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…?
