Rugby Australia and consortium at odds as confusion reigns over Melbourne Rebels’ future

Ryan-Louwrens-Rebels-v-Highlanders-SRP-2024-Alamy

The Melbourne Rebels have received a report from their private administrators over their financial future, which includes an approach from a consortium.

The club went into voluntary administration earlier this year with Rugby Australia (RA) willing to help keep the club alive in 2024 but offering nothing beyond that.

Report out

The report from the private administrator Stephen Longley revealed that the Rebels look to have traded whilst insolvent over the last five years.

“My preliminary view is that the Company may have traded whilst insolvent from 31 December 2018, and that it is likely that all debts that remain unpaid were incurred which could result in an insolvent trading claim exceeding $16.8m,” he said.

The same report also reveals losses in each of the last three years. The loss was so big that even if the Rebels board’s claims of underfunding from RA over that period were true the total loss would still be AU$8.5 million.

Longley does not see liquidation as the ideal solution, rather accepting a settlement from an “Investor Group” supposedly made up of high net worth people.

“I am of the view that the likely return to creditors under the proposed Deed will provide a materially better outcome for creditors than a winding up,” Longley stated.

The consortium claims that there has been no response from RA despite putting two offers in.

“We have offered to meet with RA to take them through our proposal in detail. They chose not to take us up on that offer, ” the group’s spokeswoman Georgia Widdup said.

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Questioning the viability of the club

Meanwhile, RA weighed in on the matter earlier this week with chairman Daniel Herbert questioning the viability of the club, underlining that rescuing the Rebels would mean taking money from a different part of the game.

“It is more about the financial viability of the franchise,” Herbert said.

“We are not in a position to pay a lot of money into an entity at the moment. It is effectively the game’s money. Putting money into something that is continually loss-making, and there is no evidence that can – I guess – change in the future. It is taking money away from other franchises, community rugby, women’s rugby and everything else.”

A settlement offer or Deed of Company Agreement (DOCA) would deliver creditors a 15c and 30c return on the dollar whilst offering full payment to players and staff who are collectively owed AU$1.3 million. Directors and other related-party creditors would receive nothing despite claiming to be owed AU$6.2 million.

Possible legal battle

Another reason Longley advised on the DOCA being the best option, instead of liquidation, was the possible legal battle as directors intend to defend any claim of insolvent trading and RA intends to defend any claim against them.

“Legal proceedings can be long and drawn out,” Longley said. “Litigation carries with it the risk of an uncertain outcome and can be expensive. Accordingly, there is a genuine risk that the recovery action for insolvent trading claims and the RA claims will not be successful.

“An appointed liquidator will be unfunded. Accordingly, a liquidator would require litigation funding in order to pursue the insolvent trading claim and RA claims.”

If the DOCA were to be accepted, the consortium would provide funding to pursue AU$8.5 million in legal claims against RA.

“Litigation funders generally require a significant share of the proceeds of any judgement as a condition of funding the litigation. In the Deed scenario, the Deed Proponents will provide funding to pursue the RA claims without the requirement to pay a funding premium to litigation funders in event that the deed administrators consider there is a commercial benefit in pursuing these claims,” Longley added.