Wasps current finances & hope (2 Viewers)

oldskyblue58

CCFC Finance Director
Have been reading some of the claims about the current Wasps finances. Gave me something to do whilst recovering from a serious health scare at the end of October. Medics are happy with progress so all good.

Thought i would examine some of the issues and claims made as fact. Sorry but it isn't going to provide the same level of hope as the Wasps Academy thread. It is important to get a proper grip on their finances to be help see a way forward for CCFC. None of it is a justification or support of Wasps

1) Wasps are in serious financial problems because they can not repay the bond. Really? because i am not sure i see it that way. The reality is that the need to repay the bond hasnt changed in terms of how or urgency so i dont think it influences the current finances. They borrowed 35m at 6.5% and it is due for repayment 2022 yes. However it is quite ridiculous to think that the repayment would or could have been made out of 7 years accumulated cash flow. That is setting aside £5m every year. If they could do that then banks would have been falling over themselves to provide short term finance. In deed why would Wasps needed to have borrowed £35m at all? In fact if the business could do that then a number of other things would have been true, The need to borrow off CCC would not have been necessary, the sale price would have been more, Wasps need for finance would have been less, the projections would have needed to show turnovers £10m+ greater than has so far been achieved to name but a few. Repayment is a problem that has been know since the get go, it is not unreasonable to think a solution has always been in mind. Reissue of bonds, floating on the AIM, traditional bank finance over a longer term are some options. The purpose of the bond was to buy time to allow the group to build value, which seems to have happened given the lease values. They are still over 4 years away from repayment

2) Current financial Results are poor. We simply do not know and won't until we see them. It may well be that things have not gone as planned. However it is also reasonable to think that the League success and the increased central distributions will have softened that. The biggest risk to Wasps at the moment is not hitting the covenant in the bond agreement concerning EBITDA . Personally I will wait until i see the evidence before jumping to conclusions of financial disaster or going out of existence

3) They haven't published their results. First and foremost they have a duty to provide their audited results to the Bond Trustees. Just my opinion but not publishing their results on time on their website is not a serious default of terms and may well be something agreed with the Bond Trustees. There could be a lot of different reasons for not publishing ranging from disaster, adverse audit, to strategic because of the JR2, to the Bond Trustees agreeing no disclosure until filed at Companies House. Some of those the Bond Trustees would have a duty to disclose promptly.

4) Wasps are struggling to pay the bond interest. I would have thought we would have heard plenty of bond holders jumping up and down demanding payment by now, not to mention a collapse in bond price.

5) There is an extra interest burden. Well yes but ACL was already paying 11% on £14m that loan has been repaid as part of the bond. So the extra burden is the 6.5% on £24m less the saving by reducing the interest on the £14m = 735K. It is not the full 2.3m that is extra burden

6) Gates are dropping. Well there is a risk there. The team has under performed so far this season and Wasps are no longer a novelty. However you have to take that in context. Total sports income in the last accounts equated to just under 40% of total turnover and was £12.3m. Of that 12.3m then between 5 and 6m is central Aviva Premiership distributions (ie not dependent on gate attendances and guaranteed) So 7m could be affected by a drop in attendances, that's roughly 22% of total turnover. Were attendances to drop by 20% then Total turnover would be affected by 4%. Wasps are not dependent on attendances in the same way as CCFC are. Comparing yesterdays attendance to the same fixture last year actually showed an increase of around 500.

