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Thread: KPMG raises question over Rugby Australia solvency after sour hedge deal

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    KPMG raises question over Rugby Australia solvency after sour hedge deal

    The Australian
    Thursday, May 7, 2020

    KPMG raises question over Rugby Australia solvency after sour hedge deal

    EXCLUSIVE
    JESSICA HALLORAN
    CHIEF SPORTS WRITER

    AN HOUR AGO MAY 7, 2020

    Concerns over Rugby Australia’s solvency have been raised by its accountants KPMG due to an
    additional $7 million owed to former sponsor HSBC, as a result of a currency hedging strategy.

    The Australian understands RA has liabilities in excess of $20m and KPMG have yet to sign off on the 2019 annual report.

    There are questions about whether any funding available from World Rugby will be enough to meet all the organisation's’s known liabilities plus the hedge.

    New South Wales chair Roger Davis has major concerns about rugby’s future and the game currently facing a $120m revenue black hole because of COVID-19.

    “I am seriously worried about the financial viability of the game,” Davis said.

    “It is running at a big loss. Our financial position is dire because we have no revenue. There’s cash pressure, no broadcast money; the solvency of the game is at risk. It’s why there are rumours that we are close to Voluntary Administration and trading insolvent …

    “We don’t have six months to fix this, Rome is burning, until the Easter Bunny, Santa Claus, whatever comes along, we are running fast out of cash. This is a cash game. The game is under threat.”

    The currency hedge was first set up under the leadership of then chief executive Bill Pulver and chair Michael Hawker. The board had hoped the currency hedge was going to go up and claw back some of the losses but it had not eventuated before COVID-19 hit.

    The annual report remains unaudited and is yet to be submitted to the Australian Securities and Investment Commission.

    World Rugby’s rescue package is understood to be in the region of $17m and sources say it is expected to drop next week.

    The Australian understand RA is trying to renegotiate its hedging strategy with its bank HSBC, as one observer said Rugby Australia is currently “kicking the can” down the road.

    Before RA director Peter Wiggs’ sudden resignation after Monday night’s heated board meeting – after his request to install Matt Carroll as CEO was shot down by his fellow RA directors – the Archer Capital boss had been looking at the books.

    Wiggs had paid for two of his own staff to go through the RA financials.

    The Australian understands after looking at some of the financial details Wiggs said at a rugby meeting: “This the worst-run business I have ever seen”.

    Nick Farr Jones, one of the 11 Wallabies captains who signed a letter two weeks ago calling for transformational change at RA, said he was impressed by Wiggs’ financial nous early on and was disappointed he had left.

    “He alerted the board to the flashing red lights and he was the one who understood his duties as a director, and he was the one who raised; ‘hey guys are you sure we are a going concern’?” Farr-Jones said.

    “I think the board is partly hiding behind the new softening of the ASIC ‘going concern’ rules during the COVID-19 period. They are relying on this expectation of income coming from World Rugby.”

    Farr-Jones was disappointed by Wiggs’ resignation.

    Over two weeks ago Wiggs met former Wallabies captains Farr-Jones and Phil Kearns, as well as RUPA boss Justin Harrison, to listen to their concerns and help push the game forward.

    Wiggs told them that over four days he would do a “deep dive” with “due diligence” into Rugby Australia to learn more about what the issues were and then he would set up “three pods” of experts to review the game over a month.

    “I was extremely comfortable with what we agreed going forward,” Farr-Jones said. “That was for Peter to effectively do a deep dive, with one of his work out guys, into the operations of Rugby Australia including, as I understand meeting with a lot of the former chief executive’s direct reports. The process that we agreed after that, was there would be three pods put in place. Which would effectively deal with the whole of the national game, from a sustainable business up to the community game. All aspects of the game.”

    Farr-Jones said representatives from the member unions would be involved in the ‘pods’, as well as RUPA, and Rugby Australia. Each group would do a one-month review.

    “Then they would come back with recommendations for approval by Rugby Australia,” he said. “Having met Peter I knew he would work hard, unlike a lot of other rugby non-executives he was prepared to roll up his sleeves and use some of his expertise from his private equity group.”

