RIM Disaster Confirmed (Rugby Today)


#BALANCETHEUSARBOARD

When USA Rugby requested nominations to its Board of Directors, there were just two positions available. In the subsequent weeks, as the financial state of the national governing body and its for-profit arm, RIM, became public, three more resignations from the board followed (the details of which are explained in Pat Clifton's article below).


There is real opportunity to #BalancetheUSARBoard and to rally around the four strong candidates that USWRF and WRLC submitted for consideration. These are the types of initiatives that the US Women's Rugby Foundation and Women's Rugby Leadership Council - which is the representative voice for the Women's Rugby Coaches and Referees Association - pursues. Consider joining WRCRA if you want to be a part of these movements.


Read the full article, which includes links to board notes and previous reports.

RUGBY TODAY: RIM Disaster Confirmed, By Pat Clifton


Just last month, Dean Barrett, Chad Keck and Will Chang announced their exit from USA Rugby’s board of directors. Add that to the announced exits of CEO Dan Payne and David Sternberg, chief executive of Rugby International Marketing, USA Rugby’s for-profit subsidiary, and five high-level officials have fled the humbled national governing body in eight weeks amidst news of RIM’s financial ruin.


Friday, a statement from USA Rugby's board to its congress summarizing a report detailing the catastrophic nature of RIM’s fiscal situation, the cause for the body count, came to light. After learning of $4.2 million in losses following USA Rugby’s February board meeting, USA Rugby’s congress put together a task force, including chair Mark Lambourne, outgoing CEO Dan Payne and outside legal and business counsel, to assess RIM’s viability as a company. The statement smeared further dark paint on an already bleak picture.


The purpose of this article is to be a one-stop-shop for those interested in what’s happened, how it happened, and what’s to come. It’ll look at the task force report, where USA Rugby is in the search for a new CEO and board, what potential pit falls may lay ahead, and finally some thoughts on how to move forward. Below the story is a timeline of stories, press releases and board minutes germane to the topic.


Task Force Report Statement

“RIM, as an ongoing concern, has no ability to successfully sustain itself as a business,” the report read. It also confirmed that The Rugby Channel, one of RIM’s properties, will either be sold or shut down, potentially by way of structured bankruptcy. Currently, FloSports is in negotiations to buy TRC. If it doesn’t, expect TRC to close its doors.


The statement parcels RIM’s assets into three different silos – TRC, events and the Rugby World Cup Sevens. Like TRC, the events business is not doing well.


“RIM has continued to experience challenges with its events business and has not met its targets on sponsorship revenue,” read the statement. “Poor decisions on locations and aggressive budgets have created numerous issues that the company is having to address to insure present obligations are met and is working extremely hard to insure these events are as successful as possible.”


Looming largest on RIM’s to-do list is staging a successful Sevens World Cup. Before that’s complete, though, the event side of the shop will host a test between Wales and South Africa at a likely barren RFK Stadium in Washington, D.C.


This game is reportedly in danger of not going off, though the union has issued a statement confirming its inevitability. Ticket sales are scarce and the venture looks like a sure loser, but RIM is contractually bound to pay three-quarters-of-a-million dollars each to both South Africa and Wales even if the balls are never inflated, so it’s likely more expensive to cancel the game than have it at this point.


The statement did paint a relatively optimistic picture for the World Cup Sevens, though there is work being done to shore up the event financially.


“There is the potential for this event to break even if current plans are executed and projections are met,” it says. “This will take a lot of work between now and the event.”

Presale for single-day tickets began Wednesday. Payne, in his new role as CEO of Rugby Americas, has been tasked with making the World Cup as big a success as possible.

It’s not without risk, though. USA Rugby owns RIM, and RIM is the legal guarantor of the World Cup Sevens, meaning should the event lose money, RIM is on the hook for it. But RIM is poor, so in the event RIM can’t cover losses, USA Rugby is trying to secure additional financial assistance from event partners to cover the gap.


If RIM were just an independent business in danger of shuttering its doors, it would be newsworthy. But given RIM is majority owned by USA Rugby, there is a real financial risk for the national governing body, making the potential impact far reaching.


