Marussia F1 Team 2014

[daveyrace]

From the Telegraph... whole piece herehttp://www.telegraph.co.uk/sport/motors ... eover.html

"Two British-Indian brothers who made their fortune in the steel industry have claimed they are in 11th-hour talks with Marussia over a £55 million deal to save the beleaguered team from collapsing into administration.
Baljinder Sohi and Sonny Kaushal, a Conservative Party candidate for council election this year in Slough, told the Telegraph they have been in close contact in recent days with the Banbury-based team, who will miss the next two races due to financial troubles.

“We are very close to a deal,” Sohi claimed. “But it has to be the right price. We have put in a serious offer and we will see what happens.” Marussia did not respond to requests for comment on Sunday night."

[turbof1]

I hope they survive. This team has had to deal with do much misfortune the last few years; they deserve their place in F1.

Luckily they still have that scope on the price money boost; it'll be atleast somewhat attractive to potentional buyers.

[ScottB]

I hope they survive. This team has had to deal with do much misfortune the last few years; they deserve their place in F1.

Luckily they still have that scope on the price money boost; it'll be atleast somewhat attractive to potentional buyers.

Conversely it's probably what's holding up the sale, as it allows for the current owner to ask for more...

[adrianjordan]

Baljinder Sohi and Sonny Kaushal, a Conservative Party candidate for council election this year in Slough, told the Telegraph they have been in close contact in recent days with the Banbury-based team[/i]

Ah, the Tories...the party where even county councillors can afford to by a Formula 1 team... (sorry, couldn't resist)

[Alexgtt]

Please let's not get political!! [-o< This is one of the few places we can escape all that crap.

Hopefully this team gets saved. There are sparks of potential there and good people running a no glitz, bare bones racing team. Their golden ticket is the prize money but I don't hold out much hope.

[turbof1]

If we assume the deal pulls through, does Marussia then have a good financial backing?

Current signs look reasonable good; unlike caterham we don't have anybody hiding in the shadows, and there seems to be 'only' 10 mil between the bid and the demanded price. The debt was said to be 30 million pounds, mostmy owed to ferrari, but around 40 million pounds (I have readed other numbers, some more, some less) would be coming towards them if they make it to next season.

It looks doable.

[Alexgtt]

I'm not so sure. Think I read somewhere debts in region of $225mil, so would be a case of re-finance debt with new owner and go forward with prize money, etc. Still more promising than Caterham situation as more transparent ownership structure.

[marcush.]

the biggest point is not the depts it is how to source the ongoing cost .200headcount thats 20Mill€ alone or 1,6mill per month ....plus a comparable number for Aero development to have a remote chance to move forward ....plus the PUs..plus plus plus.. so someone coming with 55mill is not even going to carry this undertaking much longer than season close methinks.And who would sponsor a team like Marussia with 30 or 50Mill € per year with not even some points scored 2015 being very likely .

There are not any big assets coming with Marussia -like a bonafide Windtunnel or a state of the art facility ..

[Richard]

Why would the new owner pick up the cost of refinancing the debt? Currently the best possible outcome for the team is liquidation, so the buyer only needs to offer a little bit more than the cash the current creditors would get from a liquidation sale. The current owners are in no place to haggle because the buyer could shrug and walk away, or go to Caterham, or invest in Sauber/Lotus/FI, etc.

[turbof1]

Why would the new owner pick up the cost of refinancing the debt? Currently the best possible outcome for the team is liquidation, so the buyer only needs to offer a little bit more than the cash the current creditors would get from a liquidation sale. The current owners are in no place to haggle because the buyer could shrug and walk away, or go to Caterham, or invest in Sauber/Lotus/FI, etc.

Probably because with liquidation, receiving price money goes through the window too. If the price money exceeds the cost of refinancing debt, you have your answer.

Buying a team through liquidation looks very much like a troublesome situatiion. Buying the team now means you have your staff and facilities up and running. Liquidation means rehiring that staff, of which a great deal would have moved on already. And liquidation means auction, means taxes and the risk somebody gets away with a big part of what you'd need. And it would severely limit you in time to prepare for next season.

Sure; the debt is a big issue, but Marussia has price money incoming. If we'd believe the news items that have been crawling around like ants, the debt is around 30m, with the price money varying between 35m and 40m. It would mean that you'd need to pay the debt first, and receive the price money a few months later. Hardly an issue since inflation and rent are around 0%. You could just take a loan on short term to pay the rent.

the biggest point is not the depts it is how to source the ongoing cost .200headcount thats 20Mill€ alone or 1,6mill per month ....plus a comparable number for Aero development to have a remote chance to move forward ....plus the PUs..plus plus plus.. so someone coming with 55mill is not even going to carry this undertaking much longer than season close methinks.And who would sponsor a team like Marussia with 30 or 50Mill € per year with not even some points scored 2015 being very likely .

There are not any big assets coming with Marussia -like a bonafide Windtunnel or a state of the art facility ..

