THE OTAGO Rugby Union will cease trading on Friday after it revealed it cannot pay debts of more than $2 million.
Around 100 supporters were told last night the ORU’s annual general meeting that the 131-year-old union had posted a loss of $862,000 and might not be able to field a team in this year's ITM Cup.
Chairman Wayne Graham says it has no choice but to cease trading as it has 180 creditors and debts of $2.35 million.
''The position got to a stage where we had to draw a line in the sand, and that if by 4pm Friday – unless the current situation can be resolved by all the parties involved – we have no option but to apply for liquidation from the High Court,” he said.
“It's very disappointing, it's a very sad day ... unless we take a positive step forward, and we believe by doing this we are taking a positive step forward, it's at the stage where action simply has to be taken.”
The New Zealand Rugby Union has declined to bail out the union or lend it money, saying the debt was too big and it would set a precedent with which it was not comfortable.
NZRU chief executive Steve Tew says a number of attempts had been made to recover the situation.
The NZRU will appoint people to run club rugby in the province as the union sorts out its problems.
“We are stepping in to support community rugby and all the amateur players, volunteers, administrators, and others who have a stake in the game,” said Tew.
He added the New Zealand Rugby Players' Association's benevolent fund would pay outstanding February wages to Otago's contracted ITM Cup players. The Highlanders Super Rugby franchise, also based in Dunedin, is a separate legal entity and is not affected financially.
The draw for this year's ITM Cup competition had been held back for a fortnight to buy time while all parties waited to see if Otago was able to field a team this year.
If it does go in to liquidation, it will likely be a 13-team competition, as the NZRU does not believe a promoted Heartland Championship team would be competitive.
Tew would not put a date on when a decision would be made about this year's ITM Cup.
Graham had offered a glimmer of hope to the meeting by saying if a rescue package showing a viable business plan for the next year could come together by Friday, the union would not be put into liquidation.
Four parties had been involved in negotiations which are set to continue: the ORU, the NZRU, the Bank of New Zealand and Dunedin Venues Management Ltd.
Long one of New Zealand's most powerful provincial unions, Otago has battled to keep up with the other major provinces, on and off the field, in recent times.
Severe financial pressures were alleviated recently when the Dunedin City Council purchased the union's historic Carisbrook playing ground, but three years on Otago rugby has again hit the skids.
A fortnight ago, Graham revealed several of the union's creditors could not be paid and said he was unsure if the ORU could trade on.
That sparked an urgent trip south by Tew to assess the situation, and the NZRU appointed former Bay of Plenty chief executive Jeremy Curragh to work on a recovery plan.
Graham said the board had considered resignation, but instead opted to stay and try to resolve the issue.
The money made from selling Carisbrook had not covered its debts, and it subsequently found it owed more money. Graham cited a 30-year lease on floodlights it was no longer using as an example.
“We first were suspicious things weren't right around September last year. As a board it took us two months to identify there was an issue.
''You can say perhaps we should have reacted earlier or quicker or whatever. In the scheme of things I don't think it was a long time, but it shows you how quick expenses can go up, revenue can go down, and all of a sudden you are in serious trouble.”
Tew understands the impact the annoucement will have on the region.
“Otago has a long and proud rugby history and the union has played a vital role in the rugby community for 131 years, so this is a sad day," he said
“We fully appreciate how disappointing these events will be for the many people who have worked hard backing rugby in this region.
“This situation also creates considerable financial pain for many including small and large businesses who make up the union’s creditors.
"There are many factors that contributed to today's events. Our focus now is not on apportioning blame, but on ensuring that what matters most to fans and players - rugby - continues to flourish in this proud province."
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