WP applies for liquidation
Western Province President Thelo Wakefield told a media briefing at Newlands on Monday that WP Rugby (Pty) Ltd has applied for provisional liquidation.
This follows on the Eastern Province Kings, who were declared bankrupt earlier this year, and the Border Rugby union, who applied for liquidation last month.
However, WP has become the first of the big five – which include the Golden Lions, Blue Bulls, Sharks and Cheetahs – to have gone bust.
The shock announcement by WP Rugby (Pty) Ltd – the commercial arm of the Western Province Rugby Football Union – follows on recent reports that above a projected loss of ZAR11.2-million for the past year, they also face claims of ZAR72-million from Aerios, a company whose stated commercial focus is to sell sponsorship rights in sport.
According to the report the alleged dispute between WP Rugby and the commercial company centres on two key areas.
The first issue was reportedly related to the Cape Town leg of the Sevens World Series and the second to WP and the Stormers' headline sponsor DHL.
Paul Zacks, Group CEO of WPRFU and WP Rugby (Pty) Ltd, last week told rugby365 that the report as contained "a number of material inaccuracies".
However, what is now obvious is that the reports on WP Rugby's financial woes were NOT exaggerated – as Province officials suggested.
Wakefield admitted WP Rugby has experienced "increased financial difficulties".
He said declining sponsorship and ticket sales have contributed to the problems.
"The union [WPRFU] had obtained expert legal and accounting advice and had fully explored all options, before applying for the liquidation of its commercial trading entity," Wakefield and group CEO Paul Zacks – who also attended the media briefing – said in a prepared media statement.
The statement added that the union, WPRFU, will not be affected by the liquidation, despite being a 75 percent shareholder.
"As a member of SARU [South African Rugby Union], the union is the ultimate custodian of both amateur and professional rugby in the Western Province.
"The union will ensure that the various Western Province teams continue to function as they normally and that the contracts of players remain secure."
The WP Rugby statement in full:
WESTERN PROVINCE RUGBY FOOTBALL UNION OBTAINS ORDER FOR PROVISIONAL LIQUIDATION OF WP RUGBY (PTY) LTD
The Western Province Rugby Football Union confirmed today [Monday] that it had applied for, and obtained, an order for the provisional liquidation of Western Province Rugby (Pty) Ltd, in which it is a 75 percent shareholder.
President Thelo Wakefield and Group CEO Paul Zacks said that the Union had retained expert legal and accounting advice and had fully explored all options before applying for liquidation of its commercial trading entity.
The Union wishes to provide the following assurances:
(1) Although Western Province Rugby (Pty) Ltd is being placed into liquidation, the Union will not be affected by the liquidation – the Union is a voluntary association which is independent of WP Rugby (Pty) Ltd;
(2) As a member of SARU the Union is the ultimate custodian of both amateur and professional rugby in the Western Province. The Union will ensure that the various Western Province teams continue to function as they normally do and that the contracts of players remain secure;
(3) All sponsorship agreements will continue to be honoured; and
(4) All Western Province Rugby (Pty) Ltd's current liabilities as at end October 2016 have been settled in the ordinary course of business.
Explaining the reasons behind the decision, Western Province Rugby Football Union President Thelo Wakefield said:
"The reality is that WP Rugby (Pty) Ltd has been forced to deal with a worsening financial position in recent years.
"There are a number of factors which have contributed to this, many of which are not unique to WP Rugby: a difficult economic climate resulting in a smaller sponsorship pool; increasing player wages in order to retain players; a changed Super Rugby format; a modified Currie Cup; an improved home-viewing experience; and declining gate and season ticket sales; all of which are factors which have contributed to financial challenges, not just for WP but for other rugby franchises in South Africa and around the world.
"These issues were exacerbated by the fact that over time certain commercial contracts with terms which have proved not to be favourable to WP Rugby (Pty) Limited were entered into, and which had the cumulative effect of putting both the company's short-term and long-term sustainability at severe risk.
"The tipping point for our finances was the persistent and complex legal disputes relating to certain commercial, media and WiFi rights with one partner in particular, Aerios, over the last year. This has hampered our ability to conclude key sponsorship and suite agreements which, in turn, has destabilised our relationships with key stakeholders and supporters, impacted materially on our cashflow and ultimately led to the business of rugby being commercially unviable.
"We have been forced to protect our legal rights, but it has been very costly.
"Frankly, we, as the board of WP Rugby (Pty) Limited, cannot continue to operate responsibly with the situation as it is. We face severe restrictions on our ability to conduct our business independently and with any degree of commercial freedom. The situation has become untenable.
"By placing Western Province (Pty) Ltd into liquidation we are acting in the best interests of WP Rugby and its general body of creditors and other stakeholders. We believe this decision will allow us the opportunity to move forward, rebuild, create new and better governance structures, and to produce sustainable financial growth through the exploitation of all of our commercial rights.
"This will also allow us, as the Union, to achieve our long term strategic plan and vision for 2020 – to be the leading rugby union in the world. We appeal to all our loyal and passionate supporters around the country to support us during this process."
As regards the players, Zacks has briefed Eugene Henning, Managing Director of the players' organisation MyPlayers, regarding the current situation.
Confirming the briefing, Henning said: "We were comprehensively briefed this morning in a transparent and open manner by Paul about the application and we are comfortable with the process at the moment. We will now consider the relevant legal submissions and determine what impact the process will have on player interests from where we will then base our course of action.
"We have appointed a legal representative on behalf of the players to oversee the liquidation proceedings and we will be in constant communication with WP Rugby and the players regarding the process going forward," Henning said.
Wakefield concluded: "WP Rugby is a thriving union with a new CEO, Paul Zacks, who has proven experience in business. In addition to having the strongest supporter base in South Africa and a well-run club rugby system, many of our high schools have a proud history in rugby and consistently produce exceptional talent that is the envy of other provinces. WP Rugby has a long and proud heritage which is part of the fabric of sport in the Western Cape. We must protect that at all costs and have a duty to do so on behalf of all our stakeholders and supporters."
