CVC's 2008 loss widens after Paris agreement with FOTA

[WhiteBlue]

http://www.bloomberg.com/apps/news?pid= ... M3bF5HPwEI

CVC Capital Partners Ltd.’s loss from Formula One widened last year as it paid more to the likes of Ferrari SpA and Toyota Motor Corp. to persuade them to stay in the auto racing series.

The London-based private equity firm’s loss increased 22 percent to $505 million, according to filings of CVC’s Delta 3 (UK) Ltd. unit published today. Sales rose 13 percent to $1.06 billion on fees for new races in Valencia, Spain and Singapore and more television rights income.

Read more at the link.

So Bernie really held back a ton of money and needed to adjust his figures for last year. Shrewd move to keep the mega bucks in the back pocket until the teams actually committed all the way to 2012.

I hope he will one day meet with a higher force and F1 can rid itself of Mr 50%.

[Pup]

There's nothing in that article about holding back money. I don't know where you got that from. The two interesting things I see are that a) CVC is paying 25% interest on their loans, and b) they had already secured some form of guarantee from the teams through 2012 prior to all the fuss this year over FOTA leaving.

[xpensive]

25% interest on a billiondollar loan to pay-off MrE, money now in his x's account? No wonder F1 costs an arm and a leg.

[WhiteBlue]

There's nothing in that article about holding back money. I don't know where you got that from. The two interesting things I see are that a) CVC is paying 25% interest on their loans, and b) they had already secured some form of guarantee from the teams through 2012 prior to all the fuss this year over FOTA leaving.

Well I don't get all my info from one article. It was widely known that FOM held back substantial amounts which were due according to the memorandum of understanding because most teams and their parent companies had not committed to F1 until 2012.

Bernie made public comments about the fact when he gave Williams an advance to save their 2009 season. FOTA also referred to outstanding monies as one of the disputed items in the threatened break away this summer.

[Pup]

I guess we're looking at this from opposite directions. To me, it looks like CVC negotiated a deal with the teams and then defaulted on that agreement by not paying, allowing the teams to threaten a walkout. Had CVC paid, I'd think the teams would have been obligated to stay.

So contrary to what you're saying, it seems CVC's "withholding" of funds from the teams is what made all this mess possible. Doesn't sound too smart to me, which leads me to think that the reason they didn't pay is because they couldn't. The article does say they are operating at a loss, and I imagine additional funding to pay off the teams would have been hard to get, given the financial crisis and the apparent fact that the original $2.5 billion was risky enough to justify a 25% interest rate.

[xpensive]

I'm not sure if I get this right, at the same time as the CVC had a 624 MUSD cost for the 2.5 GUSD loan to pay off MrE, the teams had to settle for 179 MUSD? This out of total revenues of 1 GUSD?

I for one can see how tempting a breakaway series must be for FOTA.

[pgj]

We still do not know what the overall figure is that goes into F1 do we? It was reported that there was a 52% increase to F1 without saying what the increase was based on.

[Pup]

Joe Saward has a far more informative piece up now over at gp.com. Which leads me to wonder why a racing journalist can write a better summary of a financial statement than Bloomberg, but no matter...

According to Joe, what Bloomberg is calling finance charges is actually payment of principal, and that the original $2.4 billion debt is now down to $1.8 billion. That makes far more sense than the absurd 25% interest rate that the Bloomberg article would have you believe.

And the $179 million due the teams is actually the extra amount that was due, after renegotiation. The total amount due the teams from last year's season was $521 million, which makes more sense, as the teams are supposedly now getting 50% of the gross income.

The 'loss' is thanks entirely to a half-billion dollar payout to the CVC mother ship.

So it would seem that despite the debt, F1 is still a handy little money maker. If CVC is paying back the debt at a rate of $600 million a year, then it's clear why 2012 has been the focus of all the negotiations. After that, the debt will be paid and everyone can sit down again to argue over who gets what out of each year's billion dollar pie.

[xpensive]

Right, I read that piece as well. However, I find it unclear how much of the 624 MUSD paid on the loan was interest?

[Pup]

Yeah, no idea there. Bloomberg would have us believe it's all interest, while Saward says it's all principal.

[xpensive]

Let's see, if the 2.45 GUSD loan was taken up in 2006 and to be paid off by 2012, that's 408 MUSD per year, right?

If we take that from the 624 paid last year, there's 216 MUSD in interest on a remaining 2450-408 MUSD debt, which makes for 10.5%. Makes sense?

[Pup]

Works for me.

[jddh1]

I work for Bloomberg. I'll e-mail the journalist and ask him where he got the numbers and how he got them. Give me a couple of days hoping he replies.

[xpensive]

Excellent jd, that journo seems to have got a thing or two backwards?

[WhiteBlue]

So contrary to what you're saying, it seems CVC's "withholding" of funds from the teams is what made all this mess possible. Doesn't sound too smart to me, which leads me to think that the reason they didn't pay is because they couldn't. The article does say they are operating at a loss, and I imagine additional funding to pay off the teams would have been hard to get, given the financial crisis and the apparent fact that the original $2.5 billion was risky enough to justify a 25% interest rate.

As allways there a two sides to it. If you believe Bernie one condition of the revenue share according to the memorandum of understanding was a concord binding the teams and their controlling corporations until 2012. That condition was obviously not met as we all know. Most teams only committed with the Concord in August 2009. Their parent companies may have get out clauses as well. Under those circumstances Bernie must have seen legal opportunities to hold the cash back.