Melbourne Super cash crisis with backer threatening to pull funds

[travelling_gerry]

By Bret Harris
December 16, 2009 One of the main backers of the Melbourne Super expansion franchise may pull out of the venture and redirect financial support to Queensland Reds after reaching an impasse with the ARU over funding.

Mining magnate Kevin Maloney was a leading member of a consortium of potential private owners negotiating with the ARU to acquire the licence to operate the Melbourne team, which will enter the Super rugby series in 2011.

But it is understood negotiations have been strained over the size of the ARU grant to the fledgling franchise and that Maloney and another potential investor, Craig Dunn, are no longer involved. An informed source has told The Australian newspaper Maloney is now looking at investing in the Reds instead.

The loss of Maloney's financial backing would be a major setback to the Melbourne franchise, which has to be up and running by early next year.

The side's creation marks a departure from the traditional state and territory owned Super rugby teams.

The ARU provides the Brumbies, NSW Waratahs, Western Force and Reds with an annual grant of $4.3 million.

Ideally, the ARU would not have to make this grant to the privately owned Melbourne franchise, but the potential investors have argued they need the funds to make a small return on their investment of $5m to $10m, which will be eaten up by start-up costs.

The investors believe they are entitled to the grant because it comes out of revenue generated by the ARU's broadcasting deal.

The ARU has softened its stance on the issue, increasing its offer from $2.1m to $3m. There is a feeling at ARU headquarters that if the national union stumped up the whole $3m, it might as well run the team itself.

But this would place the ARU in a position of conflict of interest with the other state-run teams.

http://www.foxsports.com.au/story/0,...002381,00.html

[Burgs]

Should have stuck with the traditional model with the VRU (for better or worse) already in place to run it.
It will continue to be unsustainable to have two models trying to compete, either all five should be private or all five should be State Union overseen.

[mudskipper]

And they just realised this now?

[TOCC]

eventually i think all teams should go privatised, similar to how the Brisbane Broncos are run, i dont think its very productive or efficient to have the professional and non-professional organisations tied together.

[GIGS20]

Should have stuck with the traditional model with the VRU (for better or worse) already in place to run it.
It will continue to be unsustainable to have two models trying to compete, either all five should be private or all five should be State Union overseen.

Holy shit coach, when are we going to be able to multi-praise?

[AndyS]

"...the potential investors have argued they need the funds to make a small return on their investment..."

See, this is where I have always struggled with the PE concept. If they can generate a return on investment, why can't the same be done with rugby money? That ROI is ultimately money that would have been rolled back into the team or trickled down to the grass roots in a team managed by the state union. If we end up kicking money back to the investor, how is it different from simply borrowing the money?