08/02/2015
NEWS STORY
As the furore over Marussia's possible return to the grid continues, could a little known rule cause further problems?
Writing for Forbes, Christian Sylt reveals the financial crisis the Banbury-based outfit was in last year, a crisis which saw it going into administration and missing the final three races of the season.
With debts of £63.9m, the team went under in October, its creditors including Ferrari, owed £16.6m for its engine supply, and £7m to McLaren for wind-tunnel and simulator services.
Indeed, in total, the team, or rather its operating company Manor Grand Prix Racing (MGPR), owed money to over 200 companies. Even Timo Glock, who in mid-2011 signed a new three-year deal with the team but was dropped at the end of 2012, is owed £617k.
So bad was the situation, in its report on the financial situation at MGPR, administrator FRP Advisory reveals that some unpaid creditors who had taken possession of MGPR assets demanded "duress payments" before handing them back over. This at a time the team was still hoping to attend the season finale in Abu Dhabi.
In his report (top, right), which reveals that in the eight months to the end of August 2014 MGPR made a £29.2m net loss on revenue of £24.7m with total net liabilities coming to £41.5m, Geoff Rowley, managing partner at FRP, says; “by reason of its outstanding liabilities and cash position, the company was insolvent on both a balance sheet and cash flow basis.”
In order to compete in F1, the operating companies behind the team are required to sign two essential agreements. The first is the entry form lodged with the FIA which gives the team a place on the entry list. The second is a contract, known as a Team Agreement, which is signed with the F1 Group, the sport's commercial rights holder.
According to the prospectus for the stalled stock market flotation of F1, under the Team Agreements, the teams “have agreed to participate in the World Championship from 1 January 2013 to 31 December 2020.” In return, the teams share in F1’s prize money, which in 2013 came to $797.5m.
This prize fund is made up of 47.5% of the F1 Group’s underlying profits and is paid to the top ten teams on a sliding scale, while the best performing teams also receive bonuses which bring the total payment to around 63% of profits.
However, one of the key conditions of receiving its share is that the team must remain solvent. This is made clear on page 179 (lower, right) of the prospectus, where it reads that “a team’s rights and obligations under its Team Agreement terminate if it… is insolvent.”
Therefore, ignoring the ongoing row over whether Manor should be allowed to start the season with a 2014 car, whether it should be allowed to miss the first three races - which it can do under the rules - and whether it or its rivals should get the £34.1m prize money, the fact is that according to the sport's own rules its insolvency in 2014, in terms of balance sheet and cash flow, effectively bars its way.
Chris Balfe