IRFU show interest in possible bond issue

The IRFU last night reacted positively to the proposal for a bond issue which could net Irish and British rugby anything in the region of £250-£500 million.

The Home Unions' committee last week accepted a proposal whereby Warburg Dillon Read, one of the world's foremost investment banks, would investigate a bond issue which would provide an immediate cash injection to safeguard the future of the sport. This bond issue would be guaranteed against the unions' main sources of revenue, such as television rights, sponsorship and advertising.

Roughly equivalent to taking out a mortgage on the unions' future incomes, it is expected that Warburg Dillon Read will make documented presentations to each of the unions, most probably by the end of January.

Billy Lavery, the IRFU president, stressed that the proposal is "still only in its infancy, and the whole scheme needs to be examined in closer detail, but it all sounds very attractive."

"In essence it means that the unions will be borrowing monies on its future incomes. It is a bit like a mortgage, whereby home owners borrow money on the value of their properties and then pay back the loan with interest. As with any proposal regarding such large quantities of money, the details are going to have to be examined very closely, but we'll be very interested to see the proposal in its entirety when the documentation is put in front of us," added Lavery.

The proposal for a bond issue was put forward by former Irish and Lions' international Dr Tony O'Reilly, chairman of Independent Newspapers Ltd, reputedly following a conversation with one of Ireland's two representatives on the Four Home Unions, Tom Kiernan. It would entail selling bonds to institutions, in return for which they would receive cash from advertising, sponsorship and TV coverage.

Other sports have been down this road before, most notably Bernie Ecclestone's Formula One Holdings, which raised over £850 million, and Chelsea FC, whom Warburg themselves helped to raise £75 million.

The potential cash injection would help Irish and British rugby to fund the grass-roots development of the game, and give the home unions the financial clout to furnish professionalism as well as competing against the three Southern Hemisphere superpowers. As an aside, as Lavery happily conceded last night, the vast sums of money incorporated within the scheme and the complex logistics of it would concentrate the minds of the home unions and oblige them to work more closely together than has been the case in the last troubled three years of professionalism.

Although the IRFU are believed to have an estimated £20 million on deposit, in terms of working cashflow they are as hard pressed as any of their counterparts, given that the whole underwriting of the professional game is reckoned to be in excess of £6 million per annum.

The IRFU will also need funds to refurbish Lansdowne Road. As Lavery admitted, the IRFU's first option is a lease on the Government's proposed national stadium, which would greatly enhance their currently modest take of less than £2 million from major Tests at home, in the event of which they would still need to upgrade Lansdowne Road to some extent.

Alternatively, were the national stadium not to come to fruition, then the IRFU face the costlier exercise of completely redeveloping Lansdowne Road, which might entail knocking down the existing stadium and turning it around, or else building a Test stadium on their 90-acre site at Newlands Cross.

However, the need for a major cash injection is even more acute in the other home unions, all of whom have incurred significant debts resulting from upgrading their stadiums in Cardiff, Murrayfield and Twickenham. It is also estimated that the club game in England is between £20 million and £30 million in the red.

The English RFU chairman, Francis Baron, has already said he is "broadly supportive of this scheme".

Alan Hosie, the chairman of the Six Nations' Committee, has said "I am indebted to Tony O'Reilly for leading these conversations and for assisting us in the appointment of the very best advisers."

O'Reilly was yesterday quoted in the Independent on Sunday as saying: "Anyone who cares about rugby cannot fail to be moved by the unhappy plight of the game in these isles. My hope is that this exercise will deliver financial stability and that this in turn will produce a natural, stable and genuinely collective base from which the four home unions can fulfill their true potential."