The McLaren Formula 1 team, as part of the McLaren Group that also includes the automotive side of the business, is potentially affected by an ongoing financial row between bondholders and shareholders of the group.
The McLaren Group – 59% owned by Mumtalakat, the sovereign wealth fund of Bahrain – is in something of a financial crisis, intensified by the enforced halting of road car production due to the coronavirus pandemic.
McLaren’s F1 team is relatively healthy, with good future prospects, but is vulnerable as part of the group which is seeking a reported extra £250million of liquidity funding after having been turned down by the government for a £150m business loan.
McLaren has confirmed it is in the early stages of exploring the possibility of selling a minority stake in the F1 team.
This could be seen as a way of shoring up the team’s financial position now that the cost base has been firmed up under F1’s cost cap regulations. It’s almost certainly also the result of pressure to find funding for the whole group.
Mumtalakat invested a reported extra £300m in the group in March of this year but was unwilling to commit further. As a consequence, McLaren issued new bonds (set interest-paying loans).
But the use of the McLaren car collection as collateral in the event of the company collapsing has caused a row with some existing bondholders. The original bonds were issued in 2017, partly to cover the costs of buying-out former boss Ron Dennis. This row has intensified the need to find alternative funding.
Exploring the possibility of selling a minority stake in the team is a couple of steps back from the position of Williams, which is effectively for sale.
But it is feasible that potential investors may only be interested in a controlling interest of the team, in which case McLaren would be faced with the choice of turning such investors down and finding its needed finance some other way or agreeing a price to separate the team from Group McLaren’s ownership.
As things stand, there is realistic hope that the automotive side of McLaren’s business will make a post-pandemic recovery. Furthermore, the Bahrainis are unlikely to be financially pressured into doing anything they don’t want to do. Attracting a significant investor into an F1 team that – since the cost cap agreement has been made – now has very real prospects, is certainly not unfeasible.
But in the final analysis, it is the market which will decide this. With Williams already on the market and worries about the financial shape of Renault, the automotive giant that owns the Enstone F1 team, it might be something of a buyers’ market for would-be F1 team owners.