“The immediate concern to USA Rugby’s business model is the risk of RIM failing to pay all or substantially all of its remaining 2018 licensing payments to USA Rugby,” the statement says.


RIM is scheduled to make payments to USA Rugby in June, September and December totaling more than $1 million. Whatever RIM can’t come up with, USA Rugby is left without. Next year, RIM is supposed to pay USA Rugby more than $1 million more. That, too, would appear to be in jeopardy.


“We are currently working with the RIM board to sustain as much of those payments as possible, but it is likely that at least some of those payments will need to be reduced as RIM negotiates its workout pathway with shareholders, creditors and other key partners. As the largest shareholder in RIM, it will be expected that USA Rugby will need to show flexibility in this area if we expect others to make financial concessions, so that RIM will continue as an ongoing operating concern.”


USA Rugby CEO/Board Search

With Robert Kimmitt and Rob King terming out, the lone at-large board member who will both start and finish the year as such is rookie Barbara O’Brien, confirmed last summer. That means five board seats are on offer, and every board member responsible for the existence, rise and fall of the RIM experiment will be gone, save arguably Jeremiah Johnson, the Congress rep to the board who has more than a year left on his term.

Effectively, the result will be a house cleaning, a drained swamp. Months from now, USA Rugby will have a new board and a new CEO. That much is for sure. The process by which it comes together is a little awkward. We need a CEO, which the board hires, but there really isn’t much of a board right now. First, USA Rugby’s nominating committee has to put names up for Congress to confirm.


Until they’re replaced, King and Kimmitt remain on the board. The nomination window for theirs and other open seats has been extended through the beginning of May. The next USA Rugby Congress meeting is set for September, at which time it would be reasonable to presume new board members will be confirmed.


That means the board can’t complete the CEO search process until at least September, leaving several months between the time Payne leaves his post and when it can be expectedly filled. Ross Young, former CEO of Atavus, will fill the void as interim.

Young was quietly hired by USA Rugby months ago when Rosie Spaulding, general manager for this summer’s World Cup Sevens, had to step away. Young held the same title through three 15s World Cups, 2003 in Australia, 2007 in France and 2011 in New Zealand. With the interim CEO tag, he’s a likely frontrunner to replace Payne long-term.


Once the board’s seated, hiring a new USA Rugby CEO becomes the priority. All the while, what’s left of the board and congress will be trying to figure out if RIM is to survive this as a company, and if so, what it looks like going forward.


The task force report also dove into that, saying USA Rugby and RIM are, “exploring all options to allow the company to stay in business. The intent of this work out is to allow the company to reorganized as a much smaller LLC over the next few months. The USA Rugby board, RIM board and members of both USA Rugby and RIM management are working diligently to not let RIM go out of business.”


How did we get here?

The origin story of RIM, created with the intention of raising outside capital to generate profitable returns for USA Rugby and other shareholders over and above what the union could do itself, is still filled with holes. Because of the board’s lack of detailed, published, reliable minutes from before Dan Payne’s reign, we’re left guessing. The first mention of RIM as even a concept in the board’s published minutes appears to be March, 2014. Five months later, it was essentially a done deal, with USA Rugby board members Keck, Brian McClenahan and Peter Seccia making up RIM’s initial board.


In late August, 2014, Congress was emailed to schedule an upcoming call to discuss what they’d find out was RIM. Days after that discussion, and without a formal or in-person meeting, presentation or question-and-answer session to properly vet what would end up being one of the biggest organizational and business decisions in the union’s life, congress members were emailed consent forms to vote to approve the creation of RIM. It passed.

In October, 2015, the board discussed the first sale of RIM equity to England’s RFU for $2 million. RIM would also sell equity to UK-based Chime Sports Management, the Harlequins and a handful of wealthy individuals. All told, USA Rugby sold 25-percent of RIM for $7.5 million.


Then-USA-Rugby-CEO Nigel Melville was supposed to leave his post and lead RIM, but he took a job with the RFU. Sternberg, who was originally brought on as a consultant, was trumpeted as the interim CEO in May of 2016. Payne was hired as USA Rugby’s chief executive two months later.


<