After initiating administration proceedings, Wasps may be required to forfeit their ownership of the Coventry Building Society Arena.
BBC discovered that Coventry City Council is the freeholder of the stadium and has the power to forcibly forfeit the lease to Wasps “if the tenant enters insolvency.”
Insolvency and Companies Court received notices of intention to appoint administrator against Wasps Holdings Limited and Arena Coventry Limited (2006).
The court action provides a 10-day grace period protecting Wasps against action from creditors, including HMRC, and bondholders who are owed £35m by the club.
However, the council states that there are restrictions on activating the forfeit clause. It is also unclear if a notice to appoint administrators suffices to activate the clause.
Coventry City Council stated that the lease could give rise to a right of forfeiture if the tenant enters insolvency, but there are limitations.
“We continue to monitor this situation and will take appropriate action in the best interest of Coventry City Council as well as the arena asset.
“We are monitoring the situation closely and will engage with advisors and other interested parties, if required as part of this process, in accordance with our role as freeholders of the asset.”
The council could be forced to recover the lease. This could have enormous implications for the thousands of bondholders whose bonds were secured against the lease’s worth.
The wasps insist that they are still hopeful of securing the necessary investment to avoid administration. despite filing second notices to extend the grace period Tuesday
A club statement stated that “a number of potential investors have come forward.” We are still hopeful that we can reach a deal that will allow this group and the entities within it to continue their journey. Discussions are currently at an advanced stage.
The most recent set of accounts for Wasps Holdings, covering the financial year ending June 2021, showed an £18.5m loss over a two-year period, with current liabilities of £54.7m.
But the financial woes continue to mount, with another £1m interest due to bondholders next month as a result of delaying the full repayment, which was originally due in May.
Bondholders are organizing themselves behind-the scenes to call in the debt.
The BBC was informed by Dr Dan Plumley, a Sheffield Hallam University expert in sports finance, that while potential investors might not take the opportunity to invest right away, the business has long-term potential.
He stated that “if it’s full takeover, for example, and there’s a negotiation about price, it might be that Wasps are cheaper to acquire administration because that’s where it gets to the real crisis point.”
He stated, “It is a long-term game. It must be seen in that light. It is not uncommon for professional sports teams to suffer heavy losses.
“It’s an interesting scenario with Wasps tied to the stadium too. That can be spun in both directions. This has been a problem and challenge for Wasps throughout the years. This has had its costs.
It’s possible to make a profit from the stadium. It can generate revenue over the long-term.