Investors go cool on F1's $2bn bond

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The Independent Online
THE ATTEMPT by Bernie Ecclestone to raise $2bn (pounds 1.2bn) through a corporate bond backed by revenues from his Formula One motor racing empire looked to be running into trouble last night as investors went cool on the offer.

A presentation to 200 potential investors on Monday is understood to have received a lukewarm response, with a number of leading banks indicating that they will not join in the syndication of the bond.

The European Commission added to the uncertainty by saying that its investigation into the running of Formula One and Mr Ecclestone's exclusive deal to license TV rights would not be complete before the year-end.

Last night Morgan Stanley Dean Witter, lead arranger of the bond, admitted that media reports alleging that Formula One had been misleading about the status of the EC probe had affected some investors. But it maintained the response had been good.

A statement from the bank said: "Invitations have been sent out to co- lenders, but the syndicate has not yet been finalised. The reception at the investor presentation was very positive. The economic fundamentals and logic of the deal remain well understood and appreciated. Recent media speculation has distracted some investors in the short term. We will be addressing the issues that have been raised with investors."

However, one banker suggested that the odds against a successful offer had gone from 50:50 to 80:20 and that go-ahead for the issue would depend on how much risk Morgan Stanley and other banks in the syndicate would underwrite.

Banks said to have been approached include Deutsche Bank, Merrill Lynch, Salomon Smith Barney and Warburg Dillon Read. One report said two or three banks had refused to participate: another source said other leading banks had been "non-committal".

The European Competition Commissioner, Karel Van Miert, is examining Mr Ecclestone's 15-year exclusive agreement with the governing body of motor sport, the FIA, giving him the right to promote Formula One grand prix events until 2010. It is also investigating his exclusive TV licensing agreements with broadcasters around the world to see if they are anti- competitive.

The licensing deals, which provide the bulk of Formula One's revenues and are critical to its repayment of interest and capital on the $2bn bond, run for between one and nine years.

Mr Van Miert has been unable to give Mr Ecclestone a letter of comfort in relation to the investigation. Formula One strongly denies it misled investors, saying the prospectus has 16 pages detailing risk factors, and it believes it can satisfy the EC's concerns.

The bond pays interest only for the first five years and is to be repaid in full by 2020. Formula One's contracted gross revenues are $407m next year, $422m in 2000 and $424m in 2001.

Outlook, page 21

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