    Farr-Jones said there had been a good response from Wiggs but soon communication dried up.

    “And then, I don’t know because I haven’t spoken to Peter Wiggs since, we have exchanged one or two texts where I’ve tried to understand where he is coming from,” he said. “This is not a criticism of Peter, but he went off-piste, and that was disappointing. I thought we had a process.

    “What I gather is the board just didn’t like or accept that all of a sudden Peter came in with various demands as to who would become CEO etc … I understand that. I get that. You want to do things by consensus.”

    JESSICA HALLORAN, CHIEF SPORTS WRITER

    https://www.theaustralian.com.au/spo...1a9c09d3e62147

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    Veteran Bakkies's Avatar
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    Cricket have also done a similar thing by betting on the stock market which back fired spectacularly.

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    https://omny.fm/shows/the-alan-jones-breakfast-show/cameron-clyne

    Link to Senate Report http://www.aph.gov.au/senate_ca

    https://www.change.org/p/rugby-australia-petition-for-cameron-clyne-to-resign-as-chairman-of-the-rugby-australia-board

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    Does anyone here know when and how Foxtel pays broadcast fees to RA? Given that they are just about out of cash, do they get regular payments like NRL & AFL? Just wondering how they expect to get up and running inJuly. Broadcasters ate playing a hard game ATM.

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    So essentially taking money from local clubs and playing roulette on currency hedging. That is a particularly bad look.

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    Forex Trading is fraught with danger. Unless you have the commodity to back up the deal it can turn to shit very quickly through external circumstances you have no control over. I have seen some very smart operators betting on the $ and lose it all overnight.

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    Quote Originally Posted by Jeansyjive View Post
    So essentially taking money from local clubs and playing roulette on currency hedging. That is a particularly bad look.
    Has Clyne’s fingerprints all over it doesn’t it.

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    Legend Contributor Alison's Avatar
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    Quote Originally Posted by travelling_gerry View Post
    Forex Trading is fraught with danger. Unless you have the commodity to back up the deal it can turn to shit very quickly through external circumstances you have no control over. I have seen some very smart operators betting on the $ and lose it all overnight.
    Far too dangerous for a halfwit like Clyne to be playing with. Still, it is was someone else’s money he was gambling with so he likely won’t give a crap about the loss.

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    Quote Originally Posted by travelling_gerry View Post
    Forex Trading is fraught with danger. Unless you have the commodity to back up the deal it can turn to shit very quickly through external circumstances you have no control over. I have seen some very smart operators betting on the $ and lose it all overnight.
    TBH, I suspect it is pretty common anytime you sell something that is paid for in an overseas currency. Not hedging is just as fraught if the AUD goes north and your revenues shrink accordingly.

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    just like taking the punt and going short on the stockmarket

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    Quote Originally Posted by Alison View Post
    Has Clyne’s fingerprints all over it doesn’t it.
    Pulver and Clyne, the gift that keeps on giving!

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    I would GUESS they have taken a position on USD against future TV revenue which is paid in USD and when the AUD went south in Feb....BOOM!

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    Quote Originally Posted by travelling_gerry View Post
    I would GUESS they have taken a position on USD against future TV revenue which is paid in USD and when the AUD went south in Feb....BOOM!
    I know vaguely what hedging is about and why companies do it. But surely, if the RA debt is $7mill, then the the number they they were covering against is then multiple times bigger. Say $100mil, where $7mil is 7% or $50mil even where it is 14%. What were they as a "rugby administration board" doing??

    Surely you would also write off any hedging costs every financial year? Those are are big numbers for one year.

    This story has a lot more to give.

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    Legend Contributor Alison's Avatar
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    Quote Originally Posted by travelling_gerry View Post
    I would GUESS they have taken a position on USD against future TV revenue which is paid in USD and when the AUD went south in Feb....BOOM!
    I would say you are bang on there TG!

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    Quote Originally Posted by brokendown gunfighter View Post
    just like taking the punt and going short on the stockmarket
    We'd all be rich if we could short Rugby Australia

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