Wasps 22 Discussion Threads

[dandigirl] 31/8/2020 18:39

Not sure what to make about all this.
Just googled Ricoh capacity - about 32,000.
... and Coventry average attendance - 6,677.
Plenty of room, even with social distancing.
What rental would Coventry pay?
The bond amounts to £35m.
Annual interest: £2.3m
Price about 40p equates to £14m.
Surely must be worth more than that given recent valuations at 3 to 4 times that.
Around £1m plus needed in November.
Just some thoughts.
Much depends on Mr Richardson, it seems.

[135791113] 31/8/2020 17:24

How do you know, or why do you think, any stadium at Warwick would be "better"? "Better" in what way? The Ricoh is a top of the range stadium, largest of the Premiership rugby teams and bigger than some Premiership football clubs. The proposed Warwick stadium will be 10,000 seats fewer from memory - less ticket income, less pie and pint income.

Warwick uni are looking at the opportunity to get a cheap or free stadium, of course they're keen. For Cov city they are either paying rent to Wasps or paying rent (or another form of payment) to Warwick - either way they pay someone for the privilege because they don't own any ground and don't own a stadium. No doubt paying rent to Wasps would be cheaper, but politically less acceptable given their ongoing disagreement with Sisu.

You're missing the point about having a large capacity stadium. If stadiums are only allowed to be 50% full, or need 2m distancing between people, or whatever the rules will be when fans are allowed back in, Wasps with their large stadium can accommodate their usual number of fans simply spread out, whereas somewhere like the Rec or Welford Road will suffer much more from the reduced capacity.

Thank you for your wishes of luck, good win away at Bath today and back into the top 4 places again should mean money from the playoffs and a greater slice of the prize fund. I'm sure they'll be fine. Even if the owner wants out when it comes to refinancing, a top 4 rugby team in a top class stadium will attract keen buyers.

[watching2017] 31/8/2020 16:15

aringadingding

Why would the football club, given the opportunity to acquire a much better stadium, contine to pay rent and be beholding to WASPS?

Best estimates range from £14m to £20m being the future cost of refurbishment and bringing up to standard. Therefore reports of the Football Club wanting to seize or part share the stadium must be at best wishful thinking

Also for the University to publicly announce the JV, must be considered to be a fairly reasonable chance of happening

WASPS have had the capacity to hold much larger crowds in the past but not achieved them except by bargain deals and considerable freebies. The latter highlighted by WASPS staff standing in the City Centre giving tickets away, as an example or buy one ticket and get 8!

Good luck with your Bonds and Rugby Team

[135791113] 31/8/2020 11:34

If the football club could agree something with Wasps then they wouldn't build their own ground, part of the reason for proposing a new stadium is to show Wasps that they don't have to play at the Ricoh to play in Coventry. There is no way they would make a big investment if they didn't have to and the Ricoh is already a "state of the art" stadium. Warwick Uni don't have any use for the proposed venue without Cov City as tenants or partners - Warwick have the land that Cov need and if Warwick can get a free to use stadium built on their land then everyone wins. Except of course if Cov could simply use the Ricoh.

As for rugby being a growing brand, that much is very obvious, especially with the buyout of the Premiership from CVC. To say otherwise is simply incorrect. Like everything it is in a dip at the moment, but fans are back before long and Wasps, because of the big stadium, will likely be able to accommodate more paying guests than many grounds.

[aringadingding] 31/8/2020 11:09

@watching2017 and @dandigirl

I guess I am a glass half full person...

Ultimately I don't think they will go bust in the next 6 months and I do think a refinancing will take place in May 2022. There are many ways for a company to navigate a cash squeeze and directors' loans are one they have used in the past. With regards to the refinancing, there are also many ways to structure or achieve this. The football club is a large and interesting part of the picture.

[watching2017] 26/8/2020 10:33

Aringadingding - You must be a very committed or entrenched WASPS supporter to think any of your comments are actually correct

The Terms of Reference for the Trustee do not remove the fact he has acted in favour of the Parent Company over several breaches of the covenants. It may of course be the case there are large blocks of holders giving a majority agreement to his actions - so the remainder holders will never know

I refer to the £5m "grant" in another post - the Council sells the leasehold for £15m, it is then valued up to £60m inside a year and the Council then say here is £5m against " refurbishments". Where else would that ever happen?

