A very interesting read over at the Independent regarding the impact the Force India administration effort has had and the scale of the unfortunate situation. The short version is this:
- Team was taken into administration over past due debt totaling £28.5m to more than 450 companies including parts manufacturers, hotels, delivery firms, caterers and even the race tracks in Abu Dhabi and Italy
- The team was purchased by Lawrence Stroll and a group of investors for £90m from Indian businessmen Subrata Roy and Vijay Mallya who is fighting extradition from Britain to India
- At the time, Mercedes was very involved in the process as was driver Sergio Perez with £13.7m and $4m owed respectively
- Team sponsor, BWT, had initially given the team two loans of £757,000 and €535,000 to assist with its cash flow and stepped in again with an additional £5m loan
- The quest to find a buyer garnered in excess of 20 expressions of interest
- An August 6th deadline was set and of the offers, only five were valid with one offer agreeing to buy shares and this was Stroll and party who provided a £15m loan to the company to enable the ongoing payment of costs including the time critical development of the 2019 racing car…This enabled BWT to be repaid their loan of £5m
- Mallya has a freeze order on his assets and this meant the banks would have to approve the sale of his shares but the approval was not going to come in time for an August 20 deadline, so the administrators sold the assets instead of the shares to Stroll as the assets were not covered by the freeze order (which I find very odd because the assets are the true physical collateral a team has)
- The administrators, FRP, are now being sued by Russian fertilizer producer Uralkali whose chairman and shareholder Dmitry Mazepin is the father of Force India development driver Nikita Mazepin because they say they made a higher offer but it was ignored
- There are also several lawsuits pending against Force India regarding commissions from introducing sponsors to the team and introducing a potential buyer to the team which FRP saying these lawsuits are without merit
- Mallya and Roy say they are owed £159m as that is what they put into the team but FRP says they actually owe the team £4.2m
- The article seems to suggest that all creditors will be made whole on amounts owed and that is also interesting to me as an asset sale normally does not assume the liabilities of a company unless British law doesn’t allow for that, which I am unfamiliar with, or Lawrence reckons an all-in number of $150m for the team is worth the bother including paying past due debt
In the end, this is how messy these situations can get and there is big money at play here. In the end, Lawrence may have bought a team for £119m thereabouts. IF you consider the prize money payout in 2017 to be approximately £70m and the 2018 payout to be around £55m then perhaps the all-in number of is an digestible figure.
What I also note is that the current power units are, as I stated in 2014, killing this sport. They bankrupted HRT, Manor and Caterham and ultimately Force India with a whopping £14m past due. These mid-field teams cannot continue paying $20+ million dollars for engine supplies and if F1 doesn’t seek more prize money for these teams, then the engines need to be reduced in complexity and expense.
While the Russian consortium is sour about the purchase deal, I understand why BWT wasn’t too interested in any other deal than the Stroll cash infusion to get their £5-6m loans back out of the company. If I were the head of BWT, I would look for the first deal that saw my investment dollars returned on a team heading down the drain. I’m curious if BWT’s logos on the cars are a contractual obligation or if they have worked a new continuing deal with Lawrence. If the cars are devoid of the BWT pink color next year, we’ll know.
All a very messy affair and it most likely isn’t over yet. Check out the full article for more detail.
Hat Tip: Independent