88 replies to this topic

[Module]

A sad topic but probably needed..

 

What we "know":

 

Lotus owe Kimi ~20 million €

Lotus have a debt of 150 mil €

Lotus is rumoured to have debts to employees

Lotus is rumoured to have debts to suppliers

Lotus haven't signed a contract with Renault, 2 months before 2014 testing (Unpaid 2013 engines? Doubts about being able to pay 2014?)

Quantum deal seems ever more distant as you can read in Quantum-thread

 

Kimi jumped ship, presumably because Lotus couldn't keep to their promises made in Abu Dhabi, opting to rather get in shape for 2014. A team looking forward to 2014 wouldn't let this happen if able in any way to hinder it.

 

Hulkenberg seems to have moved on from Lotus, maybe having his options open, but still seems to be on route to FI?

 

Maldonado could help Lotus with his backing but is it realistic for PDVSA to pour money if Lotus is down for the count?

 

Genii has given much of Lotus loans(rumoured 100 mil €) but are they able to write down the loans? Writing down the loans would mean a loss of 100 mil, do they have funds to cover this? Would they have funds after this to fund Lotus 2014?

 

Counting together known debts and presumably they are a lot bigger, what is the risk for creditors to cut their losses and sue Lotus? It is a company with debts probably amounting to 200 mil, with no chance of being profitable and doubtful funding.

 

Is Kimi jumping ship a get go for creditors?

[F1ultimate]

If they are barely surviving this year, 2014 will be a tall order. It will be a year of regulation changes and very rapid car development. They might even have to drastically redesign their car if a competitor ends up with an advantage they must pursue. Maldonado is looking every more plausible as a partner to Grosjean.

[Baddoer]

Are these multi-pound debt € figures official?

[MustangSally]

Are these multi-pound debt € figures official?

 

The only real figures we have are from 2012 accounts. According to those, about £60m of nearly £80m debt (Pounds not Euros) falls due for repayment this year. This does not include debt run up this year - including things like Kimi's salary.

 

In 2012, Lotus spent £59 million more than it received in revenue - which could be a rough guide to its unwieldy overhead.

 

Even as a rough or conservative estimate, these are numbers that would give many accountants a sleepless, Sunday afternoon.

 

Debt can, and often is, rolled over and restructured. The worry is the viability of Lotus business model and the credibility of the team. Then creditors are not so forgiving.

 

The Quantum business and the spat with Raikonnen has been hugely damaging to Lotus and its investor potential. 

 

Lopez must have money from somewhere - he covered the losses in 2012 - so it's really down to him whether he carries on funding the team. At the moment, it doesn't look like he wants to put his hand in his own pocket any more . . . not for Raikonnen nor even engines.

 

Maybe Ijaz will turn up on a grid walk in Austin with a couple of Brunei princesses handing out notes. But the form is that he has misled and buried many people with insane media stunts such as the one he pulled last week. 

[SealTheDiffuser]

please include a poll

[Jackmancer]

please include a poll

 

Why? As if it's up for public debate whether Lotus will survive or not.

It'd rather have some sources, rather than these "known" facts. Boullier hasn't said anything about prospects of 2014 being so dire. And I don't quite understand how a team could go so heavy in debt as 150M.

[JHSingo]

Quantum deal seems ever more distant as you can read in Quantum-thread

 

Of course. Because internet forum posters know EXACTLY what is going on, right?

[F1ultimate]

 

Lopez must have money from somewhere - he covered the losses in 2012 - so it's really down to him whether he carries on funding the team. At the moment, it doesn't look like he wants to put his hand in his own pocket any more . . . not for Raikonnen nor even engines.

 

Not even Ron Dennis is keeping Mclaren afloat from his own pocket. Doing that is as financially irresponsible as having a birthday party at an expensive club and handing over your credit card over for a tab. You can be bleed dry very quickly. 

 

Like Ron Dennis famously said once: Formula 1 is not for those with faint of wallets

[metz]

This team management deserves a guy like Ijaz.

Anybody with any credibility is staying away in droves.

Since the team itself is very competent (now that the forward facing exhaust advocates are gone) the only hope I see is new owner. One with resources and a long term view. Renault?

