Proton stops Lotus F1 sponsorship and gives £35m loan to team

06/04/2012

Various websites are reporting that the Lotus F1 team has terminated its sponsorship deal with the Group Lotus car manufacturer. As often happens when sports journalists communicate business developments in F1, the latest reports fail to present the full story. According to Pitpass' business editor Christian Sylt however, in reality very little has changed. That said, a lot could change as a recent development has put Group Lotus' owner Proton in a position where it could take over not just 50% of the team, as was previously thought, but as good as all of it.

Just last week Sylt revealed that two months ago Proton, the Malaysian-based owner of Group Lotus, had given the Lotus F1 team an estimated £35m loan. Any of the sports journalists who wrote the latest reports could have easily found the corresponding company documents to verify the existence of the loan from Proton to the team. Now we hear that Gerard Lopez, owner of Genii Capital which in turn owns Lotus F1, says that "the sponsorship agreement and the obligations of Lotus have been terminated." However, he adds that "we are happy to carry the Lotus name as we believe it is a good name for F1."

So, let's get this straight: the team will continue to be known as Lotus F1 and, unless it wants to throw away the brand equity which has been built up since the start of 2011, it will presumably retain the famous black and gold branding which is associated with the car manufacturer.

In short, from the outside it looks like very little changes and, on the inside, although Group Lotus is not making sponsorship payments to the team, the car manufacturer's owner has given it a loan. One can excuse the sports reporters from failing to dig up the relevant loan documents since they are not specialists in covering the business of F1. However, Lopez' comments give the impression that, except for using its name, the team has severed all of its ties with Group Lotus. It should be stressed that Lopez does not say this but one of the reporters who wrote about his comments alleges that the team has "ended its formal relationship with the marque."

Adding weight to the impression that all ties have been severed, Lopez confirmed that Group Lotus did indeed have an option to buy 50% of the team - something that Sylt revealed back in September - but does not have it any more. The "option was taken over by us. There was one, but we have taken it over now," he said. Presumably, given that "the obligations of Lotus have been terminated" the team will also be removing from its board the group's chief executive, Dany Bahar, and Syed Zainal Abidin Tahir, Proton's managing director, who were appointed last year.

What wasn't revealed by Lopez' comments is that the loan includes a very important clause stating that the team gives Proton "full title guarantee" to "all plant, machinery, show cars, computers, office and other equipment... and... Whiteways Technical Centre [Lotus F1's headquarters]." What this means is that if (and there is no suggestion that this will happen) the team fails to repay the loan then Proton will be entitled to take over all the property listed above which effectively constitutes the team itself. So although Lopez was keen to say that Group Lotus no longer has an option to buy 50% of Lotus F1, what wasn't revealed is that Group Lotus' owner could end up owning much more than that as a result of the loan it has given to the team.

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