Exeter Owner on Government Loans

[Neils]

Exeter boss Tony Rowe says clubs could fold over Covid loans https://mol.im/a/11977143 via https://dailym.ai/android

[Nrgee]

Dont remember him speaking up at the time of our and Worcesters demise citing the government loans were causing financial hardship.

[NellyWellyWaspy]

The key as to why Wasps and Worcester failed, and more will, is this line:

Clubs are not allowed cash windfalls under the loan terms, but without windfalls many can?t survive.

I would say all, not many, not most, cannot survive without cash injections.

This means that, the owners cannot inject cash (to cover losses), without risking DCMS calling in the loan. I would bet both at Wasps and Worcester the clubs broke that term of the loan, and DCMS called in the entire loan. Rowe has likely wanted to inject cash (I will cover that later) and asked DCMS if he could, without them calling in the loan, to which they said 'No.' You might remember Wasps saying that they had agreed with HMRC new repayment terms (but I bet they though DCMS would be included in that agreement, and they did not), and then DCMS called in the loan (I am guessing that HMRC were their collection agent).

So, in order to keep the loan on the 10 year repayment term, a club would have to run trading at break even or a profit (Rowe claims Chiefs were running at a small profit). For every club, the only way to run at a profit is to cut costs, and shed their most expensive (one might argue, best) players. This is why we are seeing an exodus at some clubs.

DCMS are playing hardball. Pay ALL the loan back, and you can then inject cash to keep or buy in players. Those clubs whose sugar daddies can afford to pay DCMS back in full will do so as soon as DCMS demand the money back as a results of the owner injecting funds. It is likely some have already had to do that.

The other clubs will be cutting their player wages, in effect spending nowhere near the cap. So, you then have a two tier premiership, where some clubs will have a small squad on maybe as little as ?2m a year budget and no marquee players, and some clubs cheating the ?5m cap with abandon.

Remember, the clubs with DCMS loans have to pay back that loan from their operating profits. They cannot use a 'loan' from the owner to meet that annual bill of maybe ?1m or more.

No wonder he is railing. He bought that hotel from the club as a sneaky way to inject funds, but I bet DCMS are saying it is still a cash windfall, as it was not part of normal trading. I wouldn't mind betting they have called in the loan in full. Ouch. That is going to hurt. That's the problem when you stand back and let the weakest be picked off by bullies. Eventually, the bullies turn on you, and when they do, nobody will stand by you. The other less uber wealthy owners are probably panicking right now. The RFU are probably fully aware, and are quietly humming away enjoying their wine, with cheese in their ears. Like in 'Allo 'Allo, where Edith is singing with the pianist, and Ren? says:

He's a very bad pianist, but when my wife sings, nobody notices. The customers stuff cheese in their ears.

This saga has some way to go, but I can see more than a few more clubs going under. No wonder Newcastle want to voluntarily exit the Premiership. Just how many of the clubs have owners that can treat the repayment of that loan as petty cash? CVC might just end up with 30% of nothing.

[Shugs]

Somewhat ironic that the covid loans that were meant to save clubs are the instrument that may end up doing the exact opposite.

[Brandnewtorugby]

 Oh, so clubs could fold due to Covid! The creative work around wasn't accepted. Surely even the Premiership/RFU cannot create reasons why Wasps and Worcester were not due to Covid, but Exeter was.

Bristol and Saracens whoop Baths arse ten times before a trip to Twickenham to play each other for the 11th time that year.

[Egret]

I think I'm with DCMS here.

Public money was loaned to independently owned rugby clubs as a last resort, their owners having no other way of keeping them afloat. The owners assured DCMS that in normal trading they were going concerns, ie profitable, otherwise they would not have agreed the terms they did (if they hadn't said they were going concerns, the money would not have been lent).

I think the DCMS have been very astute in that those clubs that took the loans (anyone know which clubs didn't) will have to run the club within it's means rather than be sugar daddy plaything.

Makes the ?35-40M pa cash injection from the RFU really important

[bigad82]

Exeter default position is moan moan moan.

[westwaleswasp]

If Baxter's lot are on fire I would not piss on them after his public output since October.
Had he kept his trap shut I might have had some sympathy for them. Be careful what you wish for and all that.
Sadly the same is true for Tigers, because their fan's contributions,  with a couple of honourable exceptions, have been as welcome as a case of genital herpes. And yes, I am of the opinion they are also on shakey ground, I was worried for them back in October, the only thing that has changed these past few months is their revolting comments on rugby fora about our demise and lack of benefit to local communities made me stop worrying.

I wish all the others with no Estate Agent connections well, and fear Rowe is correct. Trouble ahead. Maybe with 3-4 more bust clubs the whole thing comes crashing down. Sarries, Bath and Bristol can be rulers of a dead league. 