7) Wasps are showering Coventry with free tickets. That's not an unusual marketing ploy is it? All teams including CCFC provide free tickets. The problem i have with the claim that this shows they are struggling is contained in the previous paragraph. Sports income in the 2016 accounts showed £12.3m so someone is paying something and it isn't small numbers. Of course just because free tickets are available doesn't mean they are actually used and therefore increase attendance figures

8) Wages. As with many sports teams this is the achilles heel. Wages costs have rocketed and that puts a strain on the group. However there is no marquee signing this season and that will reduce costs. It has seen the squad trimmed but there have also been additions when needed. ACL has shed staff yes but why does ACL need staff that are duplicated elsewhere? Will be interesting to see what the total is in 2017

9) Wasps have big debts. well yes but the majority is secured. The security has increased in value - yes i know some doubt the value, i have in the past too, but it is based on the opinion of qualified professionals not a feeling something looks wrong. The Security will show an increase of £12m from £48m to £60m. What that increase does is to all but wipe out the accumulated negative amount shown in the 2016 accounts. So any negative balance sheet could well represent the net loss in the 2017 accounts only. That provides some comfort to lenders or investors that things are heading the right direction. That is without any increase in the value of the Premiership shares.

10) Training centre. Not sure what went on here, there are few facts to latch on to. I think it is probably a mixture of things including finance, timelines, delays, relationships, space. What they have not said is that they are not going to build something. Wasps also own a section of the Higgs site or at least a lease with rights to be there so their £400k investment will need to be sorted out. Who buys it off Wasps and at what value. It may also be easier to finance a site that Wasps own outright and to obtain grants for it.

11) The owner. Has shown a willingness to put his money where his mouth is. It is probably reasonable to think he will continue to do so and has the ability to do it

Bottom line is whilst things may not have gone to plan, and i think there is truth in that, the predictions of crisis and imminent failure are i feel wide of the mark. Sorry but the excited hope of some i think will prove to be misplaced. Wasps are going to be here for a long time to come. Not something i take any joy from concluding
 

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Philosorapter

Well-Known Member
First and foremost, I wish you all the best getting over your recent health scare.

I am sure people with some economic understanding will comment on this.

I do see what may be a pattern. When they need to pay out a dividend their bond price drops significantly.

What any of this means is beyond me.

Of course, it is just as logical to assume that someone could need to buy bonds when they go down to keep everything afloat.

IMG_0224.PNG
 
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ccfcway

Well-Known Member
get well soon.

Useful notes. I appreciate the balance on here...

Funnily enough i also thought perhaps the non submitting of accounts may also be due to JR2
 

oldskyblue58

CCFC Finance Director
Not sure people are getting what is going on with the wasps bonds and the refinancing to come. The purpose has been to buy time to enable growth in asset value. It doesn't mean in 4 years time sticking to more of the same, although that is an option.

A possible scenario in 4 years time could for example be to revert to a more traditional form of finance. General criteria would be loan to value (LTV)less than 70% a loan period up to 30 years. Interest rates on commercial secured loans are often by negotiation on a case by case basis but seem to start at around 2% above base rate. So ......

Wasps lease value 60m that makes LTV currently 58% well within criteria
It may be possible to get an interest rate of 4% or 3.5% above base rate currently
They could look to repay over 20 years ( but longer could be an option and if so monthly payments would decrease)

That would give repayments of £2.56m per year or around £214k per month. A cash flow charge not too dissimilar to now. However the interest element year 1 of the loan would be £1.4m saving around 900k compared to the current situation

Not saying this will or could happen only illustrating there are options that could improve profitability and repay the bond liability in full whilst reducing the total debt year on year

They even now have a certified record of increased value. If they meet the bond covenants for 7 years then they will also have a track record of operating profit before tax, depreciation and interest. Could other factors affect the wasps finances yes of course they could. Are they in financial trouble perhaps but equally perhaps not. The figures produced so far indicate an improvement, against that there is hearsay and no real evidence that is definitive or can't be challenged

Sorry but while I would love to see the stadium in Ccfc hands I just don't see it. I do not think the timescale works for either club for that to happen. Not to mention rental income may well increase for wasps with a similar increase in cost for Ccfc from next August. Yet to see anything that says to me that wasps financial collapse is imminent. They will have bumps in the road most businesses do but have they hit one that creates a crisis ?

That's my lot on this for now
 
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olderskyblue

Well-Known Member
I trust you will keep making good progress OSB58, as we need some sensible input on occasions.. :emoji_smile:
 

Captain Dart

Well-Known Member
There is always a lot of wishful thinking on this site, very little informed in depth analysis like you are capable of doing OSB.

