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Todd McCandless

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F1 Finances...Why the New Loan?

Posted: 28/03/2012 04:36

An interesting statement on Formula One's website today touted the re-financing of the long-term structured debt that owners CVC Capital Partners posses. The deal would reclassify the long-term note for an additional four years. Here is the statement:

Formula One Group has launched a process to extend its current financing facilities. This will involve raising $2.27bn of new facilities with maturities in 2017/18, replacing the company's existing $2.92bn facilities which are due to mature in 2013/14. The new facilities will provide the business with a secure, long term capital structure.

Proceeds raised will be kept within the Group for general corporate purposes and the company has no current plans to pay a dividend.

The news has received some interesting comments from pundits and news agencies and while they are poised to be much more knowledgeable on the matter than I, there is an element that I suspect is more to the point of why this transaction is taking place. While some have reported the news on face value and others have suggested it is a way of reclassifying the debt with a dividend payout for CVC, I reckon it is all part of making room for Ferrari and Red Bull (and any other team that wants to play ball) in the new ownership structure that was proffered and compelling enough to dislodge the loyalty and unity of the Formula One Teams Association (FOTA).

The rumors last week were that F1 boss Bernie Eccclestone was arranging an equity position for Ferrari and Red Bull via Lehman Brother's approximate 15% ownership position. This means that a portion of the 15% Lehman Brothers now holds would be purchased or gifted by/to teams looking to invest or hold ownership in the business of Formula One. While FOTA were keen to unify and demand more fo the revenue share of Formula One's commercial rights, a succession plan was still an issue as Ecclestone isn't getting any younger and CVC's rumored desire to slowly disengage from the sport of F1 and the new Concorde Agreement will expire in 2012.

In short, there are a lot of prime movers for the new restructured debt and perhaps, just perhaps, part of that is to create the investment vehicle by which the teams will be included as equity partners. That's a guess on my part but for some reason it seems viable from my vantage point.

 

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