As to increasing the "value" there are 2 factors

The valuations to date are based on future incomes and applying DCF - so there will not be a £5m capital uplift unless the works generate a long term income stream

The valuations do not include any allowance for dilapidations so any expenditure in this area cannot affect the main value

As to the football club it is correct the reports show they want to play at the Ricoh but only as a stop gap while they build a state of the art stadium in association with the University of Warwick. So I think your comment they want the Ricoh "cheaply" is somewhat inaccurate

Investing in "training facilities" ? I assume you mean the site in Henly in Arden where there is currently a number of local objections to the manner WASPS acquired the site and evicted local sports groups. The cause not being helped by applications for housing to be put on the site in place of local sports facilities. Just google Henley in ARden Sports Centre

I think you view of Rugby as a growing brand in the UK does not match reality although many Championship and lower leagues are trying to reformat the scene.

Just check the Trading Results since arriving at the Ricoh and you will not see profits so they have to turn that first to break even before thinking of future returns

As to the stadium being located in a propserous area of the UK - I think you have read too much of the local council's publicity. The stadium sits in the North of the City Centre almost on its own apart from a 8 store shopping centre. If the area is so prestigous why is the proposed training ground 25 miles away in leafy Warwickshire?

I look forward to the burst of activity when you increase your holding nearer 2022

[watching2017] 26/8/2020 10:00

They keep going with some, not small, assistance from the Freeholder and City Council

The £5m so called grant is little more than a cash flow boost. Reference to the Government building initiative is surely laughable guff. The work is an alleged refurbishment of an exhibition and will never justify that level of tax payer input.


While the Council shuffles out funds in the name of City of Culture, City of Sport, Commonwealth Games and the like WASPS will limp along. The Games are not for another year or more but it will be interesting to see how much is actually spent on the "building works" in the 2020 accounts.

[dandigirl] 25/8/2020 20:55

@arin.. As I see it, the $64,000 question is simply how do Wasps keep going without outside contributions? I guess their main income is TV revenues. Outgoings of all sorts will have to be paid. If the Group hasn’t folded before, the interest payment of £1m plus due in November will be a test. By then Richardson will have a better idea of how deep his pockets might have to be and whether he is throwing money into a seemingly bottomless pit.

[aringadingding] 25/8/2020 15:26

I have checked out the prospectus and there is nothing in there that bothers me greatly.

CC2014 some background reading re trustee processes here: hxxps://www.icmagroup.org/assets/documents/About-ICMA/APAC/ICMA-NAFMII-WG-International-Practices-of-Bond-Trustee-Arrangements-031218.pdf

The £5m is mostly government grant to get Britain building and not income, agreed, but obviously will add to the stadium value.

There is a whole load of detail we could go into if we wanted to but at this stage the dynamic, I think, is that the football club wants to play there but they don't want to pay a lot for that, and probably hope that if the club goes bust they can pick up the stadium cheaply (the low public market valuation helps them think this might happen). Wasps are doing a really great job of investing in training facilities, management, players, the brand and navigating the crisis. I think they are doing a superb job. The arena is located in a very prosperous part of the UK. Rugby as a sport is growing in value as evidenced by private equity investment. Wasps just need to see out this awkward few years when they have got involved in retail security markets, then ideally bring the football club back to the table, but otherwise just keep growing the business and think long term. I think they can do it but as stated above I am a holder.

[cc2014] 23/8/2020 13:05

I'm not sure if I should contributre or not and I don't own the bonds and aren't likely to given the risk. I have an intellectual interest in seeing how this pans out.

My concerns where I in a position would be how do you hold the Trustee to account for getting a decent return for holders, given that there will be thousands of individual bondholders. Would this require a comittee? or indeed a comittee to replace the trustee or perhaps appoint a different one. Indeed, how does the Trustee get renumerated?

Mr. Richardson is a signficant part of the puzzle. I think it worth mentioning the purpose of issuing this bond was partly to repay what he was owed. I don't know the background to that but this bond repaid £10m to him which he had lent the club

He's mentally invested in Wasps but everyone has their limit. With revenue streams from the stadium low, perhaps the better move it to let it go bust and then buy it back from the administrator. He made his money from selling his company to RSA and I would therefore assume he does not have an endless pot of money to keep Wasps going.

