Pegasus Sports denies UCI claims of financial shortfalls and missing bank guarantee
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Friday, December 24, 2010

Pegasus Sports denies UCI claims of financial shortfalls and missing bank guarantee

by Shane Stokes at 9:46 AM EST   comments
Categories: Pro Cycling
 
Team owner Chris White insists budget was half a million dollars in surplus

Chris WhiteThe Pegasus Sports team has responded to yesterday’s UCI statement accusing it of financial shortcomings and a lack of professionalism by rebuking the governing body’s stance and pointing out areas where it feels the UCI is not correct.

Describing himself as “taken aback and extremely disappointed by the urgency and unprecedented action of the UCI to issue a press release that severely tarnished the image of Pegasus Sports without first giving us the courtesy of an explanation,” team owner Chris White has insisted that bank guarantees were indeed lodged with the UCI by the December 15th deadline.

He states that it provided evidence to the UCI that a Letter of Credit was funded and in place with the UCI’s own back account. He also says that the team has received confirmation from the UCI in relation to that, and that the UCI has denied its more recent request to release the same Letter of Credit.

Explaining the reason why it missed the first deadline for Pro Continental applications, White states that the team’s chief financial backer – understood, but not confirmed, as being American businessman and former co-owner of Liverpool Football Club George Gillett Jr. – walked away from the project on December 7th, three days before the conclusion of the Pro Continental application process.

This left it in a very difficult position. “With just days left prior to the 10 December license issue date, Pegasus Sports was left with two options; either walk away from the 2011 PRO Conti license process or to fight on by repositioning the Team and re-submitting the license application,” stated White. “We chose to fight on and were grateful to the UCI for allowing the Team five additional days in which to complete the process.”

He stated that when the team resubmitted its application, the restructured budget was in a surplus of over half a million dollars, due in part to a new contract that had been concluded after December 15th.

However, despite that, the UCI rejected the application and some of the main riders from the team have signed contracts elsewhere. Robbie McEwen, Robbie Hunter and Svein Tuft are amongst those who have already left, while others head into Christmas very uncertain of their future.

White concludes the release by stating that the UCI and the Licence Commission have still not communicated directly with the team in relation to the reasons why the licence was not given, and that all such information has been put out via the media.


The full statement is as follows:


PEGASUS SPORTS 2011 UCI LICENSING

Statement from Chris White, Pegasus Sports

Based on the UCI’s press release of 23 December, we feel it is now imperative to share the facts around the Pegasus Sports licensing process. Our goal is to be transparent and honest… We don’t want to get into a boxing match or a mudslinging contest. However, we will protect our name and integrity so we can move on to creating a viable racing program.

Pegasus Sports was formed to apply for and hold a UCI PRO Tour license in 2011. The structure is registered in Australia and was a joint North American – Australian backed project.

Pegasus Sports’ financing was underpinned by an ‘equity’ guarantee supplied by its major shareholder. The initial strategy of Pegasus Sports in lieu of commercial sponsorship acquisition was to use an equity funded business model in the same way as Team Garmin commenced as Team Slipstream Sports.

Due to a number of factors external to Pegasus Sports the afore mentioned backing was retracted and this retraction was advised to Pegasus Sports on 7 December, 3 days prior to the conclusion of the PRO Conti license application process.

With just days left prior to the 10 December license issue date, Pegasus Sports was left with two options; either walk away from the 2011 PRO Conti license process or to fight on by repositioning the Team and re-submitting the license application. We chose to fight on and were grateful to the UCI for allowing the Team five additional days in which to complete the process.

Pegasus Sports met the extended time frame and lodged the following documents on 15 December;

- Financial budget (balanced in accordance with the guidelines provided)
- Letter of credit/Bank guarantee (still held by UCI)
- Contracts (sponsor & employment)
- Insurance coverage.

We maintain that all requirements of the UCI PRO Continental application process were adhered to.

We were taken aback and extremely disappointed by the urgency and unprecedented action of the UCI to issue a press release that severely tarnished the image of Pegasus Sports without first giving us the courtesy of an explanation.