Best wishes.
 

Ashdown

Well-Known Member
I think it is a forlorn hope that 'Wasps' will fail and benefit the Sky Blues. The Aviva Premiership is a tight ship and Wasps are a fairly powerful outfit still in that elite group and unlikely to be relegated out of it anytime soon. There seem to be a couple of clubs who keep rising and falling as they soon find out that there is a big gap in class between the Prem and the Championship and they can't quite cut it, a bit like in football. Sadly I see them having the whip hand over CCFC and hope it doesn't turn spiteful because of our single minded owners and their court ambitions. A Sky Blue footfall is still worth having to them though I think and sooner or later we will see an increase in the rent to perhaps £250,000 per annum and a new deal in place.
 

duffer

Well-Known Member
Have been reading some of the claims about the current Wasps finances. Gave me something to do whilst recovering from a serious health scare at the end of October. Medics are happy with progress so all good.

Thought i would examine some of the issues and claims made as fact. Sorry but it isn't going to provide the same level of hope as the Wasps Academy thread. It is important to get a proper grip on their finances to be help see a way forward for CCFC. None of it is a justification or support of Wasps

1) Wasps are in serious financial problems because they can not repay the bond. Really? because i am not sure i see it that way. The reality is that the need to repay the bond hasnt changed in terms of how or urgency so i dont think it influences the current finances. They borrowed 35m at 6.5% and it is due for repayment 2022 yes. However it is quite ridiculous to think that the repayment would or could have been made out of 7 years accumulated cash flow. That is setting aside £5m every year. If they could do that then banks would have been falling over themselves to provide short term finance. In deed why would Wasps needed to have borrowed £35m at all? In fact if the business could do that then a number of other things would have been true, The need to borrow off CCC would not have been necessary, the sale price would have been more, Wasps need for finance would have been less, the projections would have needed to show turnovers £10m+ greater than has so far been achieved to name but a few. Repayment is a problem that has been know since the get go, it is not unreasonable to think a solution has always been in mind. Reissue of bonds, floating on the AIM, traditional bank finance over a longer term are some options. The purpose of the bond was to buy time to allow the group to build value, which seems to have happened given the lease values. They are still over 4 years away from repayment

2) Current financial Results are poor. We simply do not know and won't until we see them. It may well be that things have not gone as planned. However it is also reasonable to think that the League success and the increased central distributions will have softened that. The biggest risk to Wasps at the moment is not hitting the covenant in the bond agreement concerning EBITDA . Personally I will wait until i see the evidence before jumping to conclusions of financial disaster or going out of existence

3) They haven't published their results. First and foremost they have a duty to provide their audited results to the Bond Trustees. Just my opinion but not publishing their results on time on their website is not a serious default of terms and may well be something agreed with the Bond Trustees. There could be a lot of different reasons for not publishing ranging from disaster, adverse audit, to strategic because of the JR2, to the Bond Trustees agreeing no disclosure until filed at Companies House. Some of those the Bond Trustees would have a duty to disclose promptly.

4) Wasps are struggling to pay the bond interest. I would have thought we would have heard plenty of bond holders jumping up and down demanding payment by now, not to mention a collapse in bond price.

5) There is an extra interest burden. Well yes but ACL was already paying 11% on £14m that loan has been repaid as part of the bond. So the extra burden is the 6.5% on £24m less the saving by reducing the interest on the £14m = 735K. It is not the full 2.3m that is extra burden

6) Gates are dropping. Well there is a risk there. The team has under performed so far this season and Wasps are no longer a novelty. However you have to take that in context. Total sports income in the last accounts equated to just under 40% of total turnover and was £12.3m. Of that 12.3m then between 5 and 6m is central Aviva Premiership distributions (ie not dependent on gate attendances and guaranteed) So 7m could be affected by a drop in attendances, that's roughly 22% of total turnover. Were attendances to drop by 20% then Total turnover would be affected by 4%. Wasps are not dependent on attendances in the same way as CCFC are. Comparing yesterdays attendance to the same fixture last year actually showed an increase of around 500.

