For years Rugby Australia has been going into battle with their hands tied behind their back. Now, they’ll have a fighter’s chance after securing finances to borrow up to $80 million over the next five years.
After considering following New Zealand Rugby’s $NZ200m path of going down a private equity path, RA announced the significant debt deal with Pacific Equity Partners on Friday afternoon.
The deal comes just at the right time after a week from hell, which started with World Cup-winning Wallaby Daniel Herbert taking over from Hamish McLennan as RA chair and continued on Thursday with their main Super Rugby partner Harvey Norman opting not to renew the three-year partnership.
But after two years of trumpeting the start of the golden decade of rugby, the debt deal will at least provide RA some immediate certainty and help them get their finances in order ahead of the British and Irish Lions tour in 2025 and home World Cups in 2027 (men) and 2029 (women). Hosting the Lions and men’s World Cup is expected to bring in a combined $200.
RA wants to use the injection of capital to pump more resources into the grassroots of the game, their pathways and high-performance portfolios, including the Wallabies and Wallaroos head coaching roles, before the two events so they can reap the benefits by the time they arrive.
“Given the visibility we have on revenues from the British and Irish Lions and World Cups, it became clear that debt capital was going to be the best solution for rugby,” Waugh said in a statement.
Rugby Australia CEO Phil Waugh has announced a new $80m debt deal. (Photo by Matt King/Getty Images for Rugby Australia)
Although Waugh said taking the debt deal was the right time for now, he didn’t rule out exploring a private equity deal in the future.
The decision to go down the debt path always looked likely, with new RA chief executive Phil Waugh, who comes from a banking background, often spruiking the benefits of not selling the game’s assets at a low rate. RA was previously looking to sell 20 per cent of their commercial arm.
In a soft financial market and RA currently having a low $29m broadcast deal, with no absolute certainty of a significant uplift in 2026 either, Waugh believed it was the smartest path to go down.
“This does not compromise RA’s options down the road, which could include private equity investment,” Waugh added.
“This approach ensures that we retain 100 per cent of the commercial revenues from the game, that all capital raised will go into the game, and that RA controls its own direction during this next period of growth and development.
“We plan to invest in the critical areas needed to grow the game – we have identified high-performance integration, Women’s Rugby, Community and Pathways as critical areas to focus on, and I believe investment in these areas will give us the opportunity to capitalise on the exciting major events on the horizon.”
The new debt facility comes on the back of RA’s existing $40m loan with Ares Management that it took out in May 2021, during the pandemic, and on which it is paying an interest rate of 11 per cent.
Olly
Roar Rookie
:laughing: It will be a great day when Rugby is on free to air TV but I think paid streaming service are more likely to become main stream before RA can afford to step out of the pay wall unfortunately. But there is always hope.
jeznez
Roar Guru
They might need to buy a bunch of pubs so that they can show games in them. I hear that folk can't go to a pub to watch a game anymore which is a massive worry.
Olly
Roar Rookie
Yep, I do like the words coming out of Herbert and Waugh seems to have found his voice finally. At the end of the day I want to see the CEO be the CEO and the chair stay in his lane. The alternative to not getting access to money was not looking great for RA. For the the game let's not have another pandemic and hope the current lot can better manage the game. Wouldn't it be great to see RA reach the point where the game is buying diversifying investments for the future of the game? Hopefully one day RA can buy a pub like the NRL :laughing:
jeznez
Roar Guru
I agree the board (including Waugh and Herbert) are responsible as well. Am holding fire on the new Chair and CEO until we see what happens under their stewardship. I at least like that Herbert has openly spoken about the overspending and not focussing on high value NRL recruits - that's a step in the right direction with debt building as it has been. Still adding this new facility has me worried, just like they did with the Ares Capital one, I expect they'll draw it to the max. Better hope there isn't a new pandemic that derails the future events they hope will pay it off.
Olly
Roar Rookie
Plenty of risk if they don't secure the money.....