[NellyWellyWaspy]

If Baxter's lot are on fire I would not piss on them after his public output since October.
Had he kept his trap shut I might have had some sympathy for them. Be careful what you wish for and all that.
Sadly the same is true for Tigers, because their fan's contributions,  with a couple of honourable exceptions, have been as welcome as a case of genital herpes. And yes, I am of the opinion they are also on shakey ground, I was worried for them back in October, the only thing that has changed these past few months is their revolting comments on rugby fora about our demise and lack of benefit to local communities made me stop worrying.

I wish all the others with no Estate Agent connections well, and fear Rowe is correct. Trouble ahead. Maybe with 3-4 more bust clubs the whole thing comes crashing down. Sarries, Bath and Bristol can be rulers of a dead league.

We knew that Newcastle, Irish and Tigers were on shaky ground. Glaws owe a huge sum to HMRC/DCMS, more even than what Wasps owed, and they sure as heck are not making profits with which to pay that back.

Exeter we now know are also in trouble.

We can assume the sugar daddy triumvirate (Sarries, Bath and Bristol) are OK. Sale might be also. But Quins and Saints, maybe they are OK, just. So, a premiership with six teams, maybe?

On the other hand, my local club, Stratford-upon Avon, made it to the promotion playoff knock out rounds before losing by one point. They too had trouble during Covid, but are now back on an even keel and all is well financially.

[westwaleswasp]

Surprising that nothing has emerged about Sale in any way, positive or otherwise.

[MarleyWasp]

Gloucester own almost all of the houses in the road behind the Shed so can make some money if need be. Property in Gloucester isn't expensive though.

[NellyWellyWaspy]

Gloucester own almost all of the houses in the road behind the Shed so can make some money if need be. Property in Gloucester isn't expensive though.

The problem is that selling property will likely trigger the clause where the DCMS can call in the entire loan. So, yes, raise the cash, but they would need to raise the entire ?15m they owe. The sale of the hotel is likely what has triggered Rowe's rant, as I suspect DCMS have used that to trigger the call in of the entire loan to them. They were very clever in wording the 'all bets are off' clause in the loan agreement.

The clubs told DCMS they were profitable trading businesses (they were lying), so DCMS said, fine, you are allowed to pay back the loan over 10 years out of your normal trading profits (of which the clubs really had none). DCMS took the view that the clubs had told them they had nowhere else to turn to for money - the lender of last resort. So, the owners have no cash to inject, the clubs have no assets they can sell.

Interest rates have risen, so any loans the clubs had have become a lot more expensive, and a lot more difficult to get. They have to meet those interest and capital repayment plans that are laid out by the DCMS. For Gloucester that could easily be as much as ?2m a year they have to pay to DCMS, out of their profits. Yeah, right ...

I don't doubt that each club might have some assets they can sell, but how much of those assets are already securing other loans and debts? My guess is a lot. Saying you 'own' something is different to saying you own it outright, unencumbered. I suspect the Premiership consists of 3 clubs who houses are made of brick, and the rest are just made of sticks and straw, and the big bad wolf is coming. Those in trouble will not, cannot, get help from the RFU or the rich 3. Their doors are firmly bolted, brotherhood be damned.

[JF]

The problem with covid-related loans is that so much has been lost to fraud that those with the task of recovering what's not been thieved are taking a hard line on the remaining, honest, loanees.

I'm working with a company trying to negotiate an early repayment. It's a nightmare. I suspect that the system us geared to take so long that by the time an agreement is in place it's time to repay the loan according to the original terms.

[MarleyWasp]

Gloucester own almost all of the houses in the road behind the Shed so can make some money if need be. Property in Gloucester isn't expensive though.

The problem is that selling property will likely trigger the clause where the DCMS can call in the entire loan. So, yes, raise the cash, but they would need to raise the entire ?15m they owe. The sale of the hotel is likely what has triggered Rowe's rant, as I suspect DCMS have used that to trigger the call in of the entire loan to them. They were very clever in wording the 'all bets are off' clause in the loan agreement.

By my calculations each home would need to sell for around ?400,000 each. Whilst houses in Kingsholm are generally some of the more expensive in the city, I'd be shocked if they were valued that high, considering you can buy a two bed ground floor massionette in one of the more quieter areas of the city for less than ?80k.

[Rifleman Harris]

Out of interest...if the RFU were to give Exeter or some of the others some leeway to avoid relegation, where would that leave us and Wuss?  What redress would be available?  Who would pursue it?  I guess that could become very costly, and may mean the RFU simply cannot step in to help anyone else?  Oh what a mess!