7) Wasps are showering Coventry with free tickets. That's not an unusual marketing ploy is it? All teams including CCFC provide free tickets. The problem i have with the claim that this shows they are struggling is contained in the previous paragraph. Sports income in the 2016 accounts showed £12.3m so someone is paying something and it isn't small numbers. Of course just because free tickets are available doesn't mean they are actually used and therefore increase attendance figures

8) Wages. As with many sports teams this is the achilles heel. Wages costs have rocketed and that puts a strain on the group. However there is no marquee signing this season and that will reduce costs. It has seen the squad trimmed but there have also been additions when needed. ACL has shed staff yes but why does ACL need staff that are duplicated elsewhere? Will be interesting to see what the total is in 2017

9) Wasps have big debts. well yes but the majority is secured. The security has increased in value - yes i know some doubt the value, i have in the past too, but it is based on the opinion of qualified professionals not a feeling something looks wrong. The Security will show an increase of £12m from £48m to £60m. What that increase does is to all but wipe out the accumulated negative amount shown in the 2016 accounts. So any negative balance sheet could well represent the net loss in the 2017 accounts only. That provides some comfort to lenders or investors that things are heading the right direction. That is without any increase in the value of the Premiership shares.

10) Training centre. Not sure what went on here, there are few facts to latch on to. I think it is probably a mixture of things including finance, timelines, delays, relationships, space. What they have not said is that they are not going to build something. Wasps also own a section of the Higgs site or at least a lease with rights to be there so their £400k investment will need to be sorted out. Who buys it off Wasps and at what value. It may also be easier to finance a site that Wasps own outright and to obtain grants for it.

11) The owner. Has shown a willingness to put his money where his mouth is. It is probably reasonable to think he will continue to do so and has the ability to do it

Bottom line is whilst things may not have gone to plan, and i think there is truth in that, the predictions of crisis and imminent failure are i feel wide of the mark. Sorry but the excited hope of some i think will prove to be misplaced. Wasps are going to be here for a long time to come. Not something i take any joy from concluding

Great analysis as ever, OSB. I'm sorry to hear you've not been well, but as others have said it clearly hasn't diminshed your intellect!

Your logic looks sound, as usual, but my gut feel (fwiw) is still that as a business you can't keep rolling over debt forever without it catching up on you at some point.

Similarly, that valuation of the Ricoh has a 'smoke and mirrors' feel to it, to me. If Wasps were distressed to the point of folding, then you'd be potentially be taking a lease without a key tenant (disregarding CCFC, for the moment), and no great supply of other clubs looking to take it on. In which case I just can't quite see how that valuation stands up.

However, in all fairness OSB you've actually done the figures, and I'm just going on instinct. Your point regarding the effect of attendance on profit is very well made, and I can't see the RFU going pop any time soon. However I'd also be a little nervous about TV revenue, long term. Rugby is still a minority sport, and I'm not convinced that BT will always want to throw as much money at it as they are now...

Anyway, regardless, the important thing is that you look after yourself and get better in time for Christmas. It isn't like this one is going to be settled any time soon. :)
 

oldskyblue58

CCFC Finance Director
There is no evidence of imminent disaster. Even the 6 months accounts to December though showing a £1.2m loss show an improvement and the EBITDA to finance cost is close to being achieved. To my mind presently the biggest risk to wasps is achieving the EBITDA

Will they succeed in the long term who knows. At the moment I think it could go either way. The facts we know show improvement and not relying on attendance but my own gut feeling is that things have not gone as planned.

League position and attendance is a risk to income but not in the same way as Ccfc . I know they lost 4 in a row but recent form has picked up as has league position.