[Module]

Are these multi-pound debt € figures official?

 

This is from August and the positive no problem debuke..

 

http://www.autosport...t.php/id/109230 In that one 90 M€ Genii and 120 M€ on the whole. And this is Lopez words.

 

http://www.telegraph...ts-biggest.html

 

Remember, those figures are last years so all debt after that isn't in theese reports. The reports of issues with payment came after theese comments. Even in Suzuka they tried to giva a picture of payments beinga made and so on.

 

Later there were reports about the debts haven risen with some tens of millions since last financial statements.

 

Kimis salary has been in every newspaper so I won't start searching for links.

[SealTheDiffuser]

Why? As if it's up for public debate whether Lotus will survive or not.

It'd rather have some sources, rather than these "known" facts. Boullier hasn't said anything about prospects of 2014 being so dire. And I don't quite understand how a team could go so heavy in debt as 150M.

 

For fun? Lopez and Lux advanced their private money... maybe? But as they see their "investment" dwindle... they might now pull the plug?

[jedioriginal]

Why? As if it's up for public debate whether Lotus will survive or not.
It'd rather have some sources, rather than these "known" facts. Boullier hasn't said anything about prospects of 2014 being so dire. And I don't quite understand how a team could go so heavy in debt as 150M.

Well Boullier also said many times that Kimi and all the employees have gotten their money ... So i would not take anything he says seriously.

[Module]

 

 

Lopez must have money from somewhere - he covered the losses in 2012 - so it's really down to him whether he carries on funding the team. At the moment, it doesn't look like he wants to put his hand in his own pocket any more . . . not for Raikonnen nor even engines.

 

 

In a sence they didn't cover the costs but gave a loan. So this means Genii most probably took a loan to give to Lotus so as long as Lotus is afloat Genii only gave their eligibility for credit. Lopez says in the Autosport article that they could write the money down any day, but they don't....given the mixed messages in many other things the question is can they realy? Does Genii have funds to cover writing down 100 M?

[Shiroo]

They will probably be missing on the grid next year.

No engine deal, plenty of people left the team already, missing staff, no cash for the salaries etc.

In normal circumstances, such company would be declared as a bankrupt pretty much, long time ago. 
And this is coming from die hard fan.

Sad but true. The current management ****ed up plenty of stuff. They could have a deal with Honeywell, adn instead they might get a shaddy deal like Quantum... christ.

[Miggeex]

Hopefully they have something in the bag that we haven't seen yet. Would be shame for the employees if they won't get stuff sorted. Ofc the best of them would get a place from another team. 

[Tsarwash]

Maldonado's PDVSA money is not really guaranteed next year either. It's been slowly kicking of in Venezuela for quite a while. The whole economy has been going tits up for a while, which is shocking considering how much oil there is there. 

 

http://www.bbc.co.uk...merica-24883849

[EthanM]

Why? As if it's up for public debate whether Lotus will survive or not.

It'd rather have some sources, rather than these "known" facts. Boullier hasn't said anything about prospects of 2014 being so dire. And I don't quite understand how a team could go so heavy in debt as 150M.

 

Genii for example doesn't actually pay Lotus to carry its logo on the cars. It doesn't inject cash either. Every cent Genii puts into Lotus is in the form of a loan, that's why they tend to have slightly inflated debt. Same goes for a couple of other minor sponsors, they don't actually pay Lotus money, they go under Genii's weird B2B umbrella which again translates to Genii "loaning" money to the team.

[Module]

Genii for example doesn't actually pay Lotus to carry its logo on the cars. It doesn't inject cash either. Every cent Genii puts into Lotus is in the form of a loan, that's why they tend to have slightly inflated debt. Same goes for a couple of other minor sponsors, they don't actually pay Lotus money, they go under Genii's weird B2B umbrella which again translates to Genii "loaning" money to the team.

 

Did I understand correctly? Genii gets the sponsormoney, "loaning" to Lotus to cover their costs and Lotus pays interest on loans to Genii from its revenue from for example FOM? But they don't actualy get income from sponsors directly? Why does this sound like sucking a company dry?

