Fears of debt blowout as Rugby Australia mortgages its future
RA’s debt could soon blow out to more than $100m as the game deals with the fallout of a bloody boardroom coup.
Rugby Australia’s debt could soon blow out to up to $100m as the game on Friday secured a loan that could add another $80m of financial burden to its balance sheet.
It’s a temporary reprieve for the embattled code as it deals with the fallout of a boardroom coup which claimed chairman Hamish McLennan and the exit of a major sponsor Harvey Norman.
The Australian on Friday reported that Wallabies major sponsor Cadbury is deeply concerned by the recent events where a coup led by Queensland Rugby Union chair Brett Clark, backed by six member unions, forced McLennan to stand down.
Following the boardroom turmoil of the last week, another major sporting organisation has now approached Cadbury to begin negotiations for a sponsorship deal with one of the country’s most popular sports teams.
On Friday, RA in a statement to News Corp confirmed that it had secured an $80m flexible credit facility from Pacific Equity Partners (PEP) that will allow the game to keep going as it prepares for the 2025 British & Irish Lions series and a home World Cup in 2027.
“Following a comprehensive assessment of alternative capital-raising options, RA management and the Board, with the support of financial advisor Jefferies Australia, concluded that refinancing and an increase to its credit facility on more attractive terms was in the best interests of all stakeholders,” an RA statement said.
“With the revenues expected from the British & Irish Lions tour in 2025 and home Rugby World Cups in 2027 and 2029, this new upsized and flexible $80m credit facility on a five-year term, will bridge the period through those events, allowing RA to accelerate its key growth initiatives.
“The additional investment will go to critical areas of the game’s development, with high-performance integration, women’s rugby, community and pathways being areas of focus.
The Weekend Australian can also reveal RA are now also dealing with “sizeable” budget blow out from its World Cup campaign, overspending that could total several million dollars.
While RA went from a $25 million loss to a $6.8m profit last year — helped by millions of dollars in government grants — it was already carrying a $40m debt as a result of having to rebuild the code’s balance sheet post Covid.
Documents seen by The Weekend Australian show $25m of that is money lent to it by global financial firm Ares — which RA could be paying at least 11 per cent interest on. It is not known whether RA will pay off this loan with its new credit facility. Another $10m is from the game’s international governing body World Rugby — that is understood to be offset from money from the 2023 World Cup as revenue paid in advance of the tournament.
It means any money Rugby Australia earned as a result of taking part in the France tournament – which ended with a disastrous exit for the Wallabies at the group stage – could be used to pay back that debt.
It is expected Rugby Australia’s final financial figures for the 2023 fiscal year will be tabled at a December 8 board meeting at RA’s headquarters in Sydney’s Moore Park.
Sources says the budget overrun included extra flights, accommodation and requests from then-Wallabies coach Eddie Jones to be granted additional resources to help with his campaign in France which produced the Wallabies’ worst ever result.
Long time Wallabies manager Chris Webb left soon after the disastrous World Cup campaign.
When contacted by The Weekend Australian, CEO Phil Waugh would not go into details of the budget.
“We are continuing to reconcile expenses from the Wallabies’ 2023 program,” Waugh said.
“Much of the expenses were committed to prior to the international season commencing in July. We are still finalising our actuals vs forecast.”
“It is my job as CEO to ensure all expense management within the organisation has the appropriate delegation authority policies, discipline and oversight – I have, and will continue to strengthen these processes.”
“The previous chair [McLennan] has already been quoted as saying ‘we were trying to give the team every opportunity to win’.”
While RA have been trumpeting a golden decade for the game, with the Lions tour and Rugby World Cup, the money made from these events may have to be used to pay a mounting debt.
News of the debt caps off a week of turmoil for the code.
On Tuesday, The Australian revealed Clark, the ringleader of the coup, was deep in talks with Dan Herbert, the code’s new chair, just days before he successfully moved to oust McLennan.
McLennan secured the key sponsorships of Harvey Norman and Cadbury in his time as chairman. McLennan was on the cusp of securing a multimillion-dollar deal with Cadbury for the national women’s team, the Wallaroos, and in an interview three weeks ago warned that if he was to be “speared” the game could be left in a worse financial state.
“They might find they’ve got a bigger problem on their hands,” McLennan said at the time.
Herbert did not reach out to major sponsor Cadbury in the immeidate aftermath of the boardroom axing of McLennan.
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