Wasps 22 Discussion Threads

[zeroking] 15/10/2020 22:15

There is a huge incentive to vote in favour of the proposals. The alternative is to risk default and the appointment of an administrator. Administrations tend to be slow and very expensive. Neither the owner nor management is to blame for the current predicament, which is entirely down to the virus and government restrictions. Why would you expect an administrator to run the company better or realise better value for its assets than those with the most to lose.There are only 19 months to go to the due maturity date, so no point in time limiting the relaxed covenants. Given the continuing value of the charged assets, the most likely outcome is that the bonds will be repaid at par one way or another.

[dandigirl] 15/10/2020 14:59

A J Bell require votes by tomorrow, Friday.

We have just voted against.

[aringadingding] 13/10/2020 16:27

I have voted in favour of the resolution.

The covenant package is no longer relevant and expecting covenants to be met or something in return for waiving covenants is not realistic at this point. Full face value repayment and whole interest payments are clearly relevant.

These provisions allow the company to raise more debt in a way that specifically does not impact on the bondholders' security. This may be favorable government debt.

So I can't really see any downside and I can see upside.

Shadeysaga, there is no upside of making the company go bust now. The company should be given a fair chance to refinance the bonds. If that fails to result in full payout for bondholders then clearly there will be meaningful decisions to be made about the optimum way forwards for bondholders but we are nowhere near that at the moment. The company should be allowed its first attempt to achieve the refinancing and these provisions help towards that.

[dandigirl] 12/10/2020 17:45

shadeysaga: yup!

[shadeysaga] 12/10/2020 17:34

I'm a noobie here, and I won't be staying. I've been a retail bond investor for many years and have never seen anything like this before.

It seems bizarre to expect existing bondholders to *release*, rather than *waive*, parts of their covenant package; in their previous consent solicitation in 2017/18, and in all others that I've been involved with, temporary waivers, or tinkering at the margins, of potential temporary default events, have been asked for - in exchange for consideration in the form of increased interest coupons, consent fees etc. Nothing appears to be on offer here.

It feels as though they expect to remain in permanent covenant breach - in which case, if security over the stadium is solid, where is there any incentive for bondholders to agrre to any of this? Aren't we better off allowing the whole pack of cards to collapse now, so security can be enforced?

[dandigirl] 12/10/2020 17:09

finkie: You are missing the point. Bondholders are being invited to dilute their security for what exactly? One or two more interest payments, just maybe, while others will be invited to share what we have for whose benefit? Not bondholders, for sure. No thanks. I would rather take the pain now. If that means less that 100p, so be it. Let's resolve this now as the future for bondholders does not look good. In your parlance, let's take the pain now for it is not up to us to make the books balance. We are not equity investors. Besides, it might be a wake-up call for this lousy so-called government if WASPS is the first to go under.

[a0002577] 12/10/2020 16:56

Well said, 13579111312, couldn't have put it better myself

[finkie] 12/10/2020 13:08

wont happen they need bondholders to take pain otherwise the books wont add up for other things......100p earlier than they are due to pay you back is fantasy land!!!

[dandigirl] 09/10/2020 21:16

Well, we will not be voting in favour of these proposals which are a big dilution of bondholders security. There is only one element that we can support being (a) (iii) - early redemption at par. IMV these bonds should be redeemed and there should be a new issue incorporating any changes WASPS wish to bring in. They should not be foisted on existing holders. There are only downsides here for current holders. If that brings about early liquidation, better sooner rather than later when bondholders would have weakened their current position. Don't just accede to these proposals for they are not what they seem. Let Richardson arrange redemption and then he can do what he likes.

