'If you count Derek's loans in there as well, it's over £100m'

Wasps CEO Stephen Vaughan has explained the staggering nine-figure level of debt that left the Gallagher Premiership club in need of a minor miracle to escape the financial turmoil that ultimately resulted in 167 players and staff being made redundant last Monday. With the club now in administration, it is currently suspended by the RFU and unless a takeover quickly happens in the next few weeks, Wasps will only re-emerge in the 2023/24 Championship if they manage to eventually get back in business.

It has been a harrowing time for Vaughan, the former CEO at Gloucester, who arrived at the Coventry-based Wasps in 2019 tasked with cutting costs. He became group CEO in May 2020 just two months after the pandemic caused the shutdown of rugby in England.

However, despite the club going on to reach the Premiership final when the 2019/20 season was restarted, it never recovered financially and it left Vaughan delivering the dreadful ‘we’re to cease trading’ news at the training ground at the start of this week.

Since then Vaughan - who himself was made redundant - has been in explanation mode, trying to get across his side of the Wasps demise story and he was a revealing guest when he appeared on The Rugby Pod for a 38-minute interview with Andy Goode and Jim Hamilton.

He carefully explained the club’s business model, outlining that it had broken even for the first time ever in the six months prior to the pandemic, but legacy debt became a noose around its neck when the world reopened and the lack of investor interest in rugby eventually proved unsustainable at a club where the debt in the Derek Richardson-owned business exceeded an astonishing £100million.

“The model makes sense, it’s not rocket science,” insisted Vaughan, the now out-of-work Wasps chief, shortly after his introduction on the show. “The model is you have a venue which has lots of concerts, events, exhibitions, Rugby League World Cup this week, Commonwealth Games recently, we have got Harry Styles, Arctic Monkeys. It’s a great venue, brilliant. A fantastic venue, really, really fantastic. A great part of the world. Council, great supporters.

“So you bring a rugby club in there then, the excess pays for the sports business and it goes around, around and around. That’s fine in the normal world but just go back into history a little bit: when the organisation decided to take the bond out six or seven years ago it immediately put a £35m debt onto the business.

“Then you add on all of the other debts over the years, whether it is pre-covid or not. You have seen the numbers. If you count Derek’s loans in there as well, it’s over £100m. Unfortunately, it would take a minor miracle to sort that out. Don’t get me wrong, before covid I came in and had to do a lot of changes around the playing department. Dai (Young) went and a lot of his staff went, Lee (Blackett) came in, we made it to the final and things were starting to go well.

“We broke even for six months, which is the first time in the club’s history we have ever done it, proving that the model works. However, the noose around the neck was this huge debt pile over the years. When I was at Gloucester, I used to look in and think how on earth are they making those enormous losses every single year whilst professing to be the biggest club in Europe or the richest team in the world, whatever it was.

“It used to get our back up a little at the other clubs. You’re thinking, ‘It’s okay saying you are the biggest club in the world but you are losing an absolute fortune’. So effectively that has rolled on and rolled on and rolled on. The question around why the two (the rugby and the stadium businesses) had to be split? Eighteen months ago we went to refinance the bond and we were doing quite well with lots and lots of interest, covid kicked in, the whole banking model went down the tubes and everybody backed out.

“It became quite obvious throughout that process that everybody wanted to buy the venue, very profitable and all the other things I have spoken about. But unless you are a real rugby nut and a real philanthropist around the game itself or Wasps, there was nobody interested in the sports side purely based on the numbers.

“Covid scared everybody because they realised that as it kicked in all sports business just shut down immediately and it had to take on more debt with Sport England and everything else. So as the process went through, we actually got led down the aisle by a large high street bank. The bond was going to be done and then they backed out, they literally jilted us on the altar, and that kick-started the impact of where we are now.

“What has happened since then with the advisory group and the administration, it has become fairly obvious if you are the ownership group for example and you are the board at Arena Coventry Limited that there is still a good prospect and a lot of excitement with people financially backing the venue because it is extremely profitable and it has got a great covenant and it is backed up by the council and all that good stuff whereas the rugby piece is clearly more niche.

“If there were more people out there with fortunes who were into rugby, we would have found them by now I can guarantee you that. So that is why they have been split to give the venue the best opportunity of being able to salvage something.

“Wasps have gone into administration. It had to go into administration because by nature administration takes away a lump of the debt so therefore it becomes more attractive. It went into administration and it has allowed us to have different conversations with different organisations, so that is why they were split.”