The poker game continues at Rodney Parade as members of Newport RFC decide whether to back the rescue plans of the WRU for the Newport Gwent Dragons. But Geraint Powell says it is less like poker and more like Russian roulette.
If I could claim 10p for every time I was entitled to say “I told you so” to somebody in relation to any aspect of the flawed hybrid 2003 business model of professional rugby in Wales, I would not be writing this.
I would just be relaxing, on my private yacht, moored off my private Caribbean island, waiting for my private jet to fly in from my other holiday home in Cape Town with my next crate of Allesverloren or Landskroon port.
The goldfish bowl of Welsh professional rugby can feel like a mad house at the best of times. In recent days, in the easternmost region of Gwent, with its struggling Newport Gwent Dragons “sleeping giant”, it is starting to feel like the inmates are on the verge of taking over the asylum.
I read in the press about a Welsh Rugby Union (WRU) takeover. Excuse me? There is no WRU takeover. There is a last ditch WRU bailout, for rugby reasons, not for commercial reasons, but with the intention of a future commercial success for the Dragons within acceptable risk management parameters. And one that will save Newport RFC in current ownership. RGC1404 have come from nowhere, and Gwent is next.
There is clearly no private sector solution in Gwent, a complex group structure and too much risk or insufficient resources or fears over asset stripping. A new business model will be required for Welsh professional rugby in the generality before a new generation of private investors will seriously engage with it under a more mature New Zealand-style business model.
If the WRU bailout is rejected, the Newport RFC group (including the Newport Gwent Dragons) will collapse within weeks thereafter. Probably within days. Newport RFC, 1874-2017. RIP.
If somebody had told me, after the Pontypool RFC v WRU court case in 2012, that Pontypool RFC would be resurgent in 2017 and Newport RFC would cease to exist, I would have feared for their sanity. Pooler, of all clubs, are now on the verge of inheriting the former Black and Ambers place in the WRU Premiership if the bailout fails.
The outcome will not be the end for a 4th professional region. Cross-border and commercial contracts dictate otherwise. The WRU may be able to acquire the Dragons and Rodney Parade off the receiver or liquidator – although the commercial terms become more problematic in terms of upgrading both the team and the facility – at acceptable overall risk to the member clubs of the union.
The WRU have the option of reconstituting the team elsewhere in Gwent, a phoenix rising from the ashes of Rodney Parade. They could even write-off Gwent as a professional rugby region altogether, placing the 4th franchise to North Wales.
A fourth professional rugby team will live on without a bailout, but not Newport RFC. That would mean starting again, at the bottom of the WRU pyramid.
It is a positively surreal situation. Benefactor Tony Brown wrote-off about £6m in 2006, in pursuit of his long stated underlying principle “to maintain the highest level of professional rugby in Newport for as long as possible”. He came back in 2012, and is currently owed about another £3.25 million. His co-benefactor and Newport Gwent Dragons Chairman, Martyn Hazell, is also owed about £2.1 million. Just under £4 million of this £5.5 million of debt is secured against Rodney Parade. There is close to another £1 million mortgage to the bank. There is nearly another £1 million owed to the WRU, plus a loan from Pro Rugby Wales and the usual trade creditors. The abyss awaits, as a result of no new generation of anticipated similarly wealthy benefactors, but for former Newport Gwent Dragons CEO and current WRU Chairman Gareth Davies and WRU Chief Executive Martyn Phillips.
So how was most of this secured debt of nearly £5 million of benefactor and bank debt run-up? On building the Bisley Stand for…you guessed it…nearly £5 million! And why was the Bisley Stand built? To try and ensure that Rodney Parade would be the permanent home of professional rugby in Gwent and which Newport RFC could share. The only professional rugby facility in Gwent currently with the requisite corporate hospitality facilities, with Rodney Parade as a venue that semi-pro Newport RFC would never be able to otherwise afford.
Newport RFC retaining ownership, nominal with the debt burden in building the Bisley Stand, in the long-term was always a dubious proposition without severance between the businesses in 2003.