[dandigirl] 22/8/2020 19:11

Wouldn't disagree with anything you write.
One does has to wonder as to the reasons for the structure of this bond.
Paying interest buys time. In the absence of gate income that requires someone with deepish pockets - and relatively speaking Richardson's pockets are not that deep. Surely, he will be reviewing his options in these currently awful financial conditions for sport sponsorship.

As regards trustees, have low expectations and expect even less. They are unlikely to be of any help to bond holders. Bond holders do not butter the next slice of bread.

I wouldn't buy today. However, we are holders and might just as well continue to hold. Our dilemma is whether or not to add. However, the absence of any meaningful value on the stadium means that would be just gambling.

[watching2017] 21/8/2020 16:56

The problems for any guarantee given by ACL are it only has one Asset - the lease. The lease is underpinned by rentals paid by WASPS and others. Therefore it is in part reliant on the performance of WASPS to maintain the income.

Any financial default on WASPS also impacts on ACL and the prospectus gives details how the extended lease terms can revert back to the original 50 year lease in those circumstances. At that point the value and saleability of the Arena are greatly affected

Basically they have to get past 2022 and refinance ( which could be large volumes of current Bond Holders agreeing to reinvest ?)

The Trustees have been very amenable to WASPS so far:

The first property revaluation was a year late
The 2017 Accounts were filed late for both Group and WASPS Finance
There were irregulatities in the Accounts relating to Director's loans that breached covenants
They have announced they will not meet the Bond covenants in the 2020 Accounts

But the Trustee seems to have deemed no action of comment is required. It does not inspire me to invest

[dandigirl] 21/8/2020 13:10

Looking at the prospectus, I see that the Trustee acting on behalf of the Bondholders is U.S. Bank Trustees Limited. This is the entity that bondholders have to work with.

[dandigirl] 21/8/2020 12:17

Just seen this.

The 30/06/19 audited accounts of Wasps Finance include the following statement:

"""The retail bonds are secured and carry an interest rate of 6.5% and are due for redemption on 13 May 2022.The security includes a legal mortgage granted by Arena Coventry Limited (ACL) and Arena Coventry (2006) Limited (ACL2006) over their title to the Arena, a mortgage over the whole share capital of ACL and ACL2006, fixed charges over the insurance policies held by ACL and ACL2006 in respect of the Arena, a fixed charge over a cash account held by the company and a floating charge over the undertaking and assets of the company, Wasps Holdings Limited and ACL2006. In addition, if the Invested Units (previously P-Shares)held by Wasps Holdings Limited in Premiership Rugby Limited are sold prior to the maturity of the retail bonds, then the proceeds are required to be secured by a fixed charge""".

My understanding is that the charges are in support of guarantees given to Wasps Finance Ltd. i.e. held indirectly. The documentation would need to be reviewed in some detail to see what can and cannot be done but IMV the first step would be to call the guarantees. Non payment thereafter might then permit action against the fixed assets. A nightmare for bondholders but a joy for work-out specialists who are always paid first and handsomely.

Ultimately holders are dependent on the actions of Derek Richardson who is behind all this via his Maltese company. All this was clear up front BTW. But the not so good news is that relatively speaking and in this context Richardson is not a wealthy man. Google searches suggest around £70m. Who knows what the stadium is worth today?

If you were Richardson, what would you do?

[watching2017] 13/8/2020 16:14

aringadingding responses to you:

You really should read the prospectus regarding the effects of a failure of WASPS/ACL on the lease. At no point do "the bondholders" get any control of the stadium - full stop. Anyone thinking that the asset reverts "the bondholders" at any point is seriously misunderstanding the position

As to referring to the Coventry Telegraph and their extracts off a WASPS supporters forum as a prime source for any investment is getting desperate. Having read the 2 main forums some contributors are in favour of sharing but with WASPS getting a high income and others saying the football club is not needed there ( indeed WASPS have quoted that .

The £5m from the Commonwealth Games input is meant to be for a refurbishment of a conference hall to house 2 weeks of judo and wrestling!. As the £5m is grants for this purpose one would normally expect a similar amount of expenditure so it should not be considered as a 100% income stream. If you see the actual report in the local paper it will not "improve the venue greatly" but it again reflects that WASPS does not have the resources to do this type of project which most businesses have to find themselves.