[EthanM]

Did I understand correctly? Genii gets the sponsormoney, "loaning" to Lotus to cover their costs and Lotus pays interest on loans to Genii from its revenue from for example FOM? But they don't actualy get income from sponsors directly? Why does this sound like sucking a company dry?

 

no, Genii has some weird B2B scheme which doesn't involve money, it's about networking blah blah blah. A couple of minor sponsors got their Logo on the cars without actually paying anybody money, Genii supposedly got fringe benefits out of associating with them and in turn loaned Lotus the money the sponsorship would have been worth.

 

The loaning bit is just an accounting thing. They hope that once the team is sold on (or gets a partner with money sort of kinda like Force india did with Sahara) Genii will get back part of money they put into the team when the team repays its loans, whereas if they did simple cash injections like Mallya did then they wouldn't really get back anything.

Other regular sponsors like Total, rexona, Clear etc pay the team normally.

Edited by EthanM, 10 November 2013 - 16:05.

[boldhakka]

It's a weird mix of things. For example, the Microsoft Dynamics stickers in the car are in exchange for Microsoft providing the database solutions for Lotus finance and HR departments. There's no exchange of money between Lotus, Genii, or Microsoft for those Microsoft Dynamics stickers on the car at all.

[EthanM]

It's a weird mix of things. For example, the Microsoft Dynamics stickers in the car are in exchange for Microsoft providing the database solutions for Lotus finance and HR departments. There's no exchange of money between Lotus, Genii, or Microsoft for those Microsoft Dynamics stickers on the car at all.

 

yeah but what I am talking about is deals like CNBC ... CNBC is a business type tv network, they did some features on Genii's private equity business (usefull since CNBC caters to affluent viewers interested in Business news) and in exchange got their stickers on the Lotus cars. Lotus itself didn't get any money, they got a loan from Genii

Edited by EthanM, 10 November 2013 - 16:15.

[Module]

no, Genii has some weird B2B scheme which doesn't involve money, it's about networking blah blah blah. A couple of minor sponsors got their Logo on the cars without actually paying anybody money, Genii supposedly got fringe benefits out of associating with them and in turn loaned Lotus the money the sponsorship would have been worth.

 

 

I would say thats in a way the same thing. Lotus itself doesn't get the benefits from sponsors other than eligibility to get loans from Genii. Genii gets monetary or other benefits from some of the sponsors for itself. And everything rests on a hope that somebody would buy Lotus and pay the debts before Lotus goes under?

[F1ultimate]

I would say thats in a way the same thing. Lotus itself doesn't get the benefits from sponsors other than eligibility to get loans from Genii. Genii gets monetary or other benefits from some of the sponsors for itself. And everything rests on a hope that somebody would buy Lotus and pay the debts before Lotus goes under?

 

Urghh.. that sounds like a pyramid scheme ready to collapse. 

[William Hunt]

our whole worldwide economy is a pyramid scheme, money nowadays isn't even backed up by for example a gold standard, it's value is purely based on trust which is quite baffling.

[boldhakka]

yeah but what I am talking about is deals like CNBC ... CNBC is a business type tv network, they did some features on Genii's private equity business (usefull since CNBC caters to affluent viewers interested in Business news) and in exchange got their stickers on the Lotus cars. Lotus itself didn't get any money, they got a loan from Genii

Thanks. Let me see if I understand the structure correctly.

Genii loans LotusF1 enough evey year to fund its operating expenses on top of money from FOM. Genii extracts value (e.g CNBC feature) - let's say $X every year - from LotusF1. Is this $X being counted as payment against the principal of the loan or not?

Sounds like it isn't counted. Am I right?

(setting aside the question of who and how a deal like that would valued in real dollars).

Edited by boldhakka, 11 November 2013 - 08:02.

[totgate]

Yes.

[Ferrari_F1_fan_2001]

They will survive but Grosjean really needs to step it up now and effectively take over Kimi's role; leader, consistent high points scoring, consistent finishing, show excellent race craft.

 

If Maldanado is drafted in for funding purposes, I hope he continues showing the maturity he displayed at times this year. His speed is there, is his focus?