The only way that Newport RFC might survive at the other side of an insolvency process, as a lesser entity with a limited community facility, is if these two benefactors were now to write-off these loans in their entirety so that their legacy of the Bisley Stand funded by those loans can be knocked down and converted into non-rugby use. You could not make it up!
The chances of the benefactors writing this money off if the WRU bailout goes ahead must be close to 100%, but the chances of them writing this money off if the WRU bailout does not take place and the Newport RFC group collapses must be close to 0%.
This is a perfect storm. Those readers from a legal background will be all too aware of the legal implications of a stated unambiguous intention to recall secured loans in insolvency in the event of a rejected bailout, unacceptable legal risk in then continuing trading being added to the imminent cash flow trigger. And to publicly state this recall ahead of the shareholders meeting might be perceived as an explicit threat, not so much pointing a gun at the minority shareholders’ heads as pointing a Trident missile. It is undoubtedly bailout or death, but it is better if it is implicit rather than explicit.
The group executive with the unenviable task of navigating the only way forward, which will see the transfer of Rodney Parade to the WRU, is current Chief Executive Stuart Davies. Someone who played no part in any of the group business decisions between 2003-2012, that have led to the current position, but with for some an unpalatable message. He is an executive who will have no further role to play in Newport RFC, after the severance from the professional game. It must be exceedingly doubtful whether, with all the issues at the Newport Gwent Dragons, he has ever been left with sufficient time to focus upon Newport RFC in the way he would have liked.
Not an executive who is likely to be party to the full future vision of the two benefactors (after the Newport Gwent Dragons bailout) for their severed beloved Newport RFC. Even if he will be aware of the outline business model, for Tony Brown and Martyn Hazell will continue to own nearly 4 in every 5 shares at Newport RFC after any accepted WRU bailout of the Newport Gwent Dragons.
All that we do know is that both Gwent rugby and any WRU owned Dragons at Rodney Parade need a successful Newport RFC, from rugby development to commercial cross-fertilisation, and Welsh rugby could well do without losing Newport RFC altogether so soon after losing London Welsh RFC as a professional team.
But there is no sentimentality in the professional era, and Newport RFC have unhelpfully been left exposed to the professional market, and heritage counts for nothing when the cash runs out. And it runs out for Newport RFC and the Newport Gwent Dragons next month, without a WRU bailout.
Is one of the so-called “big four” clubs, and a founder member club of the WRU at the Castle Hotel in Neath on 12 March 1881, about to become history…?
A good article making sense of an otherwise interesting but sad situation. The fact that Newport supporters could never leave the city and therefore Newport RFC out of any conversation or discussion to do with the region has caused lack of support. Given townies and valley boys cannot mix is the greatest tragedy, Pontypridd supporters don’t go to the blues and northern Gwent supporters were disenfranchised by the Ebbw vale debacle after the inception of regional rugby. Control was always going to come from Newport although the NRFC supporters never bought in to the region because Cardiff got its own why didn’t they? It’s been doomed from the start because of this attitude.
A typically poorly researched article that deliberately omits the key facts from the discussions in order to present a pro-WRU image for this shady deal.
Firstly, this is obviously just a land grab from the WRU. They are willing to pay £3.75m for an asset that is likely to be worth twice as much as that. In fact, the asset is listed in the NRFC accounts as being worth over £6m on a valuation done years ago. Ask yourselves why the WRU are paying so little.
Secondly, the Chief Executive of NRFC (Stuart Davies) and a Director of the Company (Will Godfrey) admitted publicly this week that they do not know the retail value of Rodney Parade. Ask yourselves how a company can sell an asset it has not had independently valued.
Thirdly, neither Martyn Hazell nor Tony Brown have told shareholders how much of their loans (secured against the asset of Rodney Parade) they wish to be repaid if the land was sold to a housing developer. As Geraint tries to conceal above, only about £4m is secured against Rodney Parade. If Hazell and Brown would accept only 50% of their loans to be repaid, you can see that the sum being left over after the sale is larger and larger.
