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Restructuring

USA Rugby Files for Bankruptcy

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Published: April 14th, 2020
A halt in competition is the final blow to the national governing body for the contact sport.

United States of America Rugby Football Union Ltd. on Tuesday, March 31, filed for Chapter 11 in the U.S. Bankruptcy Court for the District of Delaware in Wilmington.

The filing came a day after the nonprofit said it would seek court protection because of “compounded and insurmountable financial constraints” accelerated by Covid-19.

Court papers show the sport’s international governing body, World Rugby Ltd., has agreed to provide debtor-in-possession financing to support a reorganization. The group is the largest unsecured creditor of the Lafayette, Colo., debtor, owed $3.6 million.

Debtor counsel Mark M. Billion of Billion Law said he anticipated the DIP motion would be filed later on Wednesday but declined to comment on the size of the financing.

A first-day hearing has yet to be set before Judge Brendan Linehan Shannon on motions including separate requests to use cash collateral and the DIP.

Rugby union, a contact sport played between two teams of 15 players, originated in England in the early 1800s. A variant, rugby sevens, uses squads of seven players. A World Cup is held every four years in both versions, and additional tournaments occur annually.

Founded in 1975, USA Rugby oversees four national teams, an Olympic development pathway and multiple collegiate and high school All-American sides. It has more than 120,000 active members.

USA Rugby CEO Ross Young said cost overruns and revenue shortfalls left the organization unable to put on the World Cup Sevens tournament in San Francisco in 2018. World Rugby provided $4.4 million to short up USA Rugby’s finances, and the group shook up its management and board.

USA Rugby also has faced litigation costs in a dispute with United World Sports LLC that is currently in arbitration. UWS, which holds perpetual rights to host the U.S. portion of an annual rugby sevens tournament, sued USA Rugby in a $40 million breach of contract dispute, alleging the organization hindered efforts to boost rugby nationwide.

The debtor said it has spent $480,000 on the litigation and could not afford a $100,000 retainer needed for counsel in the arbitration.

Another revenue shortfall came last summer, when the men’s team went roughly $750,000 over budget in preparation for the World Cup, and World Rugby injected $1 million.

USA Rugby said it had cut costs and looked to seek recapitalization at the World Rugby Expo in May, but it suspended competition and activities on March 13 because of Covid-19, cutting off revenue and accelerating its funding needs.

USA Rugby has $1.13 million in assets against about $6 million in liabilities, excluding the USA Sevens claim. Sole secured creditor JPMorgan Chase Bank NA has a $467,8290 claim.

Peter K. Schaeffer of Billion Law also is debtor counsel for USA Rugby.

Editor’s note: The original version of this article was published earlier on The Deal’s premium subscription website. For access, log in to TheDeal.com or use the form below to request a free trial.

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