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Formula One completes some financial housekeeping before the new season
It seems Formula One has taken the extended pre-season quiet time to get their financial ducks all in a row
Posted Feb 27, 2011 by Weekend Round-Up
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The Sunday Telegraph has today reported that Formula One has now paid down around £1.7billion of debt originally used by CVC to finance the purchase of the motor racing enterprise back in 2006.
CVC, the private equity firm that acquired the business, are believed to be taking advantage of a dip in interest rates thanks to the economic downturn and are repaying a large amount of debt to get their spring financial tidy-up in order ready for what is set to be a fantastic year of racing in 2011.
F1 supremo and the sport’s chief executive confirmed the Telegraph’s reports saying that a large amount of the debt had been paid off including one of the larger loans from Markit Group which has been significantly paid down. This announcement flys in the face of all the naysayers that spouted abuse for Ecclestone when he cashed in on the franchise that he has built for many years. They claimed that F1 couldn’t sustain the levels of debt that CVC were proposing saddling the administration company with but this obviously isn’t the case.
Many critics called the F1 business model non-sustainable and admittedly it did look a little knife-edge when CVC secured the debt at the peak of the market but the motor sport franchise has come out the other side and looks healthier than ever. The infighting amongst F1 teams and bosses only added to the concerns over the debt and indeed the private investors to whom the debt was syndicated have probably seen their pulses raise more from their money than from action on the grid as debt repayments reached a low estimate of just 50p in the pound back in 2009 just after Honda pulled out of the season amidst the depths of the recession. Pressure also mounted as BMW, Toyota and Renault all followed the Japanese car giant out of the sport but the debt stabilised when in August 2009 a deal was announced that signed the remaining teams into F1 until the end of 2012.
The expansion of recent years to incorporate new host nations like South Korea is a clear attempt to boost the income of the sport and this worked nicely with hosting fees increasing to nearly $540million in 2010. The run-up to the new season is always good for business and this year has been no exception with the debt price rising since January to a high of 99p last week showing signs that the sport’s finances just might be on the long term road to recovery.