The administrators for both Wasps Holdings Limited (WHL), the main operating entity of Wasps RFC, and of WRFC Trading Limited, the main operating entity of Worcester Warriors RFC have made ‘No Fault Insolvency’ applications under RFU Regulation 5 which would have the effect of avoiding the automatic relegation of a club’s most senior first XV team, therefore enabling that team to compete in the league in which it participated at the time the insolvency event occurred.
Both applications cited the impact of the Covid pandemic as the primary reason for entering administration.
The RFU’s Club Financial Viability Group, having considered both applications made a recommendation to the RFU Board that both applications are not accepted, and the Board has ratified that decision.
The rationale for the decisions taken is outlined below:
Wasps Holding Limited
- As a result of analysis detailed, the RFU is of the view that insufficient evidence has been provided to enable the RFU to conclude that there has been “No Fault” on the part of the club or the directors, and equally insufficient evidence has been provided to say that the financial impact of Covid was the sole reason of WHL’s entry into administration.
- The club’s business plan ultimately lacked resilience and could not transform what was a loss-making and debt-funded business (specifically via the retail bond issued in April 2015) into a sustainable and self-serving operation. The business model clearly never managed to reach the level it was intended to via the cash generation envisaged by the subsidiaries controlling the CBS Arena, but equally the operation was immeasurably vulnerable to the lack of ability to refinance the bond, which ultimately was a key event that precipitated WHL’s entry into administration.
- Another key event was the possibility of HMRC filing a winding-up petition (which was prevented by the Notice of Intention to Appoint Administrators and subsequent entry into administration) based on the inability of the club to meet its Time to Pay arrangement. Despite several requests, the RFU has not been provided with any correspondence between the club and HMRC in relation to this. Therefore, the RFU cannot be satisfied there is no fault by the club.
- While there may be possibility that the insolvency events may not have happened were it not for the Covid pandemic, that is not the same as to say there was no fault by the club. It is clear that the directors of the club had allowed the club to be in such a precarious position that a shock such as Covid, the challenging debt markets or another external event would have created a real and increased likelihood of an insolvency event happening.
Worcester (WRFC Trading Limited and WRFC Players Limited)
- As a result of the analysis detailed, the RFU is of the view that the club has not established on the balance of probabilities that there has been “No Fault” on the part of the club (which includes its officers).
- It is acknowledged that Covid did have a substantial financial effect on both WRFC Trading Limited and WRFC Players Limited (as it did on every club in England, and in particular the other Premiership clubs).
- The insolvency event in relation to WRFC Players Limited was a direct result, and the insolvency event of WRFC Trading Limited was at least indirectly a result of, winding up petitions filed by HMRC. These petitions resulted from a failure of the club to meet its Time to Pay arrangements with HMRC. Despite several requests, the RFU has not been provided with any correspondence between the club and HMRC in relation to this. Therefore, the RFU cannot be satisfied there is no fault by the club.
- More broadly, the evidence that has been provided demonstrates a business model which did appear to be perpetually funded by debt, with no apparent attempt (except anecdotally in the last months) to execute the wider business plan and develop the land around Sixways which would have ultimately improved the chances of creating a self-sustaining model. While there may be a possibility that the insolvency events may not have happened were it not for the Covid pandemic, that is not the same as to say there was no fault by the club. The directors of the club had allowed the club to be in such a precarious position that a shock such as Covid, the challenging debt markets or another external event would have created a real and increased likelihood of an insolvency event happening.
Bill Sweeney, RFU CEO said: “We are all deeply concerned by the insolvency of Worcester Warriors and Wasps rugby clubs. We appreciate this decision will be disappointing for the clubs and their fans but it’s clear from the Club Financial Viability Group’s investigation that there were factors beyond Covid that resulted in the clubs entering insolvency. This has reinforced the need for greater financial transparency between clubs, Premiership Rugby and the RFU to enable both organisations to have better visibility of how these businesses are run. We are already working on plans with Premiership Rugby to explore how to improve the structure, governance and business model of rugby union in England and support the clubs in becoming more sustainable. We are pleased that both clubs’ women’s teams have been able to continue and that the academy pathway in the midlands continues to give opportunities to young players.”
The RFU would like to place on record its sincere thanks to the administrators of both clubs, particularly in light of the deadlines that have needed to be set in relation to the application, given the substantial amount of work that has been ongoing concurrently to secure the future of each club.
- Both clubs have a right of appeal to an independent panel.
- To allow the necessary time to plan for the season ahead and provide certainty to Wasps and Worcester as well as the other clubs in the Championship, the timeline to agree sales of both clubs is 12 December. The administrators have been aware of the deadlines from early in the insolvency process.
- Should sales of the clubs take place within the timeline and rugby creditors paid, Wasps and Worcester will begin the 2023-24 season in the Championship.
- The Club Financial Viability Group is made up of suitably qualified members of the RFU Board, Council and Executive Staff, with representatives from Premier Rugby, the Championship and National League Rugby. It includes specialist insolvency experts.