Should Newport RFC carry 100% of the financial risk for only 50% of the ownership? Yes or no?

As PhilBB seemed hell bent on derailing the Dragons thread, I have put his question and my response on a new thread.

Firstly I dispute that Newport RFC carry any risk. This is because it is Tony Brown and Martyn Hazell who are the creditors. These individuals also lent money to NRFC pre regionalisation. So, surely by lending money to NRFC - for the purpose - of propping up the Dragons (as Phil puts it) they are lending their support. So I fail to see how it puts the Dragons or NRFC at risk. I am sure there are 'loans' made to NRFC pre regionalisation that were never repaid that would put that club at equal risk. However, I do accept that it could be perceived as unfair.

If you dispute that they carry any risk then please explain to me Godfrey's loan or the company's ability to meet the unsecured debts of £3m.

Would it be any different if it was Newport RFC only?

GavinDragon wrote:Would it be any different if it was Newport RFC only?

Yes, because they'd have 100% ownership of an asset that could part, or in full, cover that exposure by selling the professional entity. As it stands, Newport RFC is in the balance for something that has no value.

GavinDragon wrote:Would it be any different if it was Newport RFC only?

And don't you see the risk of the debt carried by Newport RFC ltd?

Is it not the same risk as any sporting organisation in the Country?

But you use this risk as justification of returning to club names.

I question why would the creditors, who lent the money in the first place, lend the money to regional entities which were not clubs if they didn't believe in the business case?

You will say 'but they lent the money to NRFC' and I will say 'yes, but surely the must of known it was to support the Dragons'

GavinDragon wrote:Is it not the same risk as any sporting organisation in the Country?

But you use this risk as justification of returning to club names.

I question why would the creditors, who lent the money in the first place, lend the money to regional entities which were not clubs if they didn't believe in the business case?

You will say 'but they lent the money to NRFC' and I will say 'yes, but surely the must of known it was to support the Dragons'

I don't know of any other sporting organisation which carries 100% of the financial risk for something it only owns 50% of. Can you educate me by letting me know which organisations you're thinking of?

I've written at least twice tonight that the branding is a subject for the shareholders. 100% ownership may not equate to a change in branding, but it is none of my concern. So, please, can we quit with that diversionary attempt?

The answer to your question is that they loan money knowing that the business they are loaning to has an asset that can be sold to recover the debt. I'll repeat: they are not loaning money to 'regional entities' but to Newport RFC ltd, the club which runs and operates the development pathway as a WRU Regional Organisation.

PhilBB wrote:

GavinDragon wrote:Is it not the same risk as any sporting organisation in the Country?

But you use this risk as justification of returning to club names.

I question why would the creditors, who lent the money in the first place, lend the money to regional entities which were not clubs if they didn't believe in the business case?

You will say 'but they lent the money to NRFC' and I will say 'yes, but surely the must of known it was to support the Dragons'

I don't know of any other sporting organisation which carries 100% of the financial risk for something it only owns 50% of. Can you educate me by letting me know which organisations you're thinking of?

I've written at least twice tonight that the branding is a subject for the shareholders. 100% ownership may not equate to a change in branding, but it is none of my concern. So, please, can we quit with that diversionary attempt?

The answer to your question is that they loan money knowing that the business they are loaning to has an asset that can be sold to recover the debt. I'll repeat: they are not loaning money to 'regional entities' but to Newport RFC ltd, the club which runs and operates the development pathway as a WRU Regional Organisation.

My point is that both sporting organisations (if you believe there are two separate organisations) have been backed pre-regionalisation and after by the same people. So the risk is the same. As it would be if NRFC were to acquire the other 50% share

GavinDragon wrote:My point is that both sporting organisations (if you believe there are two separate organisations) have been backed pre-regionalisation and after by the same people. So the risk is the same. As it would be if NRFC were to acquire the other 50% share

No, Gavin, they are not two separate organisations. They are one under Newport RFC ltd. That is where the debt is loaded - it is not loaded to 'Dragons Rugby Ltd'. If they were two separate organisations then Dragons Rugby Ltd would be the one loaded with the debt.