[Tsarwash]

This is not the thread to read before you have had coffee in the morning

Edited by Tsarwash, 11 November 2013 - 10:49.

[Rinehart]

My guess is that the remaining F1 teams will be fielding 3 car teams by 2016.

Either that or class 2 (non-constructor/Gp3 ish) will run with them. 

Edited by Rinehart, 11 November 2013 - 11:43.

[Shambolic]

I';m curious as to why a team that (under different guises) has been in F1 for 30+ years, has won races and championships, and is even today up at the front, doesn't have enough money. This isn't a bandwagon joining "Lotus suxx", but a genuine beffudlement - Because Bernie, as far as I was aware, dished out cash based on many things, not least of which is longevity.

 

Or is it that Bernie had weasled his way out of such payments for teams that changed hands/ name?

[scheivlak]

I';m curious as to why a team that (under different guises) has been in F1 for 30+ years, has won races and championships, and is even today up at the front, doesn't have enough money. This isn't a bandwagon joining "Lotus suxx", but a genuine beffudlement - Because Bernie, as far as I was aware, dished out cash based on many things, not least of which is longevity.

 

Or is it that Bernie had weasled his way out of such payments for teams that changed hands/ name?

In a way, yes. As Dieter Rencken has shown us in several of his articles here on this site, most recently http://plus.autospor...business-model/. Ferrari, McLaren and Red Bull get extra money because they are top teams, Williams because of their heritage and Mercedes because they are Mercedes.

To quote Dieter: "Were, say, Lotus, to win this year's constructors' championship, the team would receive less 'Bernie Money' than would Red Bull Racing, Ferrari or McLaren, even were they to non-score in every round throughout the season".......

[jimbox01]

If you just want to focus on scary headline figures, then look at Marussia's accounts for 2012:

Balance sheet defecit - £134M

Creditors (amounts due within one year) - £159M

 

How much does Marussia get from FOM?

What happens if F1 is a flop in Russia?

 

But then to put this in perspective, Red Bull GmbH pumps roughly £100M a year into the team, but they do it in the form of sponsorship payments rather than loans, which means the they aren't accumulating the sort of debts other teams have.  Red Bull Technology (the Group) may have made a £4.5M profit last year, but that's only because Red Bull GmbH pumped £98.7M into the team, and the 'profit' just happens to be covered by R&D tax relief, so they don't pay any tax on it anyway.

Since 2007 Red Bull GmbH have spent about £590M ($945M) on the team, just think if that had be structured as group loans...

 

Fact is, there are only three completely independent teams in F1 (at the moment), McLaren, Williams, and Sauber - does Ferrari count as independent?  All the other teams rely on the continued support of their parent company - regardless of how the money is invested in the team.  Take away the parents' support and the team(s) will almost certainly collapse.

 

Unfortunately, the independents haven't exactly been raking it in either; Sauber is on it's knees, Williams made a £2.4M loss in 2012, and McLaren £8.4M pre-tax loss.

Assuming Williams haven't drastically cut back spending, their single championship point this year has cost about £120M - how do you explain that to your shareholders?

McLaren will have spent £160M+ for their 95 points, but at least they're one of the chosen ones.

 

As far as Lotus are concerned, it's not the amount of debt they've accumulated that's the concern, it's whether or not Genii is willing or able to continue supporting the team, and given recent events that is clearly very questionable.

 

Genii originally said they were using F1 as a B2B platform and didn't expect to make money from the team, but if Genii Business Exchange hasn't been a success, then there's very little point in throwing any more money away.  Lopez and Lux are motor racing enthusiast and probably would like to continue to be involved in F1, but it's not just their own money they're playing with.

 

If this deal falls though they may try hanging on (they'll want to get their money back somehow), but if even just one of their main suppliers loses confidence and patience, the same thing that happened to the '94 version of Lotus could very easily happen to them.  Then again, who knows...

[MustangSally]

Genii originally said they were using F1 as a B2B platform and didn't expect to make money from the team, but if Genii Business Exchange hasn't been a success, then there's very little point in throwing any more money away. 

 

I think the current debacle demonstrates that Genii Business Exchange isn't a success.

 

It is patently unable to do for itself what it claims it can do for others.