Geraint also forgot to tell people that the debt is secured across a number of different companies within a group, with one of the companies within the group being 50% owned by the WRU. That’s a little bit awkward when it is the WRU trying to buy an asset at below market value, isn’t it?
The long and the short of this is that, despite how Geraint badly spun it above, there is insufficient information in the public domain for shareholders to make a properly informed decision. Until they know the following, they can only sensibly vote not:
– How much is Rodney Parade worth to housing developers?
– How much do Hazell and Brown want repaid?
– How much is the debt secured against Rodney Parade?
– What figure would be left over to buy Newport RFC a new home (suitable to the Welsh Premiership) elsewhere in Newport?
Let’s not forget, the WRU have given NO guarantee of a future for either Dragons or Newport RFC with this deal. None. The WRU could easily shut down both by the time of the RSA re-negotiation in 2020 or by the time of the TV contract renewal in 2018. In the meantime, the WRU can run the Dragons out of Eugene Cross Park. The WRU does NOT need Rodney Parade in order to keep the Dragons playing.
However, there is a way, as you can see from the questions above, for Newport RFC to survive and not be lost paying for a “Regional” team that the other 73 clubs in Gwent have not paid 1penny towards.
A very interesting read.
I hope this resolves itself and, as a life long Black & Ambers fan, I can’t see any solution other than a union buyout now and I am resigned to it. It’s too late for anything else. That Peter Jackson reports in the Rugby Paper that the union have to loan us £400,000, to even get to the end of the business year and the buy out date, says it all about our predicament. My sister and brother are shareholders and they will be voting in favour of the buyout. To give the region a fresh start and to keep Newport rugby alive.
Both teams have lived for several years under the cloud of the risk of Tony Brown or Martyn Hazell dying and their heirs calling in the outstanding loans. I believe that Tony Brown will write-off his loans if the buy out by the union is approved, and continue to act in the best interests of Newport rugby as the major shareholder, but we can’t expect him not to demand repayment of the millions he has given to build the new stand if there is no buyout and Rodney Parade and that stand is knocked down to make way for shops or flats. He has been a good benefactor, and has spent many millions on us in addition to the outstanding loans. I have no doubt that Martyn Hazell will want his money back off the receiver.
We just have to hope that the union can make a better success of the region, with greater engagement. Zane Kirchner and Gavin Henson will be a good start. The union has wanted for many hears to control a region, and here is their chance. If the region does well, Newport rugby will be safe.
A union buy out means uncertainty for a few years, but to vote otherwise means the wrong kind of certainty. No Newport rugby and no Rodney Parade.
That is a bit illogical, Justin, isn’t it? Why do you think Brown will only write off loans if Rodney Parade is sold to the WRU? Remember, the WRU have given no guarantee that Rodney Parade will survive.
If Brown is true to his promises to NRFC, he will surely also write off his loans if the sale is to a property developer as that would allow NRFC a future elsewhere.
Under WRU ownership, NRFC have no guaranteed future. The WRU has categorically refused to give NRFC a guaranteed future.
The issue of the heirs is one I’ve also seen raised by Geraint Powell (whose views you are echoing). Quite simply, Brown and Hazell can deal with that possibility in their Wills, so that “fear” really has no grounding.
Your final paragraph is also wholly untrue (whilst also strangely echoing Powell). A union buyout means no certainty ever (as Celtic Warriors fans or supporters of one of the Australian teams). Voting no to that option may well allow Newport RFC to have a new home away from WRU ownership and away from Rodney Parade.
My comment was directed towards the author, not to you or at any other comment. The issue, to address your point, is that some big loans were given for a very specific purpose and which would be reversed if no union buyout. Remember that all creditors need to be repaid, just that secured creditors have priority.
A superb read, clearly written and a must read for anybody with an interest in Newport and Welsh rugby.