Outlook: Bernie bond revs up, now a race to float

VROOM, VROOM and it's away at last. The Bernie bond finally got off the starting grid yesterday just in time to allow the sponsors to collect their fees, sit back and enjoy this weekend's Spanish Grand Prix.

Bernie Ecclestone's Formula One bond is not, of course, quite the souped- up model originally billed. It has spent so much time doing practise laps that there was a real danger the issue would run out of petrol before it reached the starting line.

As it is, the offering which finally hit the Eurobond market yesterday, nine months after its first unveiling, should more accurately be described as Bernie's incredible shrinking bond. It started out life as a $3bn flotation and was then scaled back to a $2bn bond issue. Now the size of the issue has been whittled down again to $1.4bn. But not the coupon which ratchets up at the speed of Michael Schumacher leaving the grid.

The term of the bond has also shrunk from 20 years to 11, presumably to help the ratings agencies swallow any qualms they may have had about the security of the television revenues which underpin the bond.

As is usual with Formula One's finances, much of the detail remains opaque. Formula One is coy about who exactly has subscribed for the offer beyond the joint lead managers, Morgan Stanley and WestLB who between them appear to have taken on at least a quarter of the issue. WestLB also appears to have earned itself a fat fee by underwriting a large portion of the offer.

Those who would still like a piece of the action will be able to find the bond listed on that well-known market, the Luxembourg Stock Exchange.

The full prospectus is not out yet of course, so we will just have to wait to thrill at how Bernie has dealt with the ongoing European Commission investigation into his hold over the sport and other awkward regulatory issues.

Bernie has made several pit stops to change financial advisers. Salomon's did not survive the failed float and although Morgan Stanley devised the bond, it was only salvaged when WestLB stepped in to pick up a large slice of the offer.

Nevertheless, Bernie is now waxing lyrical about the relationship Formula One has established with the investment community and promises he is still on course for a flotation a few years down the track.

He has a big incentive to deliver. The structure of the bond is such that the coupon payments will begin to take a big bite out of Formula One's profits if it still privately owned in five years.