• Recovery package to ensure long term future for union
• New financial arrangements, including lower overall player spend and NZRU loan
• Constitutional review to ensure best practice governance
Agreement has been reached on a recovery package which aims to put the Otago Rugby Football Union (ORFU) on a sustainable long term footing, the New Zealand Rugby Union (NZRU) announced today.
Final agreement was reached this evening between the key parties – the NZRU, Dunedin City Council (DCC), Dunedin Venues Management Ltd (DVML), New Zealand Rugby Players Association (NZRPA) and the Bank of New Zealand.
“This is an historic day for an historic institution,” said NZRU Chief Executive Steve Tew. “The agreement we reached tonight represents a fresh start for this 131 year old organisation which we know holds a very special place in the hearts of many in this proud rugby province.
“It is very satisfying to have reached this point given how bleak the picture was several weeks ago. We could not have done this without the collective efforts of the key parties involved.
“We particularly express our gratitude towards the Dunedin City Council for the significant commitment they are making to safeguard the future of rugby across the region.
“We thank the NZRPA for proposing a North v South game which greatly assisted efforts to bring parties together. And we thank the Bank of New Zealand for their constructive approach to this challenging situation.
“Key sponsors Speights and Silver Fern Farms have also been generous in their support.
“Other parties are also contributing to a debt repayment plan for local businesses and we thank them as well. Restoring the goodwill of local businesses will be essential for the future of the union.
“This is a good result for all those in the region who turn out for club and school rugby, the volunteers who weekend in and weekend out sacrifice their time and to the coaches and professional players whose livelihoods depend on a financially sound employer. And of course it’s a good result for the fans.
“Today, the union faces the future with more certainty and one where the mistakes of the past must not be repeated.
“There will be immediate and significant changes to ensure the union is better equipped to face the challenges of the future, quite apart from the financial measures being put in place today.
“One of the conditions of the loan we are giving to the union is that the ORFU constitution will have to be modernised. The current board will have to resign and new arrangements will be introduced to ensure governance is best practice.
”We will want to have a new board in place that has the right blend of skills and experience to ensure this union never again finds itself in the predicament it currently faces. And we will be insisting on ongoing scrutiny of its business plans and accounts.
“There is a lot of work still to be done and today’s package is still conditional on a number of factors. But instead of the curtain coming down on this institution, we can now focus on building the stage for a much stronger future.”
Key elements of the recovery package
• The ORFU Change Manager has worked with the partners to shape an achievable three year financial plan to ensure ongoing financial viability. This comprises:
o Reduced operational expenses including ongoing player payments
o Additional sponsorship pledges
o Test match management income
• NZRU provides a $500,000 loan for working capital
• NZRU confirms All Blacks Tests in Dunedin in 2013 and in 2014 in addition to this year’s Investec Rugby Championship Test against South Africa
• NZRPA, NZRU and ORFU will continue to work together to reduce the 2012 player contracting spend by $290,000 from the original budget
• DCC and DVML have agreed to forgive debt of $480,000
• NZRU agrees to a North v South match in June. DVML receives all revenue and covers all costs. NZRPA to ensure players are keen and available to play with no extra fees charged
• DVML secures a three year venue hire agreement with ORFU for the ITM Cup team
• DVML agrees to manage the commercial and sponsorship rights of ORFU
• Local businesses are being prioritised in a debt repayment plan. Details to be confirmed shortly
• NZRU will enter into an additional sponsorship commitment with Bank of New Zealand
• The NZRU loan is subject to the following main conditions
o ORFU board to resign. The constitution will be modernised to ensure best practice governance
o NZRU to approve all player contracts
o Annual budgets and loan information to be provided to NZRU
o NZRU observer or representative to be at all board meetings
Otago RFU Questions and Answers
What is the NZRU contributing to the recovery package?
All parties to the recovery package are making significant contributions to ensure the long term viability of the ORFU. The NZRU will:
• Turn the $270,000 the NZRU has already loaned ORFU into a grant;
• Provide a five year loan of $500,000;
• Commit to providing additional test matches in 2013 and 2014 to be played at Forsyth Barr Stadium;
• Agree to a North v South match to be played in the June Investec Super Rugby break window;
• Continue to provide financial advice and support in the interim through Change Manager Jeremy Curragh whose costs are met by the NZRU pending appointment of a General Manager.
In addition, NZRU has already invested considerable management time in working through the union’s issues.
What happens next?
Various elements of the package will now require specific contracts to be drawn up. In addition, there will be a constitutional review. This process is expected to be completed within the next two months.
How does this package help improve the long financial viability of the ORFU?
Simply, the three year business plan provides for a significant reduction in costs and an increase in revenue, putting the union back on track to post ongoing surpluses. This is achieved through debt restructuring, an ongoing reduction in operational costs including player salaries and certainty over stadium rental costs. In addition, revenue is boosted by increased sponsorship commitments, gaming revenue and test match management payments.
How does this recovery package deal with creditors?
The business plan provides for a payment to creditors. Not all will receive full payment, but the exact details will be confirmed shortly. The Dunedin City Council has agreed to write off its debt in return for certain benefits from the NZRU and others.
When will a General Manager be appointed?
The current Change Manager Jeremy Curragh will continue in the interim while an interim General Manager is sought. The new Board will then seek to make a permanent appointment.
Will there be an Otago ITM Cup team?
Yes, the recovery package provides for an ITM Cup team with the current coach and management structure, but at a lower cost.
What impact does this package have on player salaries?
The NZ Rugby Players Association has agreed to work with the ORFU and NZRU to seek savings from 2012 contracts of $290,000. The new ORFU business plan also budgets for on-going reductions in player costs.
Why hold a North v South match?
The match provides an opportunity for the Dunedin City Council to recover some of the funds it has committed to the recovery package while also serving as an opportunity to promote rugby and the Forsyth Barr Stadium.
What appeal is this match likely to have?
The RPA and Investec Super Rugby Franchises will make every effort to ensure the match provides an appealing encounter for fans. Players will be drawn from Franchise boundaries and include Super Rugby and wider training group players.