 

From the Genii Business Exchange website:

 

The Genii Business Exchange acts as a business and financing ambassador, bringing the right prospects to the right people. We identify the needs of sponsors, business partners, clients and investors in order to initiate a positive dialogue with the relevant parties. Flexible and reactive, our team strives to efficiently quantify and close business opportunities which best lead to win-win commercial, financial or industrial relationships.

 

 

I also liked the bit about 'transforming F1 exposure into business opportunities for . . .  'high net worth individuals'.

 

In Kimi's case, they have indeed transformed his high net worth into low net worth.

[Slackbladder]

As I said in the Kimi thread... Lotus is just heading for disaster. There's no way the money works out, unless you have someone very very rich (either individual or corporate) to bankroll the team. You can't make money in F1 racing...

 

It's a huge issue for F1.. and the journalists and broadcasters need to start the alarm bells. F1 is heading for a crash.

[wj_gibson]

If I were a more plain-speaking man I might regard the money that CVC draws out of the sport as a mode of slow-motion asset stripping...

[string158]

I guess it depends on whether genii will continue to fund the team in the hope they will eventually get a return on the investment (which seems unlikely), or whether they will cut there losses and try to flog the business? 

I cant see anyone would want to buy the team as is, so I wonder if it will go into administration with someone picking up the assets and continuing the Enstone team under a different name??  ts a bit of a worry.

 

Its a massive shame, the team have been right up there this year and last.  It sounds like they've lost a lot of key staff because they havent been paid.

[wj_gibson]

As I said in the Kimi thread... Lotus is just heading for disaster. There's no way the money works out, unless you have someone very very rich (either individual or corporate) to bankroll the team. You can't make money in F1 racing...

 

It's a huge issue for F1.. and the journalists and broadcasters need to start the alarm bells. F1 is heading for a crash.

 

Why else do we think that FIA is so keen to indulge the idea of an exclusive Strategy Group that sells customer cars to others in order to comprise an F1 grid.

[string158]

As I said in the Kimi thread... Lotus is just heading for disaster. There's no way the money works out, unless you have someone very very rich (either individual or corporate) to bankroll the team. You can't make money in F1 racing...

 

It's a huge issue for F1.. and the journalists and broadcasters need to start the alarm bells. F1 is heading for a crash.

 

True,  but if you were very rich and wanted an F1 team, would it be cheaper to buy the HRT grid spot and build the team from scratch without all the debt?  Or wait until Lotus are in even more dire straits & pick up the assets when they fold?

[Rinehart]

 

It's a huge issue for F1.. and the journalists and broadcasters need to start the alarm bells. F1 is heading for a crash.

It feels like this has been the fear and the expectation for about 20 years. 

 

I wonder if it would be a blessing in disguise if this scenario actually happened. Surely from the ashes would rise a more sustainable F1.

[george1981]

The old adage springs to mind.

 

How do you make a small fortune from motor racing?

Start off with a large fortune.

 

I think Genii's plan was to buy the team for cheap, run it out of their own pocket for a few months and then sell on to a car manufacturer most likely Proton. It hasn't happened and now they're feeling the pinch.

One thing that interests me is that Genii are lending Lotus money rather than giving it to them. This probably makes them Lotus' largest creditor so if the team were to go bust then Genii would get most of the teams assets. I'm not exactly sure how much their assets would be worth and who would buy them.

[Slackbladder]

Why else do we think that FIA is so keen to indulge the idea of an exclusive Strategy Group that sells customer cars to others in order to comprise an F1 grid.

 

The FIA can't even run a bath. The only people which matter in F1 are the teams, and Bernie...

 

And Bernies looking at more and more legal troubles...this will not end well. The poster which likened CVC to an asset stripper is bang on the money,

[GT Racing Online Magazine]

Everything I have seen in so far, with every piece of news seeping through even though only half would hold for 20% correctness, sadly, but clearly indicates that there is no way Lotus will manage for more than 6 months - there are so many similar stories, with similar indications in F1s history and near history that there is very little that gives me belief that a miracle will occur. Most likely KRs drop out will also mean that we can safely assume they won't get 3rd, but rather 5th in WCC, which amounts to a "loss" of "extra" -$20M that they cannot infuse to plug the holes of the already flooding boat.