In essence, we want to look forward to simply racing bikes in a sport that we love. The events of the past 3 weeks have been traumatic for dozens of people who have been involved in Pegasus Sports.

To assist with providing transparency in respect to the relevant issues surrounding our licensing process we offer the following information (see below).


1 OCTOBER

Among other documents lodged with the UCI and their auditor was the original bank guarantee. I confirm that the UCI’s auditor in their initial report confirmed the existence and veracity of this bank guarantee.


Due to a misunderstanding, there was an ‘essential’ document (a financial underwriting document) missing from our 1 October submission. The UCI auditor in the ‘Initial Report’ highlighted this and, as a result, Pegasus Sports was not listed as an initial PRO Tour applicant.

By 7 October this document was lodged and in place with the UCI.

31 OCTOBER

As the UCI pointed out in its most recent press release, Pegasus Sports were ranked 23rd and as a result PRO Tour qualification for 2011 was not possible.

The UCI in line with regulation 2.15.056 requested immaterial amendments to two sponsorship contracts and as such Pegasus Sports was referred to the UCI License Commission.

18 NOVEMBER

Based on independent legal advice sought in Australia, Pegasus Sports resubmitted amended sponsorship contracts to conform to regulation 2.15.056. The License Commission was not satisfied with the sponsorship contracts as re-submitted and did not agree with the advice that Pegasus Sports had been provided with. The License Commission requested further edits to the said sponsorship contracts to be completed prior to 10 December. The requested edits were completed and subsequently submitted.

7 DECEMBER

Notification from the majority shareholder of Pegasus Sports was received, stating that they were retracting their support from the program.

Additionally, there was some confusion over whether the original bank guarantee lodged and approved as valid on 1 October had been released. This led Pegasus Sports to request on 8 December an extension of time to complete the PRO Continental licensing process. The UCI licensing commission denied this initial request for an extension of time.

10 DECEMBER

With the events of 7 December materially impacting Pegasus Sports existing license application, Pegasus Sports sought the UCI President’s support to allow further time to deal with the catastrophic effects of the retraction of our major financial backing. The President recommended an extension of time be granted. In a great display of compassion for the human impact, the UCI License Commission granted Pegasus Sports an additional 5 days.

11 – 15 DECEMBER

The entire organization was involved in a drive to reposition the Team’s cost base to assist in ensuring financial stability. Within the Team there was unanimous support for these tough actions and a strong willingness to see out the tough times together.

Pegasus Sports worked closely with its’ bankers to put in place a second bank guarantee in the form of a Letter of Credit. (This Letter of Credit still remains in place with the UCI as the beneficiary.)

Coupled with this approach was engagement with our existing sponsorship base to help us to close the remaining funding gap.

15 DECEMBER

Pegasus Sports lodged within the time frame the required documents, specifically;

- Balanced budget (in surplus)
- Bank guarantee/letter of credit (Still held by UCI)
- Contracts (employment and sponsor)
- Insurance

I confirm that the budget as at 15 December for 2011 was in surplus.

17 DECEMBER

In response to the UCI auditor’s report (dated 16 December) advising that there was no bank guarantee in place Pegasus Sports provided evidence to the UCI from it’s bankers (National Australia Bank) that the Letter of Credit was funded and in place with the UCI’s bank account (UBS SA).

Pegasus Sports has been advised by the UCI that the Letter of Credit is in place. Subsequent to the non-issuance of the PRO Conti license Pegasus Sports have requested that the UCI release the Letter of Credit and to this date the UCI has refused to release same.

20 DECEMBER

Based on feedback received directly from the UCI’s auditor, there were concerns raised in relation to the quantum of some revenue items. These items — along with a new sponsorship contract that was concluded post 15 December — were added to the Team’s financial position and an updated budget was sent to the Licensing Commission on the morning of 20 December.

The effect of these adjustments and adding the additional contract was that the Team’s budget was in a surplus position of greater than $500,000.

24 DECEMBER

The UCI and the UCI License Commission are yet to communicate directly with the Team regarding the reasons for non-issuance of the PRO Continental license.

All information in this regard has only been communicated through a public forum.
 

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