[a0002577] 06/10/2020 14:57

interesting announcement and especially the preamble which contains this statement

The Wasps Group fully intends to continue to meet its obligations under the Bonds to pay interest as it falls due and to refinance the Bonds on or by their scheduled maturity.

which follows this statement

Prior to COVID-19, the Wasps Group had been making further financial and operational progress against its strategy: in the first nine months of the financial year, the Wasps Group successfully held 34 major exhibitions, Hotel Revenue Per Available Room increased by 8 per cent. and a new 10-year lease was signed with Grosvenor Casino. The Wasps Group also restructured aspects of the rugby department, which not only proved successful in reducing ongoing costs, but has led to a marked improvement of the playing performance and results of the team. However, the Ricoh Arena was temporarily closed in line with the Government's public health restrictions from 21 March this year and, as of the date of this letter, these restrictions to control COVID-19 remain in place for all of the Wasps Group's principal business activities and operations. The Wasps Group has been making plans for the gradual re-opening of the Ricoh Arena in a COVID-19 secure way; however, the Government announcement on 22 September, that the level of restrictions at both a national and local level will be increased for up to six months more, will further delay progress towards the re-commencement of operations. Although the re-opening of the Ricoh Arena will remain subject to change in light of evolving Government public health restrictions and guidance, the Wasps Group remains prepared with a comprehensive re-opening plan in place.

In response to COVID-19, the Wasps Group's key priority was, and continues to be, the health and safety of its employees and visitors to the Ricoh Arena. The Wasps Group reacted quickly to mitigate the impact that COVID-19 has had (and will continue to have) on its principal business activities and operations by introducing various financial and operational measures and initiatives to preserve cash, reduce costs and maintain liquidity.

Might buy more :

they now have snooker ( a sport made for safe distancing) in the arena - you can view it on Channel 64 Freeview.

[cc2014] 06/10/2020 12:54

I suspect it will be refinanced in double figures.

[135791113] 06/10/2020 12:24

^^^^ I agree with the above.

It was always obvious the club were going to have to refinance the bond to pay back existing bondholders, and that shouldn't be seen as a negative thing, especially if they are able to borrow at a cheaper price than the 6.5% they are paying now. Even if they have to borrow at higher rates, for existing bondholders it is irrelevant.

Agree that a good performance on the pitch will help the club, additional income from TV rights, sponsorship and prize money are desperately required. Also means that if Derek Richardson does want to sell the club, he will get a lot more money for a club 2nd in the league than one in 10th, although hopefully good performance will encourage him to keep supporting the club financially.

[watching2017] 06/10/2020 12:15

Side point: In retrospect, these excellent pitch performances, which I expect we are all very much enjoying, seem to be the cumulative result of long periods of investment in players, brand, facilities etc off the pitch

Good PR !!!

EXETER declare their game to be a dead rubber and field their Colts as they have no intention of risking main stream players

[aringadingding] 06/10/2020 11:59

Hi All, I see this as positive for the following reasons:

1) It removes certain covenants. To be honest at this stage of the game I don't see covenants as particularly relevant. The removal of requirements to meet them allows management to focus on doing the most important things with the cash they have while effectively gaining advance permission from lenders to do this.

2) It sets the company up for further non-recourse debt raising. Here non-recourse means without recourse to the assets on which the bonds are secured (a good thing). This borrowing would represent cash inflow to the company, and may or may not relate to government provided COVID-19 financing. Government-provided financing would be likely to be relatively favourable terms (e.g. lower interest rate than the bonds). I'm not sure how certain it is that government provided cash may appear, but to set the group up to receive it without impacting bondholder security seems very sensible. Whatever the source of cash, cash inflow helps the company to manage their current situation.

3) It is paving the way for refinancing. Both potentially utilising the cash from bullet 2 above or simply in general by allowing the potential for refinancing prior to May 2022 (again a good thing).

4) Overall it demonstrates the company continues to be very professionally and competently managed.

Clearly the listed bond prices have not reflected the above interpretation (down circa 6% today) but frankly who knows what is going on with the supply and demand for these bonds. Maybe the very basic interpretation is that more debt is bad. I would say if it doesn't impact security and helps take advantage of low cost finance and manage a cash squeeze then it is very good.

Side point: In retrospect, these excellent pitch performances, which I expect we are all very much enjoying, seem to be the cumulative result of long periods of investment in players, brand, facilities etc off the pitch. People (e.g. channel 5 commentators) were saying right at the start of this year that a quiet confidence was building at the club and with hindsight we can say they were right, and they were right for real reasons. So I feel Wasps are in a great place to continue a long commercial and sporting journey.