The valuation is clearly based on an income model - however it does seem to be affected by short term events. In 2017 its value soared in value by £15m but in 2018 it fell by £9m, since then the football club is not providing income, they cannot get a new ground sponsor and the level of attendance at games and events has not risen. That is before COVID so what are we expecting the valuation to do especially for the bond holders' security?

As to the football club and anticipated attendance - the current best estimates circle 20 > 25% of ground capacity to be available for attendees. That is 6000 > 8000 attendees at the Ricoh , that may be negative but is based on resonable knowledge

[135791113] 13/8/2020 14:55

"This is quite a negative interpretation of things!"

Some people are long, some people are short. People see stuff in different ways and maybe talking their book.

[aringadingding] 13/8/2020 14:24

Watching2017, responses here -

"You need to read the prospectus about the position of the Bond Holders in insolvency. So far as I understand they do not at any time have recourse to controlling the stadium - their securities fall on guarantees etc provided by the WASPS grouping"

It amounts to the same thing. If they are guaranteed by the wasps group and not kept whole then bondholders can claim.

"Before COVID they were losing up to £15m a year, they showed a small profit last year purely by the sale to CVC that was a one off. Also by referring to the cash flow statement some £5m of income was brought out of deferred so that money had long gone"

I take this point that profitability has been difficult, but lets not forget it's a sports club and if the owner wishes to put money in to buy and pay players, or look to build an adjacent hotel, it's their choice. However my key point is that Wasps group would be a lot more profitable if the stadium was shared with Coventry City. Yes Coventry City have spoken about building a stadium. I'm not saying that is 100% without intention to go through with that build, but, really, if both parties can agree then why would they not rather ground share. There is no issue with it. Indeed the local paper ran a story recently interviewing a lot of Wasps fans in favour of sharing. Link below. This is the essence of my point really. You may see the picture differently overall but for me the asset of the stadium has significant value and it can be realised in various acceptable ways. hxxps://www.coventrytelegraph.net/sport/rugby/what-wasps-fans-really-think-18693809

"Even with a £5m bung from Coventry Council under the guise of contributing to holding a Commonwealth Games judo tournament they will still lose some £10m a year."

This relates to profitability as does the above point. Commonwealth Games is another example of an income stream. That amount of cash will be able to improve the venue quite a lot too actually.

""All he needs to do is refinance ". Have you seen the lending market for companies such as this? They are not generating enough to repay the so they will have to go to the external retail markets again for a long term loan at very high rates."

I think there are various routes to financing the business in the future, seems a bit early to get into the ins and outs of the different options.

"As mentioned above the valuation is not a bricks and mortar one but cash flow based - it is due for review this year I believe unless they blame COVID for not having one. The valuation also specifically excludes dilaps provisions"

Valuations aren't perfect and they often relate to an asset at a reasonably high level of occupancy, but for this asset that is where the occupancy should be. It's a great asset in a great location.

"It is a soulless concrete white elephant and the news the football club is planning to build its own stadium takes away substantial future earnings. Even if the football club returns this year the rumour is there will be restrictions of c20% capacity so £6k - no one should pay a high rent for that"

This is quite a negative interpretation of things!

[finkie] 13/8/2020 12:08

Correct Watching2017 some people who did this deal took their money out day 1.....£4m i think one chap had there is no interest in assisting bond holders only to make them pay for the mess. this coupon was 6.5% i would think they would be double that now if any money was out where which is unlikely given the income projections.

[watching2017] 12/8/2020 16:46

You need to read the prospectus about the position of the Bond Holders in insolvency. So far as I understand they do not at any time have recourse to controlling the stadium - their securities fall on guarantees etc provided by the WASPS grouping

Before COVID they were losing up to £15m a year, they showed a small profit last year purely by the sale to CVC that was a one off. Also by referring to the cash flow statement some £5m of income was brought out of deferred so that money had long gone

Even with a £5m bung from Coventry Council under the guise of contributing to holding a Commonwealth Games judo tournament they will still lose some £10m a year.

"All he needs to do is refinance ". Have you seen the lending market for companies such as this? They are not generating enough to repay the so they will have to go to the external retail markets again for a long term loan at very high rates.