From what I understand Richardson is independently wealthy. Had invested £20m which has reduced to £12m. I doubt his wealth consists of investment in wasps. Do we know there are other investors? Do we know the detailed finance behind it all ? No - so I am trying to keep an open mind about his potential to invest further, not making assumptions (well trying to) as fact

Thing about the example is that it drives the debt down which will drive down finance cost. So it's not maintaining debt levels or recycling debt. It has an end target of paying that debt down. It of course relies on there being cash flow and profits to achieve that. There are pitfalls to it

I do find it interesting that a different level of business acumen is applied to the two sports. Fans expect deep pockets and endless investment from football clubs where losses are almost irrelevant(I am not condoning that model) but a rugby club must adhere to a different higher business standard or be at risk of Armageddon. Both should aim for self sufficiency in my opinion.

Could wasps be on a path to disaster yes it's possible as is the possibility of it all being a success or the status quo or a whole range of other possibilities. The issue I have is posters who post their guess as fact without as duffer has done making clear its just his gut feeling ( I respect him and his thoughtful contribution for doing that).

I might of course be reading it all wrong but it is at least reasoned. I could be completely wrong. Wasps could of course go bust but it will have been a guess by those currently stating it as fact. Unfortunately of the two clubs the one at biggest risk in short or medium term is not wasps in my opinion. The problem I have with such claims is it gets hopes up about the stadium with no real basis other than a guess which is more likely to increase frustration and focus on the wrong issues currently needing solutions

Still do not see the terminal financial disaster about to embroiled wasps ricoh adventure
 
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chiefdave

Well-Known Member
I understand you can refinance but surely there comes a point where an ever increasing debt is not sustainable? No, that doesn't mean they're going bust tomorrow, but does it indicate there could be trouble down the line?

In their last set of accounts didn't they lose over £2m? And that's for a period where the bond interest was covered by what they initially borrowed. If you add that on top of the losses they have to see huge improvements to break even. Especially when you consider we were repeatedly told business was the best it had ever been and by a long margin.

Of course the full picture isn't known until you see the accounts but as we know with CCFC that can often be years behind so you have to look for other indicators. I would say that high level ACL staff leaving and not being replaced, the cancellation of the new training ground and the lack of maintenance at the Ricoh (for example the order for the new scoreboards was cancelled many months ago to source a cheaper option there is still no sign of) and the owner having to put money in are not positive signs.

The valuation of the lease for security has always seemed suspect to me. Given the area being focused on in JR2 could we not see an examination of the value of the assets purchased by Wasps, if they differ significantly from the valuation used as security wouldn't that raise questions?
 

bawtryneal

Well-Known Member
Hi OSB
Hope you still on the mend and all is well
Just caught up with this thread and as always a very well thought out and informative piece.
Couple of thoughts and your opinion.
How do you think they "distributed" the bond money and how much would be left to support operational cash flow.
I am not an expert on Wasps but through various other sporting links I get to hear the gossip and other parties thoughts. The General view is Wasps are the highest salaries in the league and offering long contracts to attract both best players and support staff.
How do you think this is effecting their cash flow. I agree with all your comments in both pieces above but without further share capital or internal borrowing from Eastwood and team then cash can become a major issue.
Agree with your point on ticket money only playing a small part but if salaries are 70% plus (?) of turnover then cash will be tight.
Any thoughts ?
 

oldskyblue58

CCFC Finance Director
Is it ever increasing finance? Has the finance requirement levelled out and been fully drawn down both bond and other sources? We don't know yet. Refinance on a repayment loan and assuming the cash flow is available then it is decreasing finance. Only time will tell. Yes there could be trouble ahead, I have suggested that above but it is not a given and things could be going largely to plan we don't know and can only guess.

I think you are mixing up profit/loss with cash flow. They are not the same thing and adding things together as you have is incorrect. The loss includes the interest charge already and cash flow includes the physical payment but excludes various items included in the loss that do not any physical payment. The important thing in this context is the cash flow which provides the ability to pay the interest, not whether they breakeven on the p&l.

