NZRU chief executive Steve Tew insists Otago Rugby Union's debts were too large to enable it to offer a bailout © Getty Images

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Features: Provincial rugby has no future

Players/Officials: Steve Tew

Teams: New Zealand | Otago

The New Zealand Rugby Union (NZRU) insists they will not bail out the Otago Rugby Union (ORU) who will go into liquidation this week with debts of NZ$2.35m.

The 126-year-old ORU, one of the country's strongest provinces, which has produced 156 All Black players, confirmed the serious nature of their financial plight on Monday night and are expected to report a further loss of several hundred thousand dollars at its annual meeting in Dunedin today.

NZRU chief executive Steve Tew stressed the country's governing body were keen to safeguard the game's infrastructure in the area but the size of the ORU's debt and the fact that they had already bailed out the regions Super Rugby side, the Highlanders, meant that a financial package was not available.

The future of the Highlanders Super 15 franchise, home to several All Blacks including Andrew Hore and Jimmy Cowan, as well as England's James Haskell, will be unaffected as the team is run as a separate legal entity.

"We are stepping in to support community rugby and all the amateur players, volunteers, administrators and others who have a stake in the game," Tew said in a statement. "Otago has a long and proud rugby history and the union has played a vital role in the rugby community for 131 years so this is a sad day."

NZRU will appoint local officials to operate community rugby and hold talks with local clubs to keep them sustainable. Tew added: "In addition, we will be immediately assessing the viability of entering an ITM Cup team from the region in the 2012 competition. This will need to be self-funding beyond the normal NZRU contribution if any plan is to be viable.

"We will be urgently discussing this with players and potential sponsors to see if we can achieve this. It is important to also stress that today's events do not impact on the Highlanders franchise which operates as a separate legal entity. Unlike ITM Cup players, Investec Super Rugby players are contracted by the NZRU and not by a union."

However, the union said Otago's debts were too large to enable it to offer a bailout. "The situation at Otago is unprecedented in our history," Tew said. "We have been working hard to avoid this outcome. That is why NZRU appointed a specialist late last year to develop a recovery plan and negotiate with affected parties and also why we provided interim finance to ORFU of $200,000 over the last two months.

"We appreciate the collective efforts of many to reach a solution including the current board and major creditors. We were all prepared to help, but in the end the financial hole was just too big. The union had debts of $2.35 million and was facing a significant shortfall in revenue this year. Quite simply, it has run out of money and could not trade out of its difficulties."