[Shiroo]

Everything I have seen in so far, with every piece of news seeping through even though only half would hold for 20% correctness, sadly, but clearly indicates that there is no way Lotus will manage for more than 6 months - there are so many similar stories, with similar indications in F1s history and near history that there is very little that gives me belief that a miracle will occur. Most likely KRs drop out will also mean that we can safely assume they won't get 3rd, but rather 5th in WCC, which amounts to a "loss" of "extra" -$20M that they cannot infuse to plug the holes of the already flooding boat.

 

they can't fall lower than 4th actually

[Oho]

 This probably makes them Lotus' largest creditor so if the team were to go bust then Genii would get most of the teams assets.

 

Don't know about UK law but I doubt in bankruptcy cases all debt is equal. Unpaid taxes, wages and outstanding debt to suppliers would probably trump Genii.

[george1981]

Don't know about UK law but I doubt in bankruptcy cases all debt is equal. Unpaid taxes, wages and outstanding debt to suppliers would probably trump Genii.

From what I understand the creditors get a proportion of the assets based upon what they are owed. So for instance if Genii are owed £100m, Renault owed £30m and Kimi £20m, then Genii would get 66.7%, Renault 20% and Kimi 13.3% of the assets. However if Genii had paid to run Lotus out of their own pocket then they would not be owed anything. So Renault would get 60% and Kimi would get 40% of the assets if the team were wound up. But you are correct there is some preference for unpaid wages upto £800, taxes and the administrator's fee over normal creditors. I'd be interested to know if Kimi's is considered to be an employee or a supplier? I somehow doubt he pays UK income tax or national insurance contributions.

[Oho]

....

 

I looked it up, and indeed the employee protection amounts to mere pittance. Räikkönen probably is an ordinary employee. There was some talk on this a few years back and Bira noted that to her surprise drivers tend to be in the employ of the team they drive for, possibly over some insurance reasons. He pays his taxes, what ever they might be, in accordance with the deal he has made in Switzerland where his residence is. UK no more than Finland really have no grounds for taxing a guy who does not reside in the country.

Edited by Oho, 11 November 2013 - 14:42.

[Slackbladder]

From what I understand the creditors get a proportion of the assets based upon what they are owed. So for instance if Genii are owed £100m, Renault owed £30m and Kimi £20m, then Genii would get 66.7%, Renault 20% and Kimi 13.3% of the assets. However if Genii had paid to run Lotus out of their own pocket then they would not be owed anything. So Renault would get 60% and Kimi would get 40% of the assets if the team were wound up. But you are correct there is some preference for unpaid wages upto £800, taxes and the administrator's fee over normal creditors. I'd be interested to know if Kimi's is considered to be an employee or a supplier? I somehow doubt he pays UK income tax or national insurance contributions.

 

As I understand it, the drivers are not 'employees' of the company.

[MustangSally]

Don't know about UK law but I doubt in bankruptcy cases all debt is equal. Unpaid taxes, wages and outstanding debt to suppliers would probably trump Genii.

 

Isn't the debt to Proton secured on the assets? The money from Genii is presumably an unsecured loan. 

[Dmitriy_Guller]

Bankruptcy law is a very lucrative business, so it's probably pointless for us to speculate, unless we're both experts in that field and are aware of the details.  I will say though that if Genii and employees have the same seniority when it comes to recovering what they're owed, then it would be pretty atrocious.

[DampMongoose]

In the UK, If Genii have input the funding to Lotus via a debenture with a floating charge, they have preference in any insolvency or liquidation procedure over any other unsecured creditors.  Which would include UK Taxes, such as Corporation Tax, VAT, PAYE and importantly any other trade creditors.  This means that on liquidation the debenture holder would have to be paid back in full before any other creditor is paid a penny.  If that's the case, I'm sure Genii aren't too concerned... they will also have the benefit of claiming the losses against other profits asessable in their group so it's not quite the bottomless pit people may think.

 

Edit:  Proton probably have a fixed charge that would require payment first.

Edited by DampMongoose, 11 November 2013 - 15:23.