Mercedes bought Brawn GP for 90m back in the day, and they were world champions! 55m for backmarker which is in serious trouble, sounds reasonable. All else is really a matter if you'd think F1 is a sensible investment, which of course isn't, but let's be glad some people still have interest despite that.

[Alexgtt]

I can't see the debt being £30mil. They wouldn't have gone under for that with the prize money coming to cover or finance it. The figure has to be much greater.

Yes, doing a deal with the administrator and re-financing the debt is the way to do it. That way you don't loose the staff, equipment, tools, cars, etc. and you have a chance of finding some additional backers to head into a new season and get Bernie's cheque in the bank. OK the prospects aren't great but it gives breathing space to at least try. I really don't think that will happen but here's hoping a white knight is round the corner.

[Richard]

At the moment Marussia won't get the prize money if they don't enter 2015. So the current scenario is that the prize money is worthless. If Marussia ask a buyer to allow for the prize money, that buyer can say they're not going to pay an inflated price and walk away, Marussia will be left with nothing.

However, there is the precedent that Bernie has paid prize money early for teams in trouble. So if Marussia can have that cash now, then buyer will have to include it. So Bernie's patronage will make the difference between a sale or liquidation. How much does Bernie want to keep a full grid, or would he like Marussia to go because then he can have the 3 car teams that he keeps talking about?

[turbof1]

At the moment Marussia won't get the prize money if they don't enter 2015. So the current scenario is that the prize money is worthless. If Marussia ask a buyer to allow for the prize money, that buyer can say they're not going to pay an inflated price and walk away, Marussia will be left with nothing.

However, there is the precedent that Bernie has paid prize money early for teams in trouble. So if Marussia can have that cash now, then buyer will have to include it. So Bernie's patronage will make the difference between a sale or liquidation. How much does Bernie want to keep a full grid, or would he like Marussia to go because then he can have the 3 car teams that he keeps talking about?

Ah, so if the current scenario is that the money worthless, the old owners can easily state that the price money goes to them instead of the team when the team enters in 2015?

It's relative guaranteed income if the deal goes through. I don't think any investor would be thinking about taking over the team and not entering 2015. Yes the potentional buyers could pressurize Marussia into neglecting that, but Marussia can leverage that future price money too. In the end, that future income does make the team more appealing then if that feature wasn't there.

In real this would compare to shareholders selling a company. If the company has a big clientel base (=future income), then the sellers will ask more and the buyer will offer more.

[Richard]

The buyer has no obligation to enter F1, they can walk away. Why take on a team with debt when you can start your own team with no inherited debt? Also why buy a team with debt when there are alternative deals without debt such as Force India & Sauber?

The seller in this case has no alternative. The current scenario will leave them without a penny and loss of any assets used to guarantee loans. So a buyer offering them say $1m for 'goodwill' in addition to liquidation value will result in the seller being $1m better off with the deal than without, plus avoiding the disruption of liquidation.

The buyer holds the trump card because they are free to walk away, and they have other options for investing in F1.

Pragmatically, if there is a buyer I imagine Bernie releasing the prize money early and that'll be used to bail out the debt. The new owners would start with a clean sheet. Bernie's motive is to assure suppliers that the prize money can be relied on as a last resort if a team is struggling with credit. It's like a central bank unwriting future earnings for teams, it'll shore up the credit worthiness of the teams that remain.

[turbof1]

The buyer has no obligation to enter F1, they can walk away. Why take on a team with debt when you can start your own team with no inherited debt? Also why buy a team with debt when there are alternative deals without debt such as Force India & Sauber?

The seller in this case has no alternative. The current scenario will leave them without a penny and loss of any assets used to guarantee loans. So a buyer offering them say $1m for 'goodwill' in addition to liquidation value will result in the seller being $1m better off with the deal than without, plus avoiding the disruption of liquidation.

The buyer holds the trump card because they are free to walk away, and they have other options for investing in F1.

Pragmatically, if there is a buyer I imagine Bernie releasing the prize money early and that'll be used to bail out the debt. The new owners would start with a clean sheet. Bernie's motive is to assure suppliers that the prize money can be relied on as a last resort if a team is struggling with credit. It's like a central bank unwriting future earnings for teams, it'll shore up the credit worthiness of the teams that remain.

The seller would still forego the future income if he just lets the team go into liquidation. Say that after paying off debt 5m remains of that income, and the price is 2.5m above liquidation price. Then it'd be more advantaegous to buy the team before liquidation. The choice will boil down to either buying the team BEFORE liquidation, or not buying it at all. And the seller always has a choice. Just because he's in trouble does not mean he needs to sell below the market price.

Generally it's also cheaper just buying a team then starting one yourself. start-up costs in F1 are huge and take up to years. Haas is an exception, but only because they already have facilities and people, thus avoiding a large chunk of the start-up costs.

Also, teams like FI and Sauber aren't debt-free per se. Even worse: the team is worth more, has more leverage to have bigger loans and in short could be exponentionally more expensive overall. Of course you get a bigger team for it.

I also don't believe Bernie will be that easily willing to give an advance on price money. Before long Sauber, Force India and even the administrator of Caterham will be knocking at his door.