WILLIAMS FOR SALE; MCLAREN HEADS TO COURT
Williams and Mclaren – the second and third most successful Formula 1 teams of all time in terms of championships won – face a fight for survival as the economic effects of the COVID-19 pandemic exacerbate financial vulnerabilities which have been troubling both organisations for some time. Both have struggled for competitiveness in recent seasons, leading to a reduction in their share of F1’s revenues, which are determined by constructors’ championship positions.
Although Mclaren has undergone a competitive renaissance, its wider business has encountered cashflow problems as a result of the pandemic. Its ability to raise new funds has been constrained by a previous bond issue
in 2017, when the other shareholders bought former CEO Ron Dennis’s 25% stake for a sum reported to be £275m.
Williams declared a £13m loss in its latest financial reports and announced that a formal sale process for the business had begun – an unprecedented move for a family owned team which has robustly rebuffed previous proposed acquisitions. Although 20% of Williams Grand Prix Holdings plc was listed on the Frankfurt Stock Exchange in 2011, and other minority shareholders have come and gone, Sir Frank Williams retains a controlling 52.3% share. Williams has already sold its Advanced Engineering business and it terminated its relationship with title sponsor Rokit in May, following that up with a statement saying the team had fulfilled all its contractual obligations – which can be read as a suggestion that its erstwhile sponsor had not.
But who is in the frame to invest now? Chanoch Nissany, the Israeli businessman who once drove a Minardi during practice for the Hungarian GP, is an outside possibility as his son Roy, an F2 racer, is a Williams development driver. Dmitry Mazepin, the Russian billionaire whose son Nikita also races in F2, is another name touted as a possible buyer. He tried to acquire Racing Point in 2018 when its previous owners hit financial trouble.
Most likely, though, is Michael Latifi, whose son Nicholas will race for Williams this season. Latifi owns a 10% share of Mclaren, and in April he reportedly loaned Williams some of the £28m the team obtained as part of a refinancing deal, some of which is leveraged on the group’s heritage assets – including its historic car collection.
Mclaren is also considering a partial sale and is heading to the courts as it tries to raise £280m to shore up its finances. It deems the court action necessary because its plans involve the possible sale and lease back of its properties, and the sale of some or all of its heritage car collection. These plans have been complicated by what Mclaren described in a statement as “an ad hoc group of creditors (including hedge funds and distressed asset investors)” which has challenged its right to proceed. This group has an interest in the previous bond issue and is objecting to the release of the security. Mclaren claims the group is stalling the process in order to force the company to accept an alternative financing proposal. It has now successfully applied for its legal action to be fast-tracked through the UK courts, starting on 2 July.
Mclaren says that while it “has sufficient liquidity to meet its obligations as and when they fall due in the very short term, further liquidity is required to be made available by no later than 17 July 2020”. Judge Anthony Mann, who agreed to expedite the hearing, described the timescale as “ambitious”.