As mentioned above the valuation is not a bricks and mortar one but cash flow based - it is due for review this year I believe unless they blame COVID for not having one. The valuation also specifically excludes dilaps provisions

It is a soulless concrete white elephant and the news the football club is planning to build its own stadium takes away substantial future earnings. Even if the football club returns this year the rumour is there will be restrictions of c20% capacity so £6k - no one should pay a high rent for that

[135791113] 11/8/2020 23:55

If they fold, then the bond-holders get a hold over the stadium. Now, we can argue if this is worth £30/50/70m or whatever, but its not worth "nothing" as you seem to make out.

Wasps are top 6 in the Premiership currently, which means European rugby next year, and if they manage top 4 then they get payments from the play-offs. I cant see the owner walking away and letting everything go bust, including selling off the stadium, when all he needs to do is re-finance and continue trading. That might not mean 100% return, but maybe 80% return. Most major sports teams only exist due to the continued support of their owner, Wasps are not unique in that situation.

[finkie] 11/8/2020 22:23

Your money is dead I’m afraid....look back I have been saying this for a while, they have no option other than to fold this whole fiasco, bond holders cash has already gone technically as underpinned by historic valuations which are now worthless pieces of paper. Even before covid I felt there was a wrap on the knuckles coming here. 67% interest means £0

[aringadingding] 11/8/2020 15:27

Ok good to be discussing with you, thanks for the response.

Yes I agree £35m to be repaid. My point is the value of the stadium is greater than £35m, yes. And I am noting it is significantly larger than £14m.

A couple of points in your post are pretty circular arguments. Public markets often fluctuate and significantly undervalue or overvalue the fundamentals. If Wasps had significant cash they could consider buying shares, but they don't, like you say, and even if they did they could not without moving the market significantly.

Yes we have covid now, but there are many vaccines in trials, Russia is rolling one out now so we will know pretty quickly if that one works and is safe, AstraZeneca have begun manufacture, and so yes discounting cash flows is the correct approach. Write off 1 (or 2 if you like) years of profit and the NPV will not dip vastly. I would not underestimate the potential things have to blow over.

The point I am making is that the bonds have security over the stadium. I would definitely not accept 60p tomorrow and no bondholder is likely to accept less than full payout when, on taking possession of the stadium, the exercise of appointing a party to sell the stadium, or alternatively simply forming a company to take the stadium forwards as an awesome local venue for Coventry, is so straightforward.

[cc2014] 11/8/2020 14:18

I'm not sure I follow this.

The bonds are trading at 40p but there is still £35m of bonds to be repaid not £14m.
True, if Wasps came along and offered you 60p tomorrow you'd probably take it and then they could issue a new bond some time down the line.

However, Wasps have no money. If they did they would be buying the bonds back in the market. Indeed if there was any hope news would have leaked and "friends and associates" would be buying up the bonds in the market.

So, it seems likely Wasps will default which then brings us to the value of the Stadium. As a previous poster has noted the £51m Stadium value is not based on historic build cost or even historic build cost plus a number of years inflation but is instead based on some form of discounted cash flow from future earnings from the Stadium. All fine and good until we got Covid and now those discounted future cash flows are a problem.

How much is the Stadium now worth? The market thinks it's not enough to even cover the bond allowing for the length of time and costs in selling it. Not even worth 50% of the bond apparently.

The problem is this:
Sports Income £15m - gone to some smaller number
Conference Income £11m - gone to zero?
How much is a Stadium worth with no income?

[aringadingding] 10/8/2020 17:47

Disclaimer: I am a holder of these bonds.

They are trading at 40p per £1 of issued amount. £35m were issued so that's £14m of bonds outstanding, where the bonds have security over a stadium valued at £51m in March 2019.

Both Coventry City football club, and Wasps, wish to use the stadium. If the bonds default then the bondholders take ownership of the stadium, and then would look to appoint a party sell it for >£35m, thus creating a fee for the seller party, to probably a investment fund owner, who would be able to negotiate simultaneously with Wasps and Coventry City and agree terms of sharing the stadium as a condition precedent to acquisition. It will always be more profitable as a shared asset, I would think.

The management teams of Wasps and Coventry City must both realise this, and so I think it's a shame they have not been able to get together and work things out to date. They may as well, for both their sakes.

I am quite heavily invested already, so am not a buyer, but with rugby starting up again for this season very soon, Wasps' table position looking good, and a 67% yield to maturity on these bonds at present, they look like a buy to me.

Very open to any alternative views.