High level staff leaving. I think you need to look at the nature of what ACL has become. It is a holding company that holds various sub leases. how many senior staff does that company need directly? There are staff and senior staff in other companies that can cover the roles so staffing requirements for ACL are low and it makes sense to remove unnecessary duplication especially if it is expensive

We are told they are cancelling the higgs development yes but as yet we have not been told they are not going to build at all, in fact current information is they are looking at other sites. Whether that happens or not we won't know for a while. So if they are building elsewhere it must imply some sort of financing. If they own the site outright it also adds value to the balance sheet.

Has refurbishment or maintenance not been carried out at the complex or just in the stadium bowl. I believe in excess of £5m has been spent on the hotel and atrium areas that are used 365 days a year and have enhanced incomes. A bit of paint in the stadium bowl won't change income very much nor a new score board (which is capital expenditure not maintenance). Could be a question of priorities or as you suggest a shortage of funds.

The owner putting money in is I agree a weakness but how many Ccfc fans have demanded Sisu do exactly that. The thing that drags things down is not primarily the interest but the player wage bill. Perhaps Richardson would argue he was investing in making the squad competitive and successful we don't know.

There have been two independent valuations carried out by professional qualified and different valuers. Both increased the value that underpins the bond. There is published evidence of that. The JR2 is about the value of the lease before it got into wasps hands. The new values might be referred to but did those values exist at date of sale? Almost certainly not. In any case Sisu and the club are trying to argue the value was much higher are they not? So that reinforces the bond security although there might be some discussion. The bond security is based on current not past value and have professional opinion to back it up.

I agree there are questions or even doubts. Still doesn't convince me some of the claims made by posters here of financial melt down are correct
 
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oldskyblue58

CCFC Finance Director
Hi OSB
Hope you still on the mend and all is well
Just caught up with this thread and as always a very well thought out and informative piece.
Couple of thoughts and your opinion.
How do you think they "distributed" the bond money and how much would be left to support operational cash flow.
I am not an expert on Wasps but through various other sporting links I get to hear the gossip and other parties thoughts. The General view is Wasps are the highest salaries in the league and offering long contracts to attract both best players and support staff.
How do you think this is effecting their cash flow. I agree with all your comments in both pieces above but without further share capital or internal borrowing from Eastwood and team then cash can become a major issue.
Agree with your point on ticket money only playing a small part but if salaries are 70% plus (?) of turnover then cash will be tight.
Any thoughts ?

Thanks I am certainly on the mend.

I think that after paying down the CCC Richardson and close brothers loan and providing £4..5m for interest that left around 6m in cash flow and they then spent that on the hotel and atrium revamp.

Wages are the biggest drain as with many sports teams. Runs at around £17m for all wage costs (not just playing side) against that turnover is north of 30m in the last accounts. No marquee signing this season but wages have a big impact on cash flow but that's the same with any team. Many of the top rugby sides have invested heavily this season in play staff so are wasps wages costs unusual? No idea. Is further owner or internal financing required? possibly.
 

Captain Dart

Well-Known Member
Thanks I am certainly on the mend.

I think that after paying down the CCC Richardson and close brothers loan and providing £4..5m for interest that left around 6m in cash flow and they then spent that on the hotel and atrium revamp.

Wages are the biggest drain as with many sports teams. Runs at around £17m for all wage costs (not just playing side) against that turnover is north of 30m in the last accounts. No marquee signing this season but wages have a big impact on cash flow but that's the same with any team. Many of the top rugby sides have invested heavily this season in play staff so are wasps wages costs unusual? No idea. Is further owner or internal financing required? possibly.

There is a salary cap in Rugby, but I find it hard to square a £17M wage cost with the £7M cap (NB 2 players are exempted from the cap).. wonder where it all goes?
Premiership salary cap to remain at £7m in 2018-19 and 2019-20
 

oldskyblue58

CCFC Finance Director
Last accounts showed
57 players
159 managerial and other staff
National insurance £1.15m
Directors emoluments £904K
other key senior staff £310
Highest paid director 407k
The salary cap relates to playing staff and is the core amount not the total amount Wasps can utilise
The wages also relate to the stadium other areas too that most clubs wont have

You would think there were savings that could and should be made on wages

all I can tell you
 

wingy

Well-Known Member
Well I don't pretend to understand much of this but have they had their pants pulled down by PCW?
 

