McLaren and McLaren F1 sues creditors as bankruptcy looms (4th Update)

Andreas Seidl

UPDATE (GMM) Team boss Andreas Seidl has denied that McLaren could have collapsed financially in 2020.

Recent London High Court documents showed that the Woking based team required a huge cash injection to avoid insolvency within the month of July.

This week, it emerged that a $185 million loan has been secured from the National Bank of Bahrain, which is partly owned by McLaren's Bahraini shareholders.

It raises the question as to whether the team informed Daniel Ricciardo about its money problems before the Australian decided to sign up for 2021.

"As always, I am direct and transparent, as is Zak (Brown)," Seidl told German-language reporters.

"We had an open discussion and Daniel was informed about what was going on. But we never had any doubt about McLaren being on the grid next year.

"Of course it has been a difficult period, but I was in constant contact with Zak and we always looked for the best investment options to put us in a good position."

However, McLaren has had to shed staff, and it emerges that the scheduled wind tunnel and driver simulator investment projects were also scrapped.

"Really, it does not affect anything for this year or next," Seidl insists.

"At the beginning of this crisis, we had to stop all infrastructure work and even now, without knowing what our income will be this year, we must be cautious.

"As you can imagine, I am insisting that everything gets going again as soon as possible, as we have a deficit compared to the big teams," he said.

McLaren saved by the Bahrani bank

06/30/20 (GMM) McLaren is borrowing about $185 million from a Bahraini bank.

On Monday, amid claims the team needed funds desperately in order to avoid insolvency by mid July, McLaren supremo Zak Brown declared: "The problems have been solved.

"You will hear positive news from us in the next few days," he told Auto Motor und Sport.

Indeed, the National Bank of Bahrain confirmed on Monday: "The National Bank of Bahrain hereby confirms to the markets that final documentation has been signed and all the necessary approvals have been granted in relation to a GBP 150 million financing facility."

Woking based McLaren is 56 percent owned by the Bahrain royal family's Mumtalakat investment company. The same company owns 44 percent of the bank.

Also on Monday, Liberty Media announced that its almost $3 billion loan facility concerning Formula 1 has been amended so that the covenant runs until 2022.

"This new flexibility in our debt covenants, along with a strong balance sheet and ample liquidity, will enable us to weather this difficult time," said F1 CEO Chase Carey.

Zak Brown claims McLaren's financial woes behind them

06/29/20 (GMM) McLaren's financial problems "have been solved".

That is the claim of team supremo Zak Brown, mere days after it emerged that McLaren was actually looking towards a July hearing in the London High Court to avoid insolvency.

Shortly after that news, rumors that McLaren could be rescued by a loan from the National Bank of Bahrain emerged.

When asked about the alarming situation at Woking, Brown told Auto Motor und Sport: "The problems have been solved.

"You will hear positive news from us in the next few days."

McLaren will then be well position for the future with the budget cap coming in for 2021 and beyond, he added.

"We are able to make full use of the cost cap and do our program as planned. With a strong driver duo, this will put us back on the road to victories and titles," said Brown.

However, it has been rumored that the financial problems were so dire that construction of a new wind tunnel and simulator were scrapped.

Brown insisted: "When the virus broke out, all programs were stopped. Our shareholders first wanted to see how the situation would develop.

"With the financial problem sorted out, these programs are slowly starting up again. We are still careful because we don't know how many races or Formula 1 earnings there will be this year, or if there will be a second wave of infections.

"But we are back in business," Brown said. "In five years, McLaren Racing will be worth a lot more money than it is today."

Can McLaren stay afloat?

06/24/20 (GMM) McLaren is worried it may soon run out of money.

Although the famous British team has signed up Daniel Ricciardo for 2021, McLaren has now said in a filing at London's High Court that it needs a ruling "to ensure that the Group can continue as a going concern into 2021".

The company has already laid off a quarter of its workforce, and now it is suing to have the security in its factory and historic F1 car collection released in order to raise over $300 million in loans.

The High Court papers say a ruling in McLaren's favor will work by "preventing a cash flow crisis and a value destructive insolvency".

Writing in Forbes, F1 business journalist Christian Sylt said the crisis has emerged because McLaren was unable to sell enough sports cars during the pandemic.

Sylt said McLaren needs the funding by 10 July, which is between the forthcoming first and second 'ghost' races in Austria.

The defendant's lawyer reportedly told McLaren earlier in June that the lawsuit will not be successful because it "will not be concluded before the Group runs out of cash".

And if the cash does run out, the lawyer predicted that McLaren "will then have no realistic prospect of avoiding an insolvent liquidation".

A trial will begin in London's High Court on 2 July.

06/23/20 A lawsuit has been filed by McLaren and it's Formula One team against some of its creditors.

McLaren's cash flow has dried up due to the freeze on sales and the revenue loss caused by the delayed start of the 2020 F1 season as a result of the Covid-19 coronavirus pandemic.

As a result, McLaren is looking to sell a stake in its F1 team. The company also announced in May it would need to shed 25% of its staff, which was about when it was discovered that McLaren was looking to offer its headquarters in Woking, United Kingdom, and some of its classic cars as collateral for loans.

However, McLaren already used its headquarters and classic cars as collateral for loans it secured in 2017 to buy out former shareholder Ron Dennis and pay for other expenses (Dennis' shares alone cost McLaren $343 million). Those earlier creditors are now blocking McLaren from using its headquarters and classic cars to secure new loans, and have instead provided an alternative proposal for financing.

McLaren isn't keen on the alternative financing deal so has taken the earlier creditors to court in an effort to have a judge declare they have to release their hold on the headquarters and classic cars, according to information obtained by Forbes from McLaren's lawsuit.

In its lawsuit, McLaren said it required the new funds to ensure it “can continue as a going concern into 2021" and that they would help to prevent a “cash flow crisis and a value destructive insolvency."

Due to the urgency of the potential insolvency, the parties have proposed to deal with the matter via a two- or three-day trial starting July 2, according to Forbes.