[watching2017] 06/10/2020 11:39

On top of the £5m already gifted by the local authority?

[135791113] 06/10/2020 11:10

Someone with a better background in corporate finance needs to comment, but it looks like Wasps need bondholders approval to increase their debt holding to £50m, split between the debt to bondholders (£36.5m) and additional debt required to keep them afloat until they have fans back buying tickets and pints (£13.5m).

[watching2017] 06/10/2020 10:55

Not sure if this is good for Bond Holders or not, just inevitable?

www.londonstockexchange.com/news-article/WAS1/launch-of-consent-solicitation/14709706

[dandigirl] 25/9/2020 18:13

The article sets out the position as one would expect. Everyone in rugby is hurting.
Hard to see why benefactors should keep pouring money into clubs with no end in sight and no prospect of a return anytime soon. Wouldn't fault any of them if they just walk away. Guess each will be examining their positions to decide what is best. Next couple of months critical to state the obvious!

[jumpman1] 24/9/2020 16:57

I would guess that 500k Is on top the the losses wasps already make. With the lack of income and the 38m in loans wasps already pay interest on cant see any positivity in the distance future.

[watching2017] 24/9/2020 15:15

Even stronger article in todays Guardian -
www.theguardian.com/sport/2020/sep/23/wasps-chief-warns-deep-cuts-without-government-support

But at £500k a month that would mean they have halved their annual losses?

All points to a Council buy back?

I am sure there are more just causes than an overseas multimillionaire hedge fund rugby club the government should support?

[dandigirl] 19/9/2020 10:32

Article in yesterday's FT regarding the dire finances of the top clubs. Exeter only club to make a profit in 17 and 18. Wasps - bottom of this league. Living hand to mouth at present courtesy of their benefactors. For Wasps, most immediate concern is, do they have sufficient resources to get through to November and then make the bond interest payment? We will continue to hold, but not comfortably. :)

[a0002577] 11/9/2020 18:30

What we can say is : they are playing good rugger at the moment - with a big match this weekend. In fact the change in the approach by referees has massively improved the game across the board and Wasps have taken very special and exciting advantage - so better viewing figures to be expected.

Won't say I am a happy holder but will hold and see what happens.

[aringadingding] 08/9/2020 16:46

I was thinking about this again and it seems to me:

THE SCENARIO THE COMPANY DEFAULTS OR CAN'T FULLY REFINANCE THE BONDS INVOLVES BASICALLY ALL THESE BEING TRUE:

- The owners of Coventry City decide to invest tens of millions they don't have to, and do not simply agree ground share terms. Perhaps a bored billionaire buys the club.

- The option of Coventry City buying the stadium off Wasps and Wasps moving elsewhere is explored and rejected.

- Despite taking circa £10m out at the bond launch, and despite the long term prospects (with or without ground share in Coventry) for Wasps the club and brand, and opportunities for other DR businesses to benefit, DR decides to not support his team (which have had a great 2019/20 season) though a cash squeeze in 2020.

- Wasps have a complete shocker in 2020/21 or 2021/22 and get relegated.

THE SCENARIO THE COMPANY CAN MANAGE ITS CASH IN THE COMING MONTHS AND REFINANCE IN 2022 INVOLVES:

- Wasps don't get relegated in 2020/21 or 2021/22.

- DR or other Directors potentially support the business with equity or Directors' loans in the coming 6mths (if required - I don't know but potentially required).

- They may or may not do a groundshare deal with CCFC prior to 2023. This is not essential, in my view, but all it really takes is a bit of maturity and practicality on both sides.

- The refinancing is successful. It could be for example a private debt fund who would also take and/or invest equity in the company.

CONCLUSION:

The analysis/description of what happens in the event of default, prior to or at maturity, is a separate question. I happen to think there are various interesting options in that default situation, some of which may enable negotiations between rugby and football. But it is a separate question.

The first question is to allocate relative probabilities to the two main scenarios above, and for me I think the second one is more likely.