The Otago Rugby Football Union will cease trading on Friday, saddled with debts of more than $2.2 million, with no ability to repay them.
The union's annual meeting last night heard the union had posted a loss last year of $862,000, and may not be able to field a team in this year's ITM Cup.
Union chairman Wayne Graham said the union had no other option but to cease trading and would apply to the High Court on Friday to put itself in liquidation.
"This is a very sad day but we have not taken it [decision to go into liquidation] lightly," Graham said.
"I have been involved with this union for 37 years and it is very disappointing. What I have been through in the last 18 months has been very distressing. But the reality is that it is a business and unless we take a positive step forward, and we believe we are doing that. It is going to affect a lot of people around this province but it is at this stage where it needs to happen."
No approach to Govt for bail-out
The New Zealand Rugby Union has declined to bail-out the union or loan it any money as it simply said the debt was too big and would set a precedent it was not comfortable with.
Prime Minister John Key told Firstline the Government had not been approached for assistance, but said he would prefer the union sort out its finances without taxpayer assistance.
"Our preference would be for them to find another way through that, but obviously we are concerned about the situation."
Mr Key said NZRU chief executive Steve Tew alerted him last week of the Otago union's financial strife.
"It's a bit of a worry, it's a very old union, historically very successful. I understand, amongst other things, they had a lot of debts racked up against Carisbrook that they couldn't sell for the price they anticipated they would."
180 local creditors
The union had 180 creditors in the local business community, owed $180,000 to them, and union staff would be out of a job on Friday. The union also had a loan of $1.2 million with the Bank of New Zealand.
Graham offered a glimmer of hope to the meeting by saying if a rescue package, which showed a viable business plan for the next year, could come together by Friday then the union would not be put into liquidation.
Four parties had been involved in negotiations to continue: Otago Rugby Football Union, New Zealand Rugby Union, Bank of New Zealand and Dunedin Venues Management Ltd.
Those parties could not come to agreement for a way forward but Graham declined to say what was the stumbling block.
'Grim day for Otago rugby'
The board would not resign although if the union was liquidated it would be out of a job.
New Zealand Rugby Union chief executive Steve Tew was at the meeting last night and said the Otago union was debt laden and can not trade on. Tew said the NZRU would put people in place to make sure community right continued.
"This is a pretty grim day for Otago rugby. This is a proud rugby union and province. This is a very difficult moment in time for everybody. But the reality is such we need to take a drastic step to move things forward," Tew said.
"The bottom line is the hole is too big. Other unions have been in trouble before but nothing at this level. We have already put in $200,000 to help the union out and they have in affect not been trading for the past month." Tew said the Otago union would have a couple of weeks to show it had the ability to fund a team in the national provincial competition, the ITM Cup team, or the competition would go ahead this year with 13 teams.
The strong preference was to have an Otago team in the competition, Tew said.
The Otago community will need to stump up with $1 million by Friday if they want to keep an Otago I™ Cup team.
There was no sign of fraudulent behaviour or forgery, Tew said.
He said the community had to raise up to $1m by 4pm on Friday - when the union would go into liquidation - to keep an I™ Cup team, he said.
"We're now saying to the people of this region if you want an I™ cup team you need to raise somewhere between $600,000 to $1 million, [and] convince us you can sustain that over a period of time.
"It won't be easy and they're going to have to work hard over the next few days."
International Rugby Players' Association chief executive Rob Nichol said the situation was looking pretty dire, but he hoped this would push people to raise the funds needed.
"Maybe with that kind of reality and that kind of pressure ... maybe there is a slim level of hope," he said.
"All those administrators owe it to the players to get in the room and give it another crack."
The Otago Union has said players would receive their payments for the February month, coming out of a fund from the New Zealand Rugby Players' Association, but payments would then end.
Union chairman Wayne Graham said the bulk of the loss came from the inability of the union to pay for its professional game.
"The professional game was running $700,000 to $800,000 over what we could afford. In hindsight we were spending based on last year's revenue and that revenue was not there," Graham said.
The shortfalls in funding the union last year came from a reduction in pokie machine income ($200,000 less than budgeted), sponsorship ($30,000), gate revenue ($138,000) and signage ($30,000).
Costs increased from staff ($98,000 increase), ITM Cup costs ($136,000) and Carisbrook (127,000).
Carisbrook had become a real millstone - chairman
Graham said he did not want to apportion blame for the situation as it had come from many decisions over many years.
But when pressed he said owning Carisbrook had become a real millstone around the union while options such as how much it was going to cost to play at the Forsyth Barr Stadium was never considered.
The NZRU would provide funding for community rugby and NZRU community rugby manager Brent Anderson would consult with clubs at a meeting tomorrow night.