Ares, Pacific Equity Partners line up for Rugby Australia debt
Negotiations with credit providers are entering extra time as the code looks for $60 million.
With all the focus at Rugby Australia on the boardroom politics which ended the chairmanship of Hamish McLennan, it would be easy to forget the sport is in the midst of a long-running debt process.
Street Talk understands it’s down to nail-biting extra time for the negotiations, which entered phase two last month. Credit teams are playing to fund the troubled governing body until 2025 with $60 million in debt.
Daniel Herbert has replaced Hamish McLennan as Rugby Australia’s chairman. Getty
Sources said seven parties had been whittled down to three in the scrum to give Rugby Australia a cash injection after negotiations with private equity funds fell through.
Jake Haines’ Pacific Equity Partners credit fund is understood to be in the running. The fund, dubbed Capital Solutions, was launched by PEP in March 2021 as a new direction for the private equity firm, seeking to make credit investments in Australian and New Zealand businesses
Ares’ $US3.7 billion ($5.7 billion) Sports, Media and Entertainment Fund was also understood to be around the try line. This is a logical move for the global alternatives giant, having given Rugby Australia a shot of short-term funding in 2021 to help it repay a $6.8 million loan from HSBC and give it some breathing room amid financial troubles. The fund’s other debt and equity investments include Spanish football club Atletico de Madrid, US baseball team the San Diego Padres, British motor racing team McLaren Racing and Major League Soccer team Inter Miami.
Distressed debt giants Bain Capital Credit and Oaktree Capital had previously passed on the deal, putting it in the too-hard basket with Rugby Australia facing a massive uphill battle to turn its fading fortunes around. Private equity backing away from the deal wasn’t a great signal either, nor the Wallabies’ disastrous performance in France. Sources said local credit investment firm amicaa had entered play but has since left the field.
As the column has reported, Rugby Australia and its adviser Jefferies had been in advanced talks to raise up to $250 million in equity funding to help pay down its debt and secure a legacy fund for the future. Silver Lake, CVC Capital Partners and the Forrest family’s Tattarang took a good look.
Rugby Australia largely gets its revenue from broadcast deals, match attendance and sponsorship rather than memberships. As such, the COVID-19 pandemic wrought devastation on the body, which declared a $27.1 million loss in 2020 and slashed player salaries. 2021 was a better year with Rugby Australia recording an operating loss of $4.5 million. Revenue from the Wallabies Tests helped it produce its first profit since the pandemic, announcing an $8.2 million surplus for the 2022 financial year.
To right the ship, Rugby Australia is looking to deploy a massive rebuilding strategy to transform the sport including investing in grassroots talent, professional development and centralising administration. The debt is understood to go a long way to kick-start that process, including signing on a new coach after controversial Wallabies coach Eddie Jones resigned.
It’s unclear how the ousting of McLennan in a late-night board meeting on Sunday will impact the debt negotiations. Sources close to the process described it as highly competitive.
Introducing your Newsfeed
Follow the topics, people and companies that matter to you.
Find out more