07/06/2009
NEWS STORY
Donington chief executive Simon Gillett must be wishing there was not a recession. He has had the contract to host the British Grand Prix from 2010 for around a year now and although work has begun on the circuit modifications needed to host the race, he still has a shortfall of £100m in his construction budget.
In the next 12 months he has to secure the money, complete construction and ready the circuit for the first race. Any one of these alone would be a tall order. F1 boss Bernie Ecclestone has suggested he will let Donington host its first race in 2011 if necessary but we all know that this would mean failure. Gillett would have failed to get his act together and the sport would fail to have a British GP for the first time in its 59-year history. Whether Ecclestone really would let the race return to the calendar in 2011 remains to be seen.
The British GP's future seemed to be looking up this week when it came to light that Gillett's company, Donington Ventures Leisure (DVL), had settled a lawsuit brought against it by the circuit's owner, Tom Wheatcroft, over allegedly unpaid rent. Indeed, some of the less enlightened sections of the media, such as the BBC, claimed the British GP had been "saved". However, all it takes is a quick read through Gillett's own words and you soon see that things aren't quite as rosy as they may seem.
A Daily Telegraph article, based on an interview with Gillett, reveals that both he and his business partner Paul White have put in substantial sums personally to allow construction at Donington to continue. However, they still lack outside funding and the amount needed is far from small beer.
Gillett had approached sports marketing giants IMG, who have a joint venture with the bank Goldman Sachs called ISG, which specialises in putting together debenture schemes. The Donington plan was to get funding from corporate guests buying annual high-level hospitality passes.
According to the Telegraph, ISG estimated that, even allowing for the recession, the project would raise £175m over 10 years. The article claims that Goldman Sachs was originally willing to forward £100m for construction but it withdrew this offer in March due to the economic downturn. Since then another debenture operator has reportedly predicted that, excluding corporate hospitality, individual debentures would raise around £140m for Gillett. That may well be so but he still lacks £100m.
"We are talking to a variety of funding sources, some private equity and some high street banks and I think we will have something in place soon, I'm very confident," Gillett told the Telegraph. The newspaper says that Gillett believes funding will be in place by next month but it isn't the first time we have heard this. Back in January Pitpass' business editor Chris Sylt was told by Donington that it would announce its financial plans in March. Of course that never happened so naturally one is suspicious that it will be able to secure £100m by the end of July.
"As we stand the 2010 British Grand Prix will be at Donington Park," Gillett told the Telegraph. This bold affirmation reminded Sylt of comments made by Gillett to the South Wales Argus newspaper in 2004 about his plans to launch a local motorsport centre which was not dissimilar to Donington. Gillett failed to get planning permission for the project and he told the paper that "we decided to give up on Wales, got offered four sites in the Midlands, and within five months the deal was done. We're moving in October with £30 million of investment." However, things turned out very differently for Gillett's company as just over a year later it went bust with a £200,000 deficit in the amount that it owed to its creditors.
DVL has had its own fair share of payment issues aside from the Wheatcrofts' complaint. Last month the BBC reported that DVL owed a contract caterer £46,000 and Sylt has got hold of data which shows the extent of its problem.
The data comes from globally renowned business analysis experts Dun&Bradstreet, creators of the F1 Paydex which ranks teams' creditworthiness. According to a Dun&Bradstreet report about DVL dated 27 May 2009, "98% of UK businesses have a lower risk of paying significantly late." It adds that DVL has "a greater than average risk of business failure" with a massive 66% of UK businesses having a lower risk of failure.
To put this in perspective, out of a massive 62,353 businesses in the same industry group, Dun&Bradstreet says that none has lower financial strength than DVL. Time will tell whether it can raise £100m in the next month and, if not, it looks like the end of the road for the British GP.