The papers show that WP Rugby’s overdraft facility with its bank is as high as R19m and that it had reached its limit at the end of last month, leaving it without funds to cover operating expenses.
The court papers were filed as part of proceedings the Western Province Rugby Football Union took to the high court on an urgent basis to have WP Rugby liquidated.
A provisional winding-up order was granted and the case returns to court in December when the union will seek a final order.
However, the extent of WP Rugby’s financial strain was clearly set out in the papers, which include audited financial statements before the court as well as an affidavit by union president Thelo Wakefield, who is also a director of WP Rugby.
It revealed that shareholders met in September where a proposed turnaround strategy was presented by WP Rugby’s chief executive.
It entailed a contemplated cash injection of between R64m and R75m over two years.
One of the reasons for the cash injection was to cater for advertising cost commitments in respect of agreements with Aerios which related to Newlands stadium as well as wi-fi, betting and digital media rights.
Wakefield said the manner in which the agreements have been interpreted and implemented had placed financial strain on WP Rugby. He said the contracts had become a cause for concern and that the scope of WP Rugby’s commitments with Aerios had become the subject of disputes.
However, shareholders had decided that it was no longer commercially viable to inject any further working capital into WP Rugby.
Audited financial statements for the year ending October 2015 were also placed before the court and indicated an operating loss of R4.1m in the 2014 financial year and more than triple that figure for the 2015 financial year end. It owes its bankers R19.855m for its overdraft facility and its liabilities currently exceed its assets by R12.5m.
“The respondent also does not have access to funds to cover its future operating expenses,” Wakefield said. He added that a once-off short-term solution had been arranged, via a bridging loan from RSI, so that salaries and suppliers’ claims could be paid.
However, he added that WP Rugby was not in a position to continue on a commercially solvent or going concern basis without the further support of its shareholders.
An SA Rugby spokesman said yesterday: “We’re confident that Western Province can manage the situation from within their own resources.” – Additional Reporting by Wynona Louw
– Weekend Argus
Original source: WP rugby in bleak financial situation