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The Newcastle Knights Board today said it was confident it could successfully negotiate the outstanding issues related to the proposed privatisation of the Knights when negotiations resume on Monday.
Knights Chairman Rob Tew said there were a number of key issues which need to be resolved for a deal to be finalised and he was optimistic an agreed proposal could be negotiated.
The Knights board received detailed legal documents in draft form on Wednesday and today issued comments on the documents to the Tinkler Group in advance of a meeting on Monday.
There are a number of key commercial elements which we still need to be satisfied on, all of which were clearly enshrined in the proposal received and considered by the board on the 19 January and which we were prepared to endorse in-principle at that time.
1. $10m guaranteed sponsorship per annum over 10 years
The first and overriding issue the Board has in relation to the current offer on the table is that it represents a significant departure from the $100 million dollar proposal guaranteed to be paid over ten years that was announced by The Tinkler Group last month.
Currently, the offer consists of a commitment to underwrite the difference between $10 million annually and income generated via sponsorship and sponsorship hospitality each year.
The offer also includes a one-off up-front payment of $3 million (the accumulated debts).
The present offer does not commit to a 10 year period.
The offer of guarantee at present is for a period of 2 years and does not commence until 31 March 2012.
In order to progress this proposal a number of matters need to be agreed between the parties including
The definition of the sponsorship sum.The commitment to 10 years.An ability for our members to enforce the guarantee
At present the Tinkler Groups offer to underwrite the difference between sponsorship and $10mil each year has included calculating all revenues (excluding ticketing and membership) into the definition of Sponsorship income. On that basis the total is already as high as $10mil and therefore the contribution by the Tinkler Group would be zero.
At present - in the event of a sale of the company within the 10 years - there is no obligation upon a future purchaser to commit to the guarantee and other conditions for the remainder of the 10 year period.
At present there is no ability for our members to enforce the guarantee on the guarantor. That is as a consequence of the company structure as is proposed by the Tinkler Group.
2. Ability to fairly buy back the club if something goes wrong
Separately, The Tinkler Group can sell the Knights to another party - including another Tinkler entity - and the only ability the Members have to stop this and buy the Club back is to pay the combined cost of $3 million (the accumulated debts) plus the unknown combination of the total of all Tinkler Group contributions per annum.
We are seeking to:
Identify a stated buyback sum at the outset of the agreement orInclude an ability to enforce the obligations of the guarantee and other conditions upon an incoming purchaser for the remainder of the 10 years.
3. Junior Development
The Newcastle Knights have accepted responsibility for junior development in Rugby League in our Region for some 23 years. It is written into our constitution as such and we have excelled in this area over that time.
In the current offer, the Tinkler Group have removed the commitment to Junior Development from the documentation.
We understand the financial commitment to development is substantial however, we require an iron clad commitment guaranteeing a minimum expenditure on development in the region to ensure we do not lose the benefit of the excellent work undertaken by generations of Knights operatives thus far.
Clearly these outstanding items would be as much of a concern to Members as they are to the Board, it is imperative they be resolved as quickly as possible.
We are optimistic that we can reach an agreement on the above items as they were all within the scope of the original offer proposed by the Tinkler Group in January.