As you read this, the clock is ticking on the Western Province Rugby Union (WPRU). By Friday, they need to either register a mortgage bond as security for loans solicited from Remgro in 2016, totalling nearly R44-million, or the corporate giant could demand its money back inside five business days.
The law firm ENSafrica, who represent Remgro, sent a letter of demand dated 7 June to the General Council of the WPRU – via president Thelo Wakefield and chief executive Paul Zacks – demanding that WP sign bond registration documents on some of their immovable property by 6 July.
Remgro agreed to advance the following sums towards the end of 2016 to keep WP afloat amid the crisis that saw their professional arm WP Rugby (Pty) ultimately liquidated: R7,51-million agreed on 3 November, another R7,51-million on 24 November and R19-million on 22 December. Those were the loans to the WPRU. Then, also on 22 December, there was an advance of R9,88-million to Newco – the new entity that rose from the ashes of WP Rugby (Pty) Ltd.
That adds up to R43,9-million on which interest at prime rate has been accruing, so the sum is by now considerably higher.
What Remgro wants is not unreasonable. In fact, they aren’t even demanding their money overnight. They just want WP to offer security for the loan by registering a mortgage bond in their favour.
The WPRU owns some prime property in Cape Town and its southern suburbs, so the union will have no difficulty registering a bond. Remember, it’s WP’s professional arm that was liquidated, not the union. In terms of assets, WP is comfortably the wealthiest rugby union in South Africa.
WP would, however, prefer to pay the loan with the money they will get from a possible equity partner and are believed to be in negotiations. But ‘negotiations’ don’t pay the bills and Remgro could make this coming Monday a particularly blue one for WP.
To offer perspective on just how blue: The letter from ENSafrica claims that WP acknowledged in November 2016 that Remgro have the right to demand repayment within five business days.
In addition, they claim that the union had committed to registering a mortgage bond as security for the loan. If WP don’t do this by 6 July, Remgro will use “every legal remedy at its disposal” to recoup the money.
So the next two Fridays will be interesting. This coming one is the deadline and, if WP have not adhered, they may have to pay back the money by next Friday if Remgro immediately demand the money back on five days’ notice.
If WP fail to adhere to the terms, then “every legal remedy” is the next step. Assuming everything is on paper, Remgro can go to the High Court to enforce the agreement and/or issue a summons against the union to cough up the money.
The rumour is that WP are now looking at developing their properties to yield income. There is much they can do with Newlands if they move to the Cape Town Stadium, and word is they are also aiming to develop residential units at Brookside in Claremont. However, you don’t just wake up one morning and decide that you will develop property overnight.
The bottom line is that WP really need that white knight in the form of an equity partner. And, of course, that partner would still have to be approved by the South African Rugby Union’s (Saru) executive committee.
These are turbulent times for WP, exacerbated by the Stormers’ poor performance in this year’s Super Rugby competition. Even if the WP leadership want to give Stormers coach Robbie Fleck the chop, one wonders whether they have the cashflow to pay out his contract.
In the background, Aerios are also lurking. To refresh your memory, they are the company that lost out big time through the liquidation of WP (Pty) Ltd.
Aerios held advertising rights at Newlands and believe the liquidation was an unethical move by WP to wriggle their way out of a disastrous business deal. And Aerios don’t have any intention of going away. Whether they will ultimately succeed in squeezing the many millions they want from WP remains to be seen, but they are a pain in the backside for the union.
For all those who scream incompetence at WP’s leadership, it’s worth pointing out that the other big unions have financial issues of their own.
The Sharks don’t own their stadium and are struggling to make ends meet. The Blue Bulls have for the past two years come to Saru’s annual general meeting with a plan to climb out of the financial doldrums based on tabling a motion to change the governing body’s constitution that equity partners should be allowed to own 100% shares in unions. And the Golden Lions are reliant on the money of investor Altmann Allers.
The difference is that only WP are facing a Friday deadline. And, quite possibly, a very blue Monday.