The predicament of rugby league’s Newcastle Knights highlights the pitfalls of privatising sporting teams, as former billionaire Nathan Tinkler yesterday failed — as predicted, despite bland reassurances to the contrary from his private company the Hunter Sports Group — to come up with a new $10.52 million bank guarantee to secure his ownership of the club.

Only days ago Tinkler’s right-hand man, HSG chief Troy Palmer, told The Newcastle Herald there was “not a problem” funding the guarantee by the March 31 deadline. Rubbish. As Crikey wrote last week, Tinkler’s broader financial position is dire, and the real mystery is how he has been able to hang on to his remaining assets so long.

When he bought the Knights three years ago, with 97% of members voting in favour, Tinkler was riding high and the privatisation was meant to ensure the financial viability of a club that had racked up losses estimated at between $2.3 million to $7 million, depending on whom you listen to.

Tinkler’s HSG took over the club under a privatisation agreement that obliged him to put in place each year a hefty 12-month bank guarantee, rising in line with inflation, with an Australian bank. For the first year it was set at $20 million, then in January 2013 it dropped back to $10.3 million, and at the end of January this year it was supposed to increase to $10.52 million. When HSG couldn’t fund the amount, Westpac agreed only to extend the existing $10.3 million guarantee for two months, a deadline that expired yesterday.

Though the Greater Building Society appears to have guaranteed the extra $220,000, Westpac (which is winding up two of Tinkler’s other private companies) has washed its hands of HSG, and no other Australian bank has proved willing to step into the breach.

Under the original privatisation deal Tinkler’s default on the bank guarantee gives the member-elected Newcastle Knights Members’ Club — owners of a single, so-called “heritage share” in the Knights — the right to buy the entire club back for $1. For now the members, led by chairman Nick Dan, a prominent local solicitor, are refraining from exercising that right as crisis talks get underway between the members, the NRL and HSG. The talks are meant to come up with a new “unified business model” for the Knights, which is code for a transition away from full ownership of the club by Tinkler.

Tinkler, who played league himself as a teenager, undoubtedly loves the Knights and by hiring super-coach Wayne Bennett on a four-year, $5 million contract starting from the 2012 season, gave the team a sporting chance in last year’s finals and hope for 2014, although it has been a tragic start to the season, compounded by the shocking spinal injury to back-rower Alex McKinnon.

Tinkler’s ownership of the Knights has been marked by opacity, brinkmanship, a paucity of sponsors and endless speculation about both his own finances and the timeliness of payments to the club’s players, staff and suppliers. Knights members have been in the dark, presented only with a one-line assurance each year from an independent auditor that HSG has complied with its obligations under the privatisation deal.

There has been no transparency about the Knights’ finances, and although HSG claims it has sunk $20 million into the club there are fears that the $10.52 million now sitting in an account requiring joint signatures of HSG and the members may not cover the club’s accumulated liabilities.

Until the true state of the books is revealed to both members and the NRL, the verdict is out on Tinkler’s ownership and also, therefore, his claim on any ongoing role in the club’s management.

Waiting in the wings is the hugely profitable Wests Group, owners of the Mayfield training facilities, where the Knights are based. Wests stands ready to assist the Knights if necessary, and has ruled out any ongoing joint venture with Tinkler.

After two years of speculation it must be getting too much for Knights fans, who — while thanking heavens for former Knights chairman and player Robbie Tew, who insisted on the bank guarantee and buyback provisions during the tough 2011 privatisation negotiations — find themselves right back where they started. Not to mention fans of  stablemates the A-League’s Newcastle Jets, also owned by HSG, who are waiting to find out if they’re next.

It’s time for the NRL and Football Federation Australia to step in with those B-plans they’ve been working on all this time. It’s not as though we couldn’t see this coming.