A Shares, P Shares, relegation, promotion, Wasps, administration - worth a read
Posted by: Big Dave
Date: 19 April, 2012 20:14
From today's Guardian 'Breakdown' email by Paul Rees
The financial plight being endured by Wasps has so spooked Premiership Rugby that it has written to all its member clubs stressing the need to say nothing negative about the prospect of one of the most successful sides in the professional era going into administration.
It is not keen to dwell on the precedent set in 1999 when two Premiership clubs, Richmond and London Scottish, went into administration and were immediately expelled, plunging down nine divisions to start again from the bottom.
Wasps, unlike Richmond and London Scottish, are founder members of the Premiership and one of English rugby's biggest names. The positive spin from the top is that potential buyers are in discussions and administration is a possibility rather than a probability.
Wasps have enough money to last until the end of their season, which will be at the beginning of next month. It seems they will need a settle a debt of some £2m a few weeks later, which would be before the official end of the campaign. Without a new backer, administration might be the only option.
That would trigger a deduction of 22 points under the Rugby Football Union's regulation regarding insolvency which, if applied to this season, would see Wasps finish at the bottom of the table and face the prospect, depending on whether the Championship winners fulfil the entry criteria for the Premiership, of relegation.
If Newcastle finish bottom and Wasps go into administration, it may be July before the Falcons know their fate, assuming the Championship champions are promoted, because the rules governing a club becoming insolvent are riddled with sub-clauses.
First, if an Insolvency Event, to use the jargon, occurs at a club other than during a season, "such club may not commence playing in any RFU competition without the specific written approval of the RFU and only upon such terms as the RFU may in its absolute discretion impose in giving such written approval."
That includes the deduction of league points. "Without prejudice to any other action that the RFU may take or require to be taken, and without prejudice to requirements under any Regulation or Rule of the RFU, in the event that a Club playing in the Premiership or the League (other than in the Championship) suffers an Insolvency Event, that club shall suffer a points deduction equal to one fifth of the total number of available points (including bonus points) to a Club in the League (or Premiership, as the case may be) in which that Club plays."
So Wasps could be deducted 22 points, but would if they went into administration in the close season, would the sanction be retrospective? "If the Insolvency Event occurs during a Season, the relevant points deduction will take effect during that Season. If such Insolvency Event occurs outside a Season, the RFU may at its discretion apply the points deduction to the previous Season (and the League or Premiership table of that Season shall be so amended), or may apply the deduction in the following Season."
That is not all. If Wasps go into administration having finished bottom of the Premiership and are deducted points from this season's campaign, they would have the same deduction next season, whatever division they were playing in. "If, were the points deducted from a Club to be added back to that Club's points total at the end of the Season in which they were deducted, that Club would have been in the relegation zone of its League (or the Premiership, as the case may be) then the RFU shall apply that points deduction to the following Season in addition to the Season in which it was first applied."
If Newcastle finish bottom and Wasps then go into administration, it will be many weeks before the Falcons know their fate. "Where a club suffers an Insolvency Event, provided that all outstanding creditors of that Club are paid in full within six weeks of the Insolvency Event occurring, that Club shall not be subject to the points deduction set out in (the regulations)."
Are Wasps doomed if they do not find a backer? They do not own their own ground, not their training facility at Acton. They have assets in their players, but there is not much of a transfer market in rugby union , but they do have something that may appeal to an owner.
Member clubs of Premiership Rugby have A and P shares. The former number 40 and if a side is relegated, it loses them at the rate of five a year. The value lies in the P (for perpetual) share, which is annually worth 24 per cent of the central income enjoyed by clubs in the top flight, not far short of £3m.
If Wasps sold their P share, a buyer would receive annual income of around £730,000 but the club would be left with little to attract a new owner unless he or she were an avid supporter of the club. It may depend on how desperate Wasps are for a substantial cash injection by the middle of next month, which boils down to which creditor is chasing them hardest.