MELBOURNE (Reuters) -Administrators for the Melbourne Rebels have recommended that creditors accept a deal put forward by directors to save the debt-ridden Super Rugby Pacific team and said the club may have been trading while insolvent for the last five years.
The Rebels went into voluntary administration in January and while Rugby Australia (RA) stepped in to prop up the team until the end of the season the governing body has declined to guarantee its future beyond 2024.
Rebels directors have proposed a deed of company arrangement (DOCA) which would guarantee employees 100% of their entitlements but leave unsecured creditors with as little as 15 cents to the dollar.
Administrators said the directors' proposal was preferable to liquidation given that litigation costs could leave creditors worse off.
"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," administrator Stephen Longley said in his report.
The report detailed the extent of the Rebels' liabilities, with unsecured creditors and related parties claiming nearly A$22 million ($14.32 million) out of total claims of more than A$23 million.
The unsecured creditors include the Australian Taxation Office, which is claiming more than A$11 million, and the Melbourne and Olympic Parks Trust (A$1.14m) which runs the Rebels' home ground, Melbourne Rectangular Stadium.
The administrators said the Rebels were potentially trading while insolvent as far back as Dec. 31, 2018, and had a history of trading losses exacerbated by the impact of COVID-19 in 2020 and a reduction in annual distributions from RA.
Liquidation could open up the directors to insolvent trading claims.
Administrators said they had been advised by directors that they would "vigorously defend any claim for insolvent trading" brought against them.
The deal will be put to creditors at a meeting on May 3.
Rugby Australia, which is among the Rebels' creditors, noted the administrators' report in a statement and said it would confirm its position on the future of the club after consulting with stakeholders.
"Despite multiple requests from RA, the ... directors have failed to provide any viable proposal or business plan regarding the future of the Melbourne Rebels," RA added.
Despite the financial turmoil, the Rebels are enjoying their most successful season in 14 years of Super Rugby since joining in 2011.
They lie fourth on the table ahead of their Friday clash against the Canterbury Crusaders in Christchurch.
($1 = 1.5368 Australian dollars)
(Reporting by Ian Ransom in Melbourne; Editing by Peter Rutherford)