Nick

Administrator
Good to see it is announced as a press release with comments ready to go.

Imagine if that was CCFC.
 

fernandopartridge

Well-Known Member
Good to see it is announced as a press release with comments ready to go.

Imagine if that was CCFC.
In fairness Nick, CCFC in days gone by would release stories with a prepared statement, it's no longer the case as their relationship with the CT is toxic

Sent from my SM-G935F using Tapatalk
 

Nick

Administrator
In fairness Nick, CCFC in days gone by would release stories with a prepared statement, it's no longer the case as their relationship with the CT is toxic

Sent from my SM-G935F using Tapatalk
Ah fair enough, in all honesty I couldn't remember that far back for standard ways!!
 

duffer

Well-Known Member
There's a pretty complete analysis by Les Reid here:

EXCLUSIVE: Wasps ‘breach agreement’ with bondholders over Ricoh Arena value amid £43m debt

It's going to take some pulling apart this.

Again my gut feel is that it falls somewhere between the Telegraph's "everything is fine" minor rewrite of Wasps' own press release, and the "end is nigh" scenario (that I'm not-so-secretly hoping for!). It doesn't look great in that I think it would be unexpected news for bondholders, at the very least, and must cast some doubts on Wasps' own accounting procedures.

I look forward to OSB's thoughts in due course! :)
 

oldskyblue58

CCFC Finance Director
Certainly not what they wanted to achieve and the bond price has dipped 5% on the news.

As said several times above and on other threads the EBITDA was the biggest problem. Having had a quick scan of the documents released on the LSE it raises a number of issues.

From the number and nature of the amendments sought it seems to me that the bond documents originally put out contained some flaws and poor detail. It seems the auditors in order to sign off the audit require amendments to that document that provide a belt and braces approach whilst providing clarity as to what financial items can be or must be included in any calculations. Clearly wasps either misunderstood the bond terms or tried to pull a fast one either way they got it wrong

So how did the professionals not get this right in the bond terms and why was it not picked up in the first audit. When did the wasps board know about it.

In theory the bond trustees could call the loan in. I would think though possible it is unlikely. Action will be agreed 19th January when they vote on the amendments. The bondholders trustees could be persuaded that the underlying business is indeed heading in the right direction. The results themselves actually show considerable improvement not only in turnover but also in reducing total costs. So is this a terminal issue, I don't think so but there is that possibility

What wasps appeared to have tried to do is that a shortfall of 1.1m in the EBITDA calculation could be covered by Richardson putting that sum in to the business. The auditors disagreed based on the bond documents and their view has succeeded. One of the amendments is to put the wasps understanding in to the bond terms. The cover for that is that wasps must keep 6 months interest on deposit and to shorten the requirement to rectify any default in 10 days not 30.

Not good news and a PR disaster. Possibly why Armstrong lost his job perhaps ? But they have had plenty of time to prepare and to spin things

However.........
Turnover up 8%, all profit measures improved, increased value of the assets. Gross margin increased, success on the pitch, central distributions rising by 1.2m over next 8 years, New terms agreed with Ricoh, several new sponsors on board, net worth 19m . The business itself isn't struggling as such but the operating profit they have made has not hit target of 3.5m by 1.1m

Does any of this really tie in with repaying the bond no but it might make refinancing harder. Is it a reflection of falling crowds no the average for that period was up, do they need to maximise attendance yes. Are wasps reliant on the rugby team for its financial success no its a loss maker. Are costs being cut yes. Has Richardson put more money in yes and probably will need to cover the 6 month rent deposit too and his loans are excluded from the bond debt except that new monies put in will count towards the operating profit figure for EBITDA. Which means if amendments are carried that the 1.1 m put in the wrong year could count towards the EBITDA for 2018

The breaking of the bond covenants is a major problem but the underlying business is improving and decent. Not sure at all that loosens their grip on the stadium or improves anything for Ccfc. Are they going to go bust I don't think so but they need to succeed at the vote to avoid further trouble. It's bad news but is it terminal ?

