renewing and overhauling, and can rapidly adapt to the new landscape, I suspect that it will remain at the forefront of and at the highest level of the Welsh club game. And that is just where it has been since 1874, with only the interruption of 1990-91.

Just because Newport RFC can never be a region, and of course there is much ongoing debate over the role of the Welsh club game, it does not mean that, if given the opportunity, that it shouldn’t continue to be at the summit of the Welsh club game.