26/10/2010
NEWS STORY
There isn't any doubt that Renault has had a better season this year than in 2009. However, whilst its improved on-track performance has been on show for the world to see, we have had little indication of what has been going on behind the scenes to ensure that the team stayed on track. That veil has now been lifted, courtesy of an article in the Evening Standard by Pitpass' business editor Chris Sylt, and the upshot is that Renault has relied on a rather unexpected backer.
Saying that Renault had a bad season in 2009 really is an understatement. It finished the year in eighth place, its worst ranking since Renault bought the team from clothing company Benetton in 2000, and an exodus of car manufacturers from F1 put a question mark over whether it would be racing in 2010.
The catalyst for the team's annus horribilis was the accusation in August last year that its boss Flavio Briatore had rigged the result of the 2008 Singapore Grand Prix by ordering Nelson Piquet junior to crash. In the wake of the scandal Briatore left the team followed by two-time world champion Fernando Alonso. It proceeded to lose a total of £50m of sponsorship coming from companies including Spanish insurer Mutua Madrilena, Pepe Jeans and Dutch bank ING which alone was believed to be paying £40m annually.
This led to Renault selling a 75% stake in the stricken team in December last year to a group led by Luxembourg-based businessman Gerard Lopez who was one of the early investors in Skype. However, despite becoming a minority shareholder, Renault provided invaluable support to the team this year.
According to F1's industry guide Formula Money, the car manufacturer still spends £38m supplying its F1 cars with 2.4 litre V8 engines. In February Renault also gave the team a £20m loan secured on its right to race in F1 as well as all its assets and land which had a value of £35.2m at the end of 2008.
But by July cracks were starting to appear when the team requested advance payment of the prize money it is due to receive at the end of this year. Lopez explained that the team "committed to a higher investment plan than the one that was initially foreseen" and that it "didn't plan on increasing the spend." However, the team ultimately didn't need the advance payment and F1's boss Bernie Ecclestone revealed that he "never gave them the money and they got over the crisis." The boost it needed came from an unexpected source.
On 14 September Renault released its security over the assets, grid slot and land and 17 days later its team used them to secure another loan this time from Lithuanian bank AB Snoras. It isn't known when the loan has to be repaid by but it is clear that if the team fails to repay, the bank could call in its security and take control of it. The loan documents are clear about this and state that the "'mortgaged property' means Renault F1 Team limited."
The documents also reveal that "the lender is under an obligation to make further advances to the company." So although the loan carries with it an element of risk that the team could change hands if it fails to repay, it looks like it will secure its immediate future.
Getting the loan from Snoras is not in fact as unusual as it may seem at first. The bank became a sponsor of the team in August and has prominent logos on the sides of its cars.
It maybe completely unknown in the UK but Snoras is a giant in its home country. It is the fifth biggest bank in Lithuania by assets under management and has over a million clients. The prospect of broadening its exposure even more is likely to have attracted it to the team since its driver line-up of Polish Robert Kubica and his Russian team-mate Vitaly Petrov has given Renault a high profile in eastern Europe.