We will know more 19 January.
 
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fernandopartridge

Well-Known Member
Certainly not what they wanted to achieve and the bond price has dipped 5% on the news.

As said several times above and on other threads the EBITDA was the biggest problem. Having had a quick scan of the documents released on the LSE it raises a number of issues.

From the number and nature of the amendments sought it seems to me that the bond documents originally put out contained some flaws and poor detail. It seems the auditors in order to sign off the audit require amendments to that document that provide a belt and braces approach whilst providing clarity as to what financial items can be or must be included in any calculations. Clearly wasps either misunderstood the bond terms or tried to pull a fast one either way they got it wrong

So how did the professionals not get this right in the bond terms and why was it not picked up in the first audit. When did the wasps board know about it.

In theory the bond trustees could call the loan in. I would think though possible it is unlikely. Action will be agreed 19th January when they vote on the amendments. The bondholders trustees could be persuaded that the underlying business is indeed heading in the right direction. The results themselves actually show considerable improvement not only in turnover but also in reducing total costs. So is this a terminal issue, I don't think so but there is that possibility

What wasps appeared to have tried to do is that a shortfall of 1.1m in the EBITDA calculation could be covered by Richardson putting that sum in to the business. The auditors disagreed based on the bond documents and their view has succeeded. One of the amendments is to put the wasps understanding in to the bond terms. The cover for that is that wasps must keep 6 months interest on deposit and to shorten the requirement to rectify any default in 10 days not 30.

Not good news and a PR disaster. Possibly why Armstrong lost his job perhaps ? But they have had plenty of time to prepare and to spin things

However.........
Turnover up 8%, all profit measures improved, increased value of the assets. Gross margin increased, success on the pitch, central distributions rising by 1.2m over next 8 years, New terms agreed with Ricoh, several new sponsors on board, net worth 19m . The business itself isn't struggling as such but the operating profit they have made has not hit target of 3.5m by 1.1m

Does any of this really tie in with repaying the bond no but it might make refinancing harder. Is it a reflection of falling crowds no the average for that period was up, do they need to maximise attendance yes. Are wasps reliant on the rugby team for its financial success no its a loss maker. Are costs being cut yes. Has Richardson put more money in yes and probably will need to cover the 6 month rent deposit too and his loans are excluded from the bond debt except that new monies put in will count towards the operating profit figure for EBITDA. Which means if amendments are carried that the 1.1 m put in the wrong year could count towards the EBITDA for 2018

The breaking of the bond covenants is a major problem but the underlying business is improving and decent. Not sure at all that loosens their grip on the stadium or improves anything for Ccfc. Are they going to go bust I don't think so but they need to succeed at the vote to avoid further trouble. It's bad news but is it terminal ?

We will know more 19 January.
Could the bondholders call an early repayment? I'd have a lack of confidence in the Wasps board, my admittedly biased outlook is that they've tried to pull the wool over the bondholders eyes and got caught.

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chiefdave

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Action will be agreed 19th January when they vote on the amendments.
Its like the council ethics committee. Get found out for breaking the rules but rather than any punishment you just change the rules.
The breaking of the bond covenants is a major problem but the underlying business is improving and decent. Not sure at all that loosens their grip on the stadium or improves anything for Ccfc. Are they going to go bust I don't think so but they need to succeed at the vote to avoid further trouble.
Do we know the overall figure from this? Looking at the press release it says operating profit of £800K, then £2.4m, then an operating loss of 800K.

Couple of figures strike me as odd. I'm not sure on what planet the Ricoh lease can now be worth £60m, thats another huge jump with no explanation of why or how the figure has been arrived at. If that's anywhere close to correct it should raise serious questions about how ACL was run under council ownership and the sale process and price.

Also 895 events? Are they counting people going to Costa as an event!
 

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