F1 hit with £158m lawsuit
17/09/2006  |
After the memorandum of understanding about the future of F1 was signed in May, between the carmakers and CVC, it would be easy to think that the sport's new owners were home and dry. But, as Christian Sylt and Caroline Reid can reveal, they have recently received a lawsuit against F1's parent company SLEC asking it to pay the grand total of £158,372,933.83.
The lawsuit comes from Swiss financing firm Kamos-Finanz and has been issued to both SLEC, which is majority owned by CVC, and Bambino, the family trust of F1's boss Bernie Ecclestone. But perhaps the most surprising thing is that the claim relates to a deal done almost five years before CVC came on board.
Back in 2001, an investigation by the European Commission into F1's business practices was coming to a close. One of the EC's recommendations was that the FIA should sell F1's commercial rights for a period of 100 years to prevent it from profiting financially from the sport. SLEC, named after Bernie Ecclestone's Croatian wife Slavica, was the winning bidder.
The price tag for the 100-year rights was $313.6 million and this is where things get interesting. The loan which SLEC is now being sued over was advanced to it on 24 April 2001, and although its purpose is not yet a matter of public record, industry insiders believe it helped finance the acquisition of the F1 commercial rights which SLEC bought the following day. So why might the lawsuit be coming now?
SLEC's subsidiary company, Formula One Administration (FOA) holds F1's lucrative commercial rights and is where the majority of the sport's money comes in. However, FOA could not pay out its profits (a dividend) until it fully repaid a $1.4 billion bond, secured on F1's revenues, which it took out in 1999.
The bond is believed to have been paid off at the end of May this year which would give it access to money from FOA. However, to this day, the loan hasn't been paid back so Kamos sued on 3 July.
SLEC and Bambino are due to file their defences at London's High Court by 2 October. Both refused to comment on the proceedings.
Kamos' claim against SLEC also includes interest on the loan so as every day goes by, the bill it may eventually have to pay is growing ever bigger. |
