Debt Solution Tips

THE Welsh Rugby Union group has reduced its debt with Barclays by £10m and negotiated a new revolving funding arrangement.

In an endorsement of its business plan and strategic direction under its chief executive Roger Lewis, Barclays has removed the punitive covenants under the previous arrangement.

As part of the restructuring, its debt has been reduced to £45m – of which £10m is redeemable only under a number of exceptional circumstances, including the sale of the Millennium Stadium.

The reduction of £10m had been made possible from record revenues of £50m generated by the WRU from its last financial year to the end of May 2008.

As with many businesses, the union has also negotiated a new revolving funding facility. This means that in theory the union could pay off up to an additional £10m of its debt without penalty, as well as being able to draw down up to the same amount.

The vast majority of the union’s revenues are generated around the autumn internationals and Six Nations’ Championship, so the facility allows the union the option of boosting cash-flow during quieter financial periods.

The deal follows a year of negotiations between the bank and the WRU’s group finance director, Steve Phillips.

However, the reduction in the debt, which now has to be repaid by 2035 as opposed to the previous arrangement of 2039, will not result in a cashflow boost.

The WRU has agreed to raise the capital repayments on the debt – off setting the interest rate saving of £200,000 from the £10m reduction with an additional cost this year of around £500,000.

The union could negotiate with Barclays a repayment of the debt before the new repayment deadline of 2035.

Drawing down on the new revolving facility will also allow the union to potentially make further investments into the game at all levels, as well as on its key asset – the now ten-year-old Millennium Stadium.

Mr Lewis said: “This is a major step forward for us and offers us considerable opportunities in taking our business planning onto a new level.

“Any organisation with ambitions to grow and prosper must have the confidence and the ability to manage its finances properly, effectively and responsibly.

“Now the WRU has a new level of financial freedom and the announcement of this deal sends out all the right messages to our stakeholders, potential partners for the future and the rugby fans of Wales.

“I have overseen major changes in the senior management team, internal structuring and commercial strategy of the WRU and Barclays are basically telling us we are making the right decisions.

“I know Steve [Phillips] in particular has shown great determination and endeavour to reconfigure our internal structures to create the measures and balances we were then able to take into our talks with Barclays.

“I am now excited by the pros-

pect of being able to utilise this new financial standing we enjoy for the benefit of Welsh rugby as a whole.”

Mr Phillips said: “The dialogue with Barclays has been extremely focused and they challenged us on all our financial plans and strategies.

“This arrangement basically means they are restoring to us a level of trust which allows us to properly manage our business and make the hard decisions involving millions of pounds.

“It is incumbent on us to manage that trust with the due control it deserves, which means using this arrangement with the kind of commercial creativity which will help us prosper.

“What it all boils down to is that Barclays are giving us a greater degree of freedom in how we manage our business and allows us to focus on the repayment profile of this substantial loan. I am delighted that Barclays have afforded us this opportunity and would wish to thank them for their efforts over the last few months.”

Greer Hooper, relationship director with Barclays Commercial Bank, said: “By really understanding the business, Barclays has been able to provide innovative solutions and financial packages beneficial to both parties. The facilities of the Welsh Rugby Union have been restructured on a more commercial footing which reflects the confidence which we have in the business and the management team. Barclays are delighted to continue our support for the Welsh Rugby Union and wish them continued success on and off the field of rugby.”