Again, I will point out that the risk is NOT the same. It cannot be, as the debt is attracted by an asset that cannot be fully realised in order to service any necessary debt repayment. Were the Newport Gwent Dragons 100% owned by Newport RFC then your point would be spot on.

And that is why, surely you will agree, it is only fair for Newport RFC to 100% own Newport Gwent Dragons.

The alternative would be for other clubs in the development pathway to acquire the WRU's 50% share and for them to carry their fair share of investment risk. Don't you agree?

So, the question remains, do you think it fair for Newport RFC ltd to carry 100% of the debt for an asset it only owns 50% of? If you think it unfair, then you agree (in part) with those Newport supporters who want change.

As a 'regionalist', of course, you may prefer for Newport RFC to sell its share (even to its own Directors) so that you have a true 'standalone of any club ownership' 'region'. That business could then, in turn, rent Rodney Parade as Newport County do. Would you be in favour of that?

I appreciate there's a few questions there, Gavin, but it would be good to get to the crux of this by you offering your fair answers to them. Thanks.

PhilBB wrote:

GavinDragon wrote:My point is that both sporting organisations (if you believe there are two separate organisations) have been backed pre-regionalisation and after by the same people. So the risk is the same. As it would be if NRFC were to acquire the other 50% share

No, Gavin, they are not two separate organisations. They are one under Newport RFC ltd. That is where the debt is loaded - it is not loaded to 'Dragons Rugby Ltd'. If they were two separate organisations then Dragons Rugby Ltd would be the one loaded with the debt.

Again, I will point out that the risk is NOT the same. It cannot be, as the debt is attracted by an asset that cannot be fully realised in order to service any necessary debt repayment. Were the Newport Gwent Dragons 100% owned by Newport RFC then your point would be spot on.

And that is why, surely you will agree, it is only fair for Newport RFC to 100% own Newport Gwent Dragons.

The alternative would be for other clubs in the development pathway to acquire the WRU's 50% share and for them to carry their fair share of investment risk. Don't you agree?

So, the question remains, do you think it fair for Newport RFC ltd to carry 100% of the debt for an asset it only owns 50% of? If you think it unfair, then you agree (in part) with those Newport supporters who want change.

As a 'regionalist', of course, you may prefer for Newport RFC to sell its share (even to its own Directors) so that you have a true 'standalone of any club ownership' 'region'. That business could then, in turn, rent Rodney Parade as Newport County do. Would you be in favour of that?

I appreciate there's a few questions there, Gavin, but it would be good to get to the crux of this by you offering your fair answers to them. Thanks.

As you know you are correct. However, I don't agree with Newport supporters who would seek to revert the pro team to 'Newport' because the loans made against RP were made to NRFC for the upkeep of the NGD, which the creditors know. Hence why there is no real risk.

If NRFC gained 100% share the risk would be no less

GavinDragon wrote:

As you know you are correct. However, I don't agree with Newport supporters who would seek to revert the pro team to 'Newport' because the loans made against RP were made to NRFC for the upkeep of the NGD, which the creditors know. Hence why there is no real risk.  

If NRFC gained 100% share the risk would be no less

Gavin, in all seriousness you must be ignoring half of what I'm writing. Therefore, I'll give it a final go:

If NRFC gained 100% share the risk would be significantly less as it would have an asset (1/4 of Pro Rugby Wales and its shareholding in EPRC) that it could sell if it was failing to meet its debt obligations. Alternatively, it could choose to pay off debt by selling RP and moving to a new stadium elsewhere (perhaps as Llanelli did) whilst maintaining the asset of professional rugby.

As it stands, it may have to lose a significant sum of its asset (thus leaving it with little to reinvest into a new facility) if it needed to pay the debt for a team it only owns 50% of.

Now, if you disagree with any of that then please address the points individually but simply writing 'the risk would be no less' is factually and obviously wrong.

