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
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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