BB Breaking - Announcements

[DGP Wasp]

The test for a no-fault Insolvency Event is a simple one. It seemingly does not require that events beyond the club’s control are the sole cause of the Insolvency Event(s), it merely requires the RFU to ask: “had the event(s) beyond the club’s control not happened, would the Insolvency Event(s) have occurred?”. If the answer to that question is “no”, then the no-fault test is satisfied.

Interesting.  But who is required to answer that question?  Presumably in Wasps and Worcester's case, the administrators, as removing relegation would increase creditors' chances of recovering at least some of their money, and the administrators are there to get the best deal for creditors? Surely it wouldn't be that difficult to point to accounts that demonstrate that cash flow became a major issue after Q1 2020?

[Shugs]

Yes, Andrew Sheridan confirmed it was probable they would make this case on behalf of Wasps.

[NellyWellyWaspy]

It would have to be done quickly. Even so, neither Wasps nor Worcester are likely to play again this season. But, if players signed only one year short terms deals, some could come back (one could argue that some would have been 'let go' anyway, and some would have chosen to move also, especially as in the case of Wasps 70% of the players had contracts expiring at the season end).

Interestingly, if other clubs do not NOW (i.e. before any decision is made) file for administration, they might not be so likely to be able to argue Covid as their causal factor.

I think this has legs. IF the RFU decide to let courts argue it, it would take years. Clearly, that cannot happen. Thus, some sort of special committee would have to hear the cases. If said committee were not to agree to invoke that clause, it would go to the Courts, with potential damages if the Court overturns the decision. Given its one off nature, one has to think the RFU would relent after an unreasonable delay (trying to use the delay to punish both Worcester and Wasps with regard to permanently losing staff and players). As we know, time is of the essence.

The reality is, Wasps free of all those debts, run on a shoestring but in the Premiership, might well be an attractive proposition.

[Peej]

Hard to say it is Covid's fault as Wasps were losing £175,000 a week for seven years

[Bloke in North Dorset]

Hard to say it is Covid's fault as Wasps were losing £175,000 a week for seven years

Vaughn did say they were making an operating profit but that the debt overhang was just too much. As the main debt was pre Covid its hard to see how they can argue that Covid was the reason. It looks more like the current financial crises was the reason as it caused HSBC to back out of the deal "at the alter".

I suppose you could try arguing that the extended Covid lockdowns caused the financial mess we're in now, and whether you agree with lockdowns or not, its hard to argue that they were not at least some of the cause, but that's a bit convoluted and as the PRL's mind is now made up I can't see them giving it more than a second's thought.

[Shugs]

The question isn’t how much were you losing pre covid. It’s without covid would this have happened. That allows for a myriad of arguments to be introduced.

[mike909]

The question isn’t how much were you losing pre covid. It’s without covid would this have happened. That allows for a myriad of arguments to be introduced.

This is what PRL ought to be considering. We'd need to show two things, I think (at least...) firstly that the financial position of the club was "on plan" pre covid and that a material change was triggered by covid and secondly, in the absence of covid that this would have allowed - as you rightly suggest - the club to meet its obligations.

If they are not interested in such matters - given their conduct iro of other more privileged clubs - I'd hope that matters do go to court at some point. Even if it's too late to save anything. It might seem petty, but I'd not want PRL to get away scot free, given what's happened already.

[wasps]

The club was always in debt, it's probably never been in profit.
It's just the scale that has changed




We've gone into administration because HMRC called in their debt and we couldn't pay it.


So why did HMRC call it in, rather than stick to the agreed payment plan.
I suspect that's because we couldn't refinance the bond so HMRC saw an increase in the risk of them getting their money.


So why couldn't we refinance the bond when it sounds like it was so close to being agreed?
Something that happened this year was likely what made HSBC change their mind - probably related to economic pressures and government decisions




Covid may have caused us to be in a lot more debt than we would otherwise have been, by the immediate cause of administration probably wasn't directly covid related and it would likely be a tough argument to prove it otherwise given that the deck is likely stacked against us

[Shugs]

But how far can you widen the argument? For instance - was covid partly responsible for the financial instability that caused the bond to be difficult to finance. Post covid how much revenue did we lose due to people having less disposable income - crowds didn’t recover. Etc etc etc.

[Skippy]

Given that HSBC appears to have jilted us at the altar, it is perhaps satisfying (but no means compensation) to see one of those responsible lose her job at 1.30 today.

[wasps]

But how far can you widen the argument? For instance - was covid partly responsible for the financial instability that caused the bond to be difficult to finance. Post covid how much revenue did we lose due to people having less disposable income - crowds didn’t recover. Etc etc etc.

Well, if HSBC were interested at the start of 2022, and then weren't a few months later after getting so close to completing the deal.


Maybe, indirectly, covid was still a factor in HSBC getting cold feet, but I'm sure they and others would point to more localised economic issues

[jamestaylor002]

But how far can you widen the argument? For instance - was covid partly responsible for the financial instability that caused the bond to be difficult to finance. Post covid how much revenue did we lose due to people having less disposable income - crowds didn’t recover. Etc etc etc.

I think you could widen the argument very far and if you go far back enough the administrators might find something that they can pin everything onto.

Weird comparison but we do it when we analyse a game of rugby (after watching it) where the final result has been determined by a moment in the first 10 minutes of the game. (Or, in England's case, Ewels getting red carded in the first few minutes!!).

[NellyWellyWaspy]

The issue is that there is not any burden of proof required, just that you can, with some reason and maybe some evidence, say that is was probably precipitated by Covid, as in, you only have to argue that it made matters worse.

[mike909]

The issue is that there is not any burden of proof required, just that you can, with some reason and maybe some evidence, say that is was probably precipitated by Covid, as in, you only have to argue that it made matters worse.

Would you not have to also - I think as Shugs suggested - demonstrate that you wouldn't otherwise, be in this position?

[wasps]

How legally binding is this non-fault clause?
I.e. is it an RFU / PRL rule, or is it part of a legally binding contract clause?


If the decision gets made by PRL / RFU, without external oversight, I don't think any evidence is going to matter much


Even if it is contractually, legally binding, I think both us and worcester will have a very hard time proving it.
The case would likely be long and very drawn out after which multiple seasons may have passed