Olly
Roar Rookie
No, I do not sing his praise. I recognize what he has done over just throwing stones at someone. He inherited a disaster and somehow managed to keep the game alive during COVID when it was in no position to survive. He overreached in his role but pretending that the new chair, CEO, and board members are not responsible as well for the RWC is ridiculous. What has been done has been done. The game needs to move forward and take any wins it can get. Be it on the field or commercially.
kingplaymaker
Roar Guru
Not surprising when you only have 5 teams. Where's the income going to come from?
jeznez
Roar Guru
Andy, I'm pretty sure Olly ran the same arguments when the 40m from Ares Capital Loan Note was announced. They haven't drawn it down yet, they may never use it, many companies have debt, etc. Rinse and repeat on the new 80m facility. Never mind that they drew 25m of the Ares facility by end of last year and I suspect that this years report is likely to show the remaining 15m used. The only bit we remain none the wiser on, is whether this new facility replaces the Ares Capital one or is in addition. I hope this isn't like when they used the Ares Capital Loan Note to pay off the 7m they owed HSBC at a 3% higher interest rate.
Adam Rogers
Roar Rookie
All businesses use credit, whether it is a loan to buy property, trucks or whatever, essentially using debt to drive growth. It is essentially why companies like Uber run for years without declaring a profit, they are using loans/debt to grow into new markets, and scale, covering their repayment requirements with their revenue, but needing more capital/money to grow, than their current income allows. RA is essentially relying on the revenue from Lions and RWC to pay off the loans they are taking out now, the loans now intended to drive growth in attracting players and improving performance in the hope it will drive viewership, revenue and sponsorship.
jeznez
Roar Guru
Whatever Olly. You’ve been singing McLennan’s praises with regard to his fiscal performance. He’s been a disaster. Let’s hope they can right the ship.
W Evans
Roar Rookie
Agreed. But I think it’s even worse than that. Rugby Australia as well as the state unions seem to have founded their short, mid and long term strategy on money from 2025-2027 which is already being spent.
AndyS
Roar Rookie
Yeah, sure. And when they blow this lot, I guess they can just get another $100M. And maybe another after that. It is all free money after all, so form an orderly queue and hold out your bucket. No risk involved, no problem, nothing to see...
Bliksem
Roar Rookie
I think Japan may have said something similar about the Olympic games in 2020.
Bliksem
Roar Rookie
Let's hope that nothing happens that prevent the Lions to tour or the RWCs to go ahead - like a pandemic, conflict, etc. Spending money before you earn it is very risky.
Bliksem
Roar Rookie
This is small change for Twiggy - he doesn't have to choose he can do everything. It is rugby's loss if we are unable to convince or come up with a deal that allow someone like him to invest in a sport that he clearly supports. If he in the future aligns with league, and step away from the dramas in rugby union we only have ourselves to blame.
Bliksem
Roar Rookie
What would be interesting to see is if Ireland can maintain their #1 status with only four professional teams. I think they are a team short, however I like the 6+6+6... system. Ireland has also been successful to retain players - do you have more details of the tax-back system as Australia needs to make provision that they will rebuild every 4-8 years as we loose players to the NHs.
Olly
Roar Rookie
You are complain about everything now. Securing money is a positive for the game, it needs this money desperately. The alternative of them not being able to secure money would have been something to be concerned about. This would have been a disaster. TV deal is not hurt by the budget blowout of the RWC, it is hurt by the Wallabies performance. Throwing money at it trying to fix the Wallabies performance was a no brainer. They can't just sit on their hands and do nothing. If they did that you would be complaining that they didn't do enough. Money for the game is a positive, now we just need to see them use it well. They do seem to have a plan that they are working to. Clearly some hurdles to overcome and the change at the chair level is going to cause some pain but at least they are trying to make change.
Olly
Roar Rookie
Lol a over simplistic view on it. I think you would be surprised to see how much debt some of the most successful companies in the world carry. Literally billions of dollars of debt. Rugby has had to do something and security money is a positive. Now we see if they can make the most of it.
AndyS
Roar Rookie
AKA, a Visa card. You pay interest, and plenty of it, on whatever is outstanding every month. Living on it for years at a time is a very strong indicator of financial illiteracy, and having maxed out their first card they’ve got themselves another...also a bad sign. Surest tell is what the money is used for though, so I guess we'll see. It can't really afford it to be anything that isn't an immediate existential necessity; nice-to-haves or using it to gamble on uncertain outcomes will mean disaster.
jeznez
Roar Guru
Olly my comments come from concern for the game. RA are in deep deep trouble and have been spending cash on things that aren’t critical. How do you elect to turn the RWC into a development tour (instead of trying to win it) and still blow the budget? Taking on debt is fine, if it’s improving future revenue. The WC blown budget has hurt the next broadcast deal, that’s a mind numbingly poor spend.