PhilBB wrote:

GavinDragon wrote:

As you know you are correct. However, I don't agree with Newport supporters who would seek to revert the pro team to 'Newport' because the loans made against RP were made to NRFC for the upkeep of the NGD, which the creditors know. Hence why there is no real risk.  

If NRFC gained 100% share the risk would be no less

Gavin, in all seriousness you must be ignoring half of what I'm writing. Therefore, I'll give it a final go:

If NRFC gained 100% share the risk would be significantly less as it would have an asset (1/4 of Pro Rugby Wales and its shareholding in EPRC) that it could sell if it was failing to meet its debt obligations. Alternatively, it could choose to pay off debt by selling RP and moving to a new stadium elsewhere (perhaps as Llanelli did) whilst maintaining the asset of professional rugby.

As it stands, it may have to lose a significant sum of its asset (thus leaving it with little to reinvest into a new facility) if it needed to pay the debt for a team it only owns 50% of.

Now, if you disagree with any of that then please address the points individually but simply writing 'the risk would be no less' is factually and obviously wrong.

How much is this asset worth? And why, if it is such an asset, have no loans been made against it? Surely because it is not tangible?

GavinDragon wrote:

How much is this asset worth? And why, if it is such an asset, have no loans been made against it? Surely because it is not tangible?

The last value for half this asset was £1.25m that the WRU paid Samuel for the other half of the Warriors 12 years ago. Now, since then, the Pro Team has an asset in its shareholding in PRW and its shareholding in EPRC, neither of which existed in 2003.

Is it tangible? That's a fair question. I'd say that it has no value as it stands because the company that enjoys those assets is 50% shared between two organisations - the WRU and Newport RFC ltd. Therefore, the only real value is when one organisation owns 100%.

It's nigh on impossible to lend against an asset you cannot secure 50% of. I think that answers your question. Agree or not?

PhilBB wrote:

GavinDragon wrote:

How much is this asset worth? And why, if it is such an asset, have no loans been made against it? Surely because it is not tangible?

The last value for half this asset was £1.25m that the WRU paid Samuel for the other half of the Warriors 12 years ago. Now, since then, the Pro Team has an asset in its shareholding in PRW and its shareholding in EPRC, neither of which existed in 2003.

Is it tangible? That's a fair question. I'd say that it has no value as it stands because the company that enjoys those assets is 50% shared between two organisations - the WRU and Newport RFC ltd. Therefore, the only real value is when one organisation owns 100%.

It's nigh on impossible to lend against an asset you cannot secure 50% of. I think that answers your question. Agree or not?

you are also assuming PRW has tangible asset

GavinDragon wrote:

you are also assuming PRW has  tangible asset

I'm seeing you ignoring many of the points put to you, Gavin. Is that the best way to interact in good faith?

Yes, I'd say that the organisation with Directors on Celtic Rugby, a long term professional contract with no danger of competition eroding or dissolving it, a strong working relationship with the other clubs in Europe and a collective bargaining position is, indeed, a tangible asset of which 25% would have a value.

I'm sure that you'll agree with that shareholding in EPRC is also tangible and valuable.

Therefore, all of that negates completely your claim that 100% ownership wouldn't make a difference.

Of course, if you disagree then please pick at my clear opinion with details that disprove it. Otherwise, if that cannot be done, wouldn't you say that 100% ownership of the NGD is the only way to go - be that for individuals, a collective of clubs in the development pathway or for Newport RFC.

Yes?

PhilBB wrote:

GavinDragon wrote:

you are also assuming PRW has  tangible asset

I'm seeing you ignoring many of the points put to you, Gavin.I s that the best way to interact in good faith?

Yes, I'd say that the organisation with Directors on Celtic Rugby, a long term professional contract with no danger of competition eroding or dissolving it, a strong working relationship with the other clubs in Europe and a collective bargaining position is, indeed, a tangible asset of which 25% would have a value.

I'm sure that you'll agree with that shareholding in EPRC is also tangible and valuable.

Therefore, all of that negates completely your claim that 100% ownership wouldn't make a difference.

Of course, if you disagree then please pick at my clear opinion with details that disprove it. Otherwise, if that cannot be done, wouldn't you say that 100% ownership of the NGD is the only way to go - be that for individuals, a collective of clubs in the development pathway or for Newport RFC.

Yes?

100% ownership wouldn't make a difference to the debt held against RP.

And I believe the best way to interact in good faith is over a pint ;-)

GavinDragon wrote:

100% ownership wouldn't make a difference to the debt held against RP.

Yes, it would for the reasons given above. A loan secured against RP as security can be fulfilled with an unsecured loan, or income, from the business that has a long term security of income.

Gavin, I'm beginning to think that you just want to avoid the point. Please don't see this as a desire to change the branding because, if you think this through, the point is that the NGD should be 100% owned by SOMEBODY. ANYBODY. The present ownership structure is, by your own admission, leading to an unfair burden on one club's shoulders.

I couldn't care if it was 100% owned by Tony Brown, or with Hazell and Godfrey, or Newport RFC 100%, or if each of the 80 clubs or so had c.12% each. So, please, let's move that diversion away.

The key thing is that if Newport RFC is burdened with the debt then Newport RFC should have the asset. If you disagree with that and believe that you think it fair for Newport RFC to carry all of the debt for 50% of the asset, please explicitly state as much.

PhilBB wrote:

GavinDragon wrote:

100% ownership wouldn't make a difference to the debt held against RP.

Yes, it would for the reasons given above. A loan secured against RP as security can be fulfilled with an unsecured loan, or income, from the business that has a long term security of income.

Gavin, I'm beginning to think that you just want to avoid the point. Please don't see this as a desire to change the branding because, if you think this through, the point is that the NGD should be 100% owned by SOMEBODY. ANYBODY. The present ownership structure is, by your own admission, leading to an unfair burden on one club's shoulders.

I couldn't care if it was 100% owned by Tony Brown, or with Hazell and Godfrey, or Newport RFC 100%, or if each of the 80 clubs or so had c.12% each. So, please, let's move that diversion away.

The key thing is that if Newport RFC is burdened with the debt then Newport RFC should have the asset. If you disagree with that and believe that you think it fair for Newport RFC to carry all of the debt for 50% of the asset, please explicitly state as much.

which would become very insecure VERY quickly should the WRU cease providing the income it relies on. Which it only did at the onset of regional rugby on the pretence that it REPRESENTED everyone in Gwent.

GavinDragon wrote:
which would become very insecure VERY quickly should the WRU cease funding it. Which it only did at the onset of regional rugby on the pretence that it REPRESENTED everyone in Gwent.

Firstly, the WRU doesn't fund. It makes a payment of £600k per annum to each of the four for fulfilling their obligations as laid out in the RSA. On top of that £600k is another £150k towards Academy costs.

Then, of course, the WRU have their players that they subbie out for 40% of the wage.

None of that small amount of money is under threat from the NGD becoming a 100% standalone, either privately owned (a la the Ospreys) or club owned (a la Cardiff and Llanelli). The three other living examples, all being members of PRW, categorically prove this.

Therefore, there is no potential for insecurity. The term of the existing RSA has 5 years to run and the new CEO of the WRU will no doubt renegotiate it quickly to provide yet more long term security for Pro Rugby Wales members.

Gavin, it would be good if you could actually address the points raised. Readers will see that you're not doing so, seemingly reluctant to make your own opinion clear here. Again, this has nothing to do with branding or the marketing approach any kind of standalone team would choose to take, it's only about 100% of the risk carried by a 50% owner. In those terms alone, please could you actually address the points raised and state your opinion.

So far we've seen the 'insecurity' angle and the 'being 100% owners won't make a difference to the debt against RP' and others not only fall well short but not actually address the points or present your opinion.

Any chance of addressing the points now, Gavin?