Members could get Knights plus $20m if HSG defaults Save By ROBERT DILLON Dec. 10, 2012, 10:30 p.m.
MONITORING: Nick Dan
HUNTER Sports Group could be forced to relinquish control of the Newcastle Knights within weeks if they are unable to honour a fundamental prerequisite of Nathan Tinkler’s takeover deal by Saturday.
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Under the terms and conditions of Tinkler’s privatisation agreement, signed on August1 last year, HSG were obliged to provide the Knights Members Club board with an annual audit to confirm all financial stipulations were being honoured. That audit is due by Saturday, but HSG have indicated they might be unable to comply.
They have asked the Members Club board for a two-month extension, until February 15, but that request is likely to be denied unless HSG agree to extend a $20million bank guarantee until March.
The $20million surety – which underpinned Tinkler’s entire takeover sales pitch – reverts to $10.3million on January 1. Hence the Members Club board are reluctant to grant HSG more time to complete the audit, unless the bank guarantee time frame is adjusted accordingly.
If HSG are unable to deliver the audit or alternatively unable to extend the bank guarantee, the Members Club board have the capacity to take measures to eventually usurp control of the club, thereby terminating Tinkler’s tumultuous tenure.
Were HSG to default on Saturday, effectively reneging on the privatisation contract, informed sources have explained to the Newcastle Herald the board’s first step would be to approach the bank that holds the guarantee with a formal claim to access the $20million.
That could happen as early as next week.
Without audited figures, the board would estimate a worst-case shortfall and withdraw that amount on behalf of the club.
HSG would then have 20 business days to replenish, or top up, the bank guarantee.
If HSG failed to do so, the Members Club board would then be entitled to activate another process that would ultimately remove HSG as the controlling body.
Whatever was left of the bank guarantee would then become available to the club.
If that chain of events were to align, one source told the Herald that HSG could be unseated by mid-January, barring legal challenges.
HSG could delay that, and buy time, by taking out injunctions.
Alternatively they could provide a complying audit by Saturday – highly unlikely, given the auditors were due to start yesterday and may need several weeks – or agree to extend the bank guarantee.
But it remains to be seen if they can find any bank willing to offer such a guarantee, given Tinkler’s apparently precarious financial position.
When Tinkler bought the Knights last year, it took months for HSG to source a bank willing to provide a guarantee.
The annual audit was included as a key component in the deed of sale to enable the Members Club board to determine if HSG has upheld promises to underwrite $10million in sponsorship, $2.5million in junior development, $300,000 for the Newcastle Rugby League and provide ‘‘adequate working capital’’.
The Herald left messages with HSG chief executive Troy Palmer and Knights chief executive Matt Gidley yesterday but received no reply. A club spokesperson said they had ‘‘nothing more to add from our end’’.
Knights Members Club chairman Nick Dan said the directors would hold crisis talks with Gidley tonight, but Palmer would not be present.
Asked if he felt the two parties could reach a compromise, Dan replied: ‘‘We’ll have to look at some things we haven’t looked at before.’’
The situation is being monitored by the NRL.
‘‘We have been given written assurances from the Hunter Sports Group that they are financially sound,’’ NRL chief executive Shane Mattiske said yesterday.
‘‘As you are aware, there is a bank guarantee in place and there are a number of safeguards that the members have in relation to the ownership of the Knights.
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‘‘We are certainly watching matters closely, including the progress of the audit.
‘‘Certainly we hope the matters will be resolved amicably.’’
HSG has attracted mounting scrutiny over its tardy payment of creditors, including the State Government, which has launched legal action to recover almost $600,000 in overdue stadium hire fees.
http://www.theherald.com.au/story/1177734/members-could-get-knights-plus-20m-if-hsg-defaults/?cs=311
