Cape Town – Crisis-plagued Western Province Rugby intend mortgaging certain properties they own around the city as security for amounts owed to shareholders Remgro after intended final liquidation of professional arm WP Rugby (Pty) Ltd next week, Sport24 has reliably learnt.
This is one planned course of action by the cash-strapped, Newlands-based organisation in a new business model as they battle for financial stability.
But it has also been established that Remgro, the Stellenbosch-based investment holding company chaired by billionaire tycoon Johann Rupert, would extend its current 24.9 percent stake in WP Rugby to 49 percent under the new professional business structure expected to take shape if liquidation is successfully finalised.
That stake may well rise further before too long to a maximum of 74 percent as the South African Rugby Union General Council on Friday gave the go-ahead for private equity partners to expand their influence to that extent, although Remgro chief investment officer Jannie Durand could not be reached for comment.
Remgro has already made “bridging loans” to WP to pay salaries of players and staff recently, and would be in a powerful position to pounce for majority shareholding given the newly-announced SARU blessing for it.
It has been reported that a projected loss of more than R50-million is in the offing for 2017, and that WP Rugby (Pty) Ltd’s overdraft facility has been exhausted, with the bank owed almost R20-million.
One WP-owned property expected to feature in the cash-flow easing bid is the rugby complex at Montreal Road, Oranjezicht, in the residential high-demand City Bowl, home of Tech-Gardens Rugby Club and featuring a clubhouse and two rugby pitches.
WP Rugby also owns a portion of Brookside, the home of Villager Rugby Club in Claremont, as well as several houses around Newlands stadium.
Paul Zacks, WP Rugby’s CEO, had not replied to questions posed by Sport24 at the time of writing.
The final liquidation hearing is set for the Cape High Court on Monday, although Aerios, an advertising sales company involved in a major advertising rights dispute with WP – it is claiming R72-million from them - have filed papers opposing the winding-up.
They say liquidation of WP Rugby (Pty) Ltd is a “fraudulent plot” to try to break contractual obligations to Aerios.
The company allege that WP reneged on a deal for exclusive advertising rights to sell stadium space and a later one to install Wi-Fi and digitise Newlands in a multi-million rand development contract in exchange for content rights.
Last month the WP Rugby Football Union (WPRFU) concluded a “pre-liquidation loan agreement” with Remgro Sport Investments and WP Rugby (Pty) Ltd, in which the Union and Remgro each advanced their proportionate share of a loan of R10-m to the provisionally-liquidated Pty, to enable it to settle its trade creditors and meet its monthly obligations due at the end of October and in the first week of November.
Under a joint investment agreement, the Union will acquire a shelf company, New Rugby Company, which will be the only vehicle through which the Union will conduct the business of professional rugby in the Western Cape.
The so-called New Rugby Company will offer to purchase the business conducted by the Old Rugby Company (the Pty, in liquidation).
If the offer is accepted and the sale becomes unconditional, the union and Remgro Sport Investments will be obliged to enable the New Rugby Company to pay the purchase price for the Old Rugby Company business and to cover its working capital for the next two to three years.
It is estimated that the total funding required by the New Rugby Company for the acquisition and required working capital will be in the region of R70-m.
The Union will have 51 percent shareholding in the new unit, and Remgro 49 percent.
For as long as Remgro Sport Investments holds less than 50 percent of the shares, the board of the new company will consist of a maximum of 10 directors: the Union will appoint four of them and Remgro three, whilst one independent director will be appointed and removed by agreement between the Union and Remgro.
The independent chairman and chief executive officer will be appointed and removed by agreement between the Union and Remgro.
If WP do mortgage some of their properties, it is unlikely to help allay a perception from critics that Newlands “family silver” has either been sold already or is endangered due to dubious or ill-advised administrative practices.
Recently former Springbok and WP tighthead prop Cobus Visagie, chartered accountant and director of London-based AMC Trade Finance, took to Facebook to charge:“The WP Union (have) sold more than R100-million of assets to balance the books. It’s a disgrace what … the inept bunch over there achieved in the last 15 years.”
WP Rugby has been slipping toward a financial precipice for well over a decade.
In 2007, WP’s professional and amateur arms declared a combined loss of R12.6-million, and financial services businessman Phil Kilroe, the then-UCT delegate to WP who had served on the executive between 2001 and 2003, was quoted as saying in the Cape Argus at the time: “I told the Union when I was on the executive that they were not living within their means … they have been selling off assets for years and declaring a profit.”
He said that from 1998 onwards, they had sold assets worth R54-million “over and above their normal day to day income, just to balance the books”.
In the financial results that 2007 year, it was stated that WP anticipated receiving R10-million for “selling off a portion of the Brookside field”.
*Apart from its broader financial woes, Sport24 reported in late October this year that WP was feeling the damaging effects of 36 unsold suites at Newlands, season tickets being down on budget by more than 3,000, and public ticket sales down by a value of around R5-million.
*Additional reporting by Liz McGregor