17/09/2013
NEWS STORY
Pitpass hears that the organisers of the Grand Prix of America in New Jersey have not given up hope of being included on the 2014 Formula One calendar but, unsurprisingly, money is the sticking point.
Back in July Pitpass' business editor Christian Sylt revealed that the race organisers had engaged investment bank UBS to raise £64.2m ($100m) which is required to complete engineering work on the 3.2-mile road course where the Grand Prix is due to be held. It is believed that the money has not yet been raised and last month, F1's boss Bernie Ecclestone told Sylt that he had effectively written off chances of the race taking place in 2014 due to the lack of funding.
The race "is not on the cards for next year" he said adding that the problem is the organisers "haven't got any money." Contrary to a recent report, Ecclestone has not formally dropped the race already as he is not in a position to do this. The organisers still have a contract with the F1 Group and it gives them several months to get the money together.
Accordingly, when Autosport.com recently published an alleged provisional 2014 calendar which lacked the Grand Prix of America Ecclestone issued a strong denial. "We have a contract with New Jersey and I hope they can honour the contract," he said.
Pitpass understands that the contract has a November deadline for raising the money. This falls after the 27 September when the World Motor Sport Council will meet to agree on the provisional 2014 calendar.
The New Jersey race organisers need to ensure that the Grand Prix is on the provisional calendar as this will give them a vital few more months to try and raise the £64.2m. Pitpass understands that the race promoter Leo Hindery junior is ensuring that any registration fees are paid to the FIA to get the Grand Prix of America on the provisional calendar. Over the past few months he is believed to have been in contact with a string of New York-based investment funds to try and secure the funding so the last thing he would want is for the race not to be listed.
Hindery is the billionaire managing partner of private equity fund InterMedia Partners but he isn't personally providing the required £64.2m. Quite the opposite in fact because, as Pitpass has revealed, he is prepared to sell 100% of the race organising company in order to try and get the money.
So where does this leave us? Well, it means that we will most probably see the Grand Prix of America on the provisional calendar but that doesn't mean that it is more likely to go ahead next year. The core problem still remains and, as Pitpass has reported, this seems to be the lack of state funding.
Few races get revenue from F1 trackside advertising or the sport's corporate hospitality outfit the Paddock Club. It means that ticket sales are their largest source of income and this rarely covers the race hosting fee and running costs.
It explains why Vicky Chandhok, president of the Indian motorsport governing body, the Federation of Motorsports Clubs in India (FMSCI), recently told Forbes that "no Formula 1 circuit in the world will make money." Accordingly, it is understandably tough to get investment in a race promotion company.
However, investors will provide funding if the business has assets which money can be secured on. The most obvious asset is a circuit itself but of course it is hard for organisers to own the track in the case of a race held on public roads, such as the one planned for New Jersey.
Government funding is usually needed to compensate for the difficulty of raising private investment however Hindery has confirmed that no state support will be used to back the race in New Jersey. It could be a decision that he comes to regret.