The Welsh Rugby Union has officially offered the latest version of the Professional Rugby Agreement (PRA 25) to both the Ospreys and Scarlets.
They say this was done to usher in a period of stability before the WRU looks to reduce the number of professional clubs to three by 2028. Both clubs in the west have not yet signed PRA 25 but are expected to do so in the near future, meaning they will be on the same deal as Cardiff and the Dragons.
But what does PRA 25 actually entail? Many fans will remember the failure to get the Ospreys and Scarlets to sign up to it last year was what sparked the WRU’s change in approach as they took it off the table and, for the first time, declared Welsh rugby could no longer afford four equally funded teams.
The first thing we must address is the length of the PRA. It is a four-year contract but has a break-clause after two years which is how the WRU are hoping to cut a team by 2028.
But it does provide stability in funding.
In PRA 23 – the deal the Ospreys and Scarlets were on – you won with the WRU and lost with the WRU, so if the governing body performs below its financial projections, the clubs are liable to clawbacks.
Given the WRU is currently £6m below its financial projections on ticket sales for this calendar year this would have hit both the Ospreys and Scarlets very hard.
Under PRA 25 there is fixed funding from the governing body for the first couple of years but the final two years will be determined by the WRU’s commercial performance.
Next year on PRA23 (YE27) the Ospreys and Scarlets would have received £5.4m in funding but would have to repay £2.1m in advanced money from CVC payments that were brought forward.
This would have equated to a £3.3m net cash payment.
Arguably the biggest positive for the clubs regarding PRA 25 is the debt-for-equity swap.
That means reducing their debt in exchange for preferential shares in the club. Preferential shares aren’t ordinary shares which the club owners hold, and only individuals with ordinary shares control the club.
“So, that takes three million of that debt that we swap for equity,” said WRU CEO Abi Tierney.
“That reduces the debt for Ospreys and Scarlets which is really important. We also refinanced (with Goldman Sachs and Natwest) which was really important for us be able to do PRA 25.
“We’re looking to try and bring some stability in the system by reducing their financial outlays.”
If the club is sold then individuals with preferential shares gets the money back when the club is sold.
This isn’t anything new, with Cardiff Rugby going down that route when Peter Thomas’ loans to the club were converted into preferential shares.
Both the Ospreys and Scarlets would also have to offer up a certain amount of money upfront to cover the losses of that club after the WRU payments. This varies from club to club based on the projected losses.
Next year on PRA25 (YE27), clubs receive £6.4m funding and repay £0.1m as part of debt management which is lower because of debt for equity swap and also because terms are for a longer period under PRA25.
This means a £6.3m cash payment. Competition money is extra and comes via the WRU as they are the shareholders in URC and EPCR; whichever deal the club is on, this is circa £1.7m per club.
As a result the overall budgets for the Welsh teams, including backroom staff, would be around £8m (£6.3m + £1.7m) per club in PRA25 versus £5m (£3.3m + £1.7m) per club on PRA23, although investor contributions need to be added to this.
There will also be variable income from gate receipts and sponsorship which the club itself would generate.
In terms of outright playing budgets they would be £5.1m in FY26 and £6.6m in FY27.
Under the initial PRA 25 offered to the clubs in December 2024 the WRU would have certain shareholder rights which include:
- Approval of major transactions including new shareholder loans along with the acquisition and disposal of significant strategic assets.
- Approval of new equity investors providing they satisfy the WRU’s fit and proper person test.
- The right to have a WRU observer at all board meetings at each club.
- Approval of shortlist for a new chair or CEO.
- Requirement for formal quarterly two-way business reviews between WRU and clubs executive teams.
- The ability for all preference shares except one preference share to be purchased by the club and if that happens all of the governance rights would cease.
Regarding the rugby side of PRA 25 there is far greater central alignment.
The WRU does not have outright control but has a greater say over things like the value and length of player contracts, along with specific requests regarding playing position and minutes for players of national interest through a consultative mechanism.
Also, the WRU would have a say over the shortlist for coaching or S&C appointments.