25/10/2006
NEWS STORY
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The Midland F1 Racing team was running on fumes last season, writes Christian Sylt.
However, this doesn't refer to the Silverstone-based outfit's qualifying strategy, but to the company's financial situation.
Following months of speculation, Russian-born Alex Shnaider bought the company from Eddie Jordan for an alleged £25m in early 2005, as the Irishman, like fellow team-owner, Paul Stoddart at Minardi, struggled to keep pace with his rivals, not merely on the track but financially, as the manufacturers continued to help widen the vast chasm between the haves and have-nots.
In spite of the fact that the team's liabilities exceeded its assets by £24m, Shnaider's company, Midland Resources Holding, provided a further £26million in interest-free loans to cover costs, and thereby keep the team afloat, just.
This turned out to be an extremely shrewd move, for just over 18 months later, Shnaider was able to sell the company to the Dutch luxury car maker, Spyker, for £57m.
Spyker itself had tiny revenues of just £5.3m last year, and financed the acquisition by issuing 2.65 million new shares and taking out a loan.
The Dutch company paid such a high price because of F1's high barrier to entry, the $48m bond, which although scrapped in time for 2008, is still in place at present. Furthermore, though there are currently only 11 teams on the F1 grid, there is (officially) space for one more, and from 2008 that will be filled by Britain's Prodrive team, providing it can find engines and chassis.
Therefore, Spyker's only choice to showcase its car making craftsmanship in F1 was to buy an existing team... step forward Mr Shnaider.