McLaren looking for $500M through restructuring

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Source: McLaren Media

There’s little doubt that the impact of COVID-19 on small businesses around the world have taken their toll. The one-size-fits-all lockdowns have been very difficult for small businesses to weather with restaurants, retail and live events all suffering.

Large companies are feeling the pain as well and perhaps more to the point, Formula 1 itself has had a tough year in 2020 as well as many of the teams. Perhaps one of the more visible struggles has been the McLaren team.

As the year progresses, McLaren were looking for cash investment and selling its building to then lease it was one such way to generate what it needed most, liquidity. Now, according to a report in the Financial Times and covered by Mr. Noble at Autosport, McLaren are looking for more liquidity.

Mike Flewitt, McLaren Automotive chief executive, told the Financial Times: “We need to restructure the total business.

“We went into this year having two very successful years in automotive, but the total business did not have the liquidity to survive this kind of crisis.”

“We will look for investors who have a common vision to our shareholder base, both in terms of the structure, direction of the company, and medium-term plans,”

As Mr. Noble points out in the article, “nothing has been ruled out, and investment could come from private equity funds, individuals, families, sovereign wealth funds or a US-based SPAC.” Jonathan is correct in saying that McLaren secured a $150 Million loan with the National Bank of Bahrain to increase liquidity. It is now in need of more and looking for another $500M.

The challenge here is that the F1 racing team may be there or thereabouts in regards to it’s P&L and securing third in the constructor’s championship would have been an additional $10-11M so you can see why that was critical for the team. Perhaps the prize money and sponsor revenue they get is close to covering the cost of running the F1 team but this leave the entire automotive division and applied technology division that could be the serious drain on the company.

The Special Purpose Acquisition Company idea could help but there is a part of me that wonders if the McLaren F1 team won’t be spun out of the McLaren Group allowing the automotive and applied technology group to secure funding separately from the F1 team. IT’s parts may be more valuable or easier to leverage than its sum.

It’s a shame because McLaren seem to be heading in the right direction with a new engine deal with Mercedes and terrific driver lineup for 2021. Zak Brown has done a good job of bringing in more sponsors and the future is looking better than it has in quite